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Accounting 1 Test 1

STUDY
PLAY
The classification and normal balance of the accounts payable account is
a liability with a credit balance
Which of the following accounts is a stockholders' equity account?
dividends
In which of the following types of accounts are increases recorded by credits?
revenues, liabilities
Revenue should be recognized when
the service is performed
Which group of accounts is comprised of only assets?
Prepaid Expenses, Buildings, Patents
A chart of accounts is
usually a listing of accounts in financial statement order
Which side of the account increases a cash account?
debit
Expenses follow the same debit and credit rules a
dividends
Which of the following types of accounts have a normal credit balance?
revenues and liabilities
Which of the following entries records the acquisition of office supplies on account?
Office Supplies, debit; Accounts Payable, credit
The business entity concept means that
the entity is an individual economic unit for which data are recorded, analyzed, and reported
The asset created by a business when it makes a sale on account is termed
accounts receivable
Select the type of business that is most likely to obtain large amounts of resources by issuing stock.
corporation
Two common areas of accounting that respectively provide information to internal and external users are
managerial accounting and financial accounting
Debts owed by a business are referred to as
liabilities
If stockholders wanted to know how money flowed into and out of the company, what financial statement would they use?
statement of cash flows
Liabilities are reported on the
balance sheet
Most businesses in the United States are
proprietorships
The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)
income statement
The objectivity concept requires that
amounts recorded in the financial statements must be based on independently verifiable evidence
Which of the following is not a characteristic of a corporation?
A corporation's resources are limited to its individual owners' resources.
Which of the following is a manufacturing business?
Ford Motors.
Which of the following best describes accounting?
is an information system that provides reports to users regarding economic activities and condition of a business.
A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing
the income statement
The debt created by a business when it makes a purchase on account is referred to as an
account payable
Multiple-step income statements show
both gross profit and income from operations
The arrangements between buyer and seller as to when payments for merchandise are to be made are called
credit terms
Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?
administrative expense
Net income plus operating expenses is equal to
gross profit
The inventory system employing accounting records that continuously disclose the amount of inventory is called
perpetual
The term "inventory" can indicate
merchandise held for sale in the normal course of business
When comparing a retail business to a service business, the financial statement that changes the most is the
income statement
Which of the following accounts usually has a debit balance?
Freight In
If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
FOB shipping point
Merchandise inventory is classified on the balance sheet as a
current asset
If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
credit memo
Generally, the revenue account for a merchandising business is entitled
sales
Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
selling expenses
Which of the following accounts will only be found in the chart of accounts of a merchandising company?
merchandise inventory
Which of the following accounts has a normal credit balance?
sales
Control of inventory should begin as soon as the inventory is received. Which of the following internal control steps is not done to meet this goal?
check the invoice with the person who specifically purchased the item
Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the
inventory ledger
When merchandise sold is assumed to be in the order in which the purchases were made, the company is using
first-in, first-out
If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the
manufacturer
Damaged merchandise that can be sold only at prices below cost should be valued at
net realizable value
The method of computing inventory that uses records of the selling prices of the merchandise is called
retail method
Which of the following companies would be more likely to use the specific identification inventory costing method?
Gordon's Jewelers
Which of the following is not an example for safeguarding inventory?
Returning inventory that is defective or broken.
Under the _________ inventory method, accounting records maintain a continuously updated inventory value.
perpetual
Taking a physical count of inventory
should be done near year-end
Under a periodic inventory system
a physical inventory is taken at the end of the period
The two most widely used methods for determining the cost of inventory are
FIFO and LIFO
Ending inventory is made up of the oldest purchases when a company uses
last-in, first-out