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ACCT 207 Exam 1 practice test questions
Terms in this set (27)
Business purchases supplies on account from a supplier. The liability credited is
MD&A(Management Discussion and Analysis) section of the annual report covers
-ability of a company to pay near term obligations
-ability to fund operations/ expenses
-results of the companies operations
Information needed to determine if a company is using accounting methods similar to its competitors is in the....
notes to the financial statements
How to find creditors claims(formula)
=assets-common stock-retained earnings
Most important info needed to determine if a company can pay its current obligations
relationship between current assets and current liabilities
current assets/ current liabilities
Which organization issues accounting standards for countries outside the US
IASB(International Accounting Standards Board)
Two of the major characteristics that make accounting info useful are
Relevance and Faithful representation
In order for accounting info to be relevant it must
help predict future events or confirm prior expectations
Different companies using the same accounting principle is an application of
A company which prepares quarterly reports relies on
Company sold $11 million in second quarter, received payment for $7.5 million of sales before end of second quarter
income statement would show sales revenue of $11 million
Company bought equip. for $20,000 in 2007. In 2011 a new piece of the same equip. sells for $28,000 and their used machine is worth $18,000. What would the balance sheet show?
Balance sheet for 2011, machine would be $20,000
Process used in determining whether or not GAAP were used
Examination of financial statements/ documents by an independent auditor
Company has $10,000 gallons of supplies that cost $300,000. $100,000 of which hasn't been paid. Company expects to earn $800,000 for its services when it uses the supplies. What is reported?
$300,000 in supplies and $100,000 in accounts payable
Companies president donates her own money to charity and receives publicity that includes the companies name. How would this appear on the balance sheet?
Company buys an asset in June which will be applied equally from June until September. If the accountant forgets to make the appropriate adjusting entry for the use of the supply in September what impact would this have on the financial statements?
Assets are overstated, shareholders equity is overstated
-September: customer signed contract to have house painted in October.
-Company bought paint in August on credit and paid bill in September.
-Company painted the house in November
Revenue and Expenses recorded in November
One major difference between prepaid and accruel adjustments is
prepaid adjustments involve previously recorded transactions and accruals are new transactions
Which account would normally never be effected by an adjusting journal entry
company performed $500 of IT services for client but has not billed the client at of the end of the accounting period. What adjusting entry must be made?
Debit Accounts Receivable/ Credit Service Revenue
The matching principle states
A company should record expenses in the period in which it generates revenue (when its used up)
A company that receives money in advance for performing a service (entry)
debits cash and credits unearned revenue
If the totals of a trial balance are not equal it could be due to:
An error in calculating the account balances
Sep. 1st. a company paid $48,000 in cash for equipment used in business operations. The equip. will be used for four years. The company records depreciation expense of $48,000 for the calendar year ending Dec. 30th 2011. Which accounting principle has been violated?
Matching principle or Expense Recognition Principle
the primary difference between accrued revenues and unearned revenues is that accrued revenues have
not been recorded and unearned revenues have been recorded
Adjusting Entries are made to ensure that:
-expenses are recognized when they are uncured
-Revenues are recorded in the period in which that are earned
-Balance Sheet and Income Statements have correct balances at the end of the accounting period
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