Like this study set? Create a free account to save it.

Sign up for an account

Already have a Quizlet account? .

Create an account

Test 1-3

A trial balance proves

The mathematical equality of debits and credits after the posting process

Borrowing money is an example of a(n)

Financing expense

In recording accounting transactions, evidence that a transaction has taken place is obtained from

Source documents

A practical decision to expense small capital expenditures than record them as property, plant and equipment and depreciate them probably is made on the basis of the characteristic of


A business organized as a corporation

Is owned by its stockholders

Which statement account is true

There are separate accounts for specific assets and liabilities but only one account for s.e items

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing operations

Going operation assumption

Which is not an external user of accounting data


A small neighborhood barber shop that is operated by its owner would likely be organized as a


Buying and selling products are examples of

Operating activities

Which of the following is not a current liability

Bonds payable

Debt and obligations of a boss can be referred to as


The ability of a boss to pay obligations that are expected to become due within the next year of the operating cycle is


A credit is not the normal balance for which account listed below


A ledger

Is a collection of the entire group of accounts maintained by a company

The right to receive money in the future is called an

Accounts receivable

Dividends can be recorded on

Retained earnings statement

Retained earnings at the end of the period is equal to

Retained earnings beginning of period + net income - dividends

An annual report includes all of the following except

Salary info for all executives

Which of the following is NOT an advantage of the corporate form of business organization?

Favorable tax treatment

A current asset is

Expected to be converted to cash or used in the business within a relatively short period of time

The financial statement that summarizes the changes in retained earnings for a specific period of time is:

Retained earnings sheet

Management could determine the amount due from customers by examining which ledger account?

Account Receivable

A chart of accounts for a business firm?

Lists the accounts in a ledger

Assets normally show

Debit Balances

A company that receives money in advance of performing a service:

Debits cash and credits unearned fees

Transactions in journal are initially recorded in

Chronological order

Which of the following financial statements is concerned with the company in a point of time?

Balance sheet

Generally accepted accounting principles

Are accounting rules that are recognized as a general guide for financial reporting

Which of the following clarifies information presented in the financial statements as well as expanding upon where detail is needed?

Notes to financial statements

The primary purpose of the statement of cash flows is to report

The information about money receipts and cash pay of a company

The usual sequence of step in the recording process is to

Analyze each enter in journal, transfer info into ledger

Which of the following describes the classification and normal balance of the retain earnings account?

Stockholders equity, credit

On March 1st, 2007, Dillon Company hires a new employee who will start to work on March 6th. The employee will be paid on the last day of each month. Should a journal entry be made on March 6th? Why or why not?

No, hiring is important, however, it is not an event that should be recorded

Which financial statement is used to determine cash generated from operator?

Statement of Cash Flows

All are characteristics of accounting information EXCEPT


When a company receives a utility bill but will NOT pay it right away, it should

debit utilities expense and credit accounts payable

An investment by the stockholders in a business increases

Assets and Stockholders equity

The name given to entering transaction data in the journal is


The cost principle requires that when assets are acquired, they be recorded at

the amount paid for them


increase assets and decrease liabilities

Intangible Assets are

listed after property, plant and equipment

A company spends $20 million dollars for an office building. Over what period should the cost be written off?

Over the useful life of the building

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause...

Revenues to be understated

Accumulated Depreciation is an...

Contra Asset Account

Adjusting entries are made to ensure

All the above

Advantage of the single - step income statement over the multiple - step form is...

It's simplicity

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a...

Debit to an expense account and a credit to an asset account

Barnes Company is taking a physical inventory on March 31st, the last day of its fiscal year. Which of the following must be included in the inventory count?

Goods that Barnes is holding in inventory on March 31st for which the related accounts payable is 15 days past due

Closing Entries

Cause the revenues and expense accounts to have zero balances

Expenses sometimes make their contribution to revenues in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period?

Wages Payable

Failure to prepare an adjusting entry at the end of period to record accrued revenue would cause

An understatement of assets and an understatement of revenues

Failure to prepare an adjusting entry at the end of the period to record an accrual expense would cause...

An understatement of expenses and an understatement of liabilities

Goods purchased for future use in the business, such as supplies, are called...

Prepaid Expenses

If a company fails to adjust for accrued revenues...

Assets will be understated and revenues will be understated

If a resource has been consumed but a bill has NOT been received at the end of the accounting period then

An adjusting entry should be made recognizing the expense

If goods in transit are shipped FOB destination...

The seller has legal title to the goods until they are delivered

In a period of declining prices which of the following methods generally result in lowest balance sheet figure for inventory?

FIFO Method

In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?

LIFO Method

In a service type, revenues is considered earned

When the service is preformed

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

FIFO Method

Indicate which of the following will NOT appear on both a single - step income statement and a multiple - step income statement...

statement and a multiple - step income statement...

Multiple - step income statements show...

Both income from operation and gross profit

Net income will result if gross profit exceeds

Operating Expenses

One of the accounting concepts upon which adjustments for prepayments and accruals are based is...


Prepaid expenses are...

Paid and recorded in an asset account before they are used or consumed

Sales Revenue...

May be recorded before cash is collected

Sales revenues less cost of goods sold is called...

Gross Profit

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

Non-existent; that is no such accounting requirement

The factor, which determines whether or not good should be included in a physical count of inventory, is

Legal Title

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit..

Merchandise Inventory

The operating expenses section of an income statement for a merchandising company would NOT include

Cost of Goods Sold

The revenue principle dictates that revenues should be recognized in the accounting records...

When it is earned

The Sales Returns and Allowances account is classified as an

Contra revenue account

Unearned revenue is classified as an...


Using accrual accounting, expenses are recorded and reported only

When they are incurred whether or not cash is paid

When sales of merchandise are made for cash, the transition may be recorded by the following entry

Debit Cash, Credit Sales

Which of the following terms best describes the assumption made in the applying the four inventory methods

Cost Flow Method

Which of the following accounts would not likely need to be adjusted at year-end?


Which of the following is NOT a common cost flow assumption used in costing inventory?

Middle in, First Out

Which of the following items will increase inventorial costs for the buy of goods?

Freight charges paid by the purchaser

Which of the following should NOT be included in the physical inventory of a company?

Goods held on consignment from another company

Which of the following would NOT be considered a merchandising operation

Service Firm

Which of the following is not one of the main factors that contribute to fraudulent activity?

Incompatible Duties

Which of the following is not an accounting issue associated with accounts receivable?

Depreciating account receivable

Which of the following is not a basic principle of cash management?

Keep inventory levels high

Recording depreciation each period is necessary in accordance with the

Matching principle

Which of the following is not an internal control procedure for cash?

Payments should be made with cash

Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period?

To match bad debt expense to the period in which revenues were earned

Which of the following is not a suggested procedure to establish internal control over cash disbursements?

Anyone can sign checks

Two key parties to a promissory note are the

Maker and the Payee

Which of the following would be deducted from the balance per books on bank reconciliation?

Service Charges

Which of the following is not an objective of system of internal controls?

Overstate liabilities in order to be conservative

The balance in accumulated depreciation account represents the

Amount charged to expense since the acquisition of the plant assets

Deposits in transit

have been recorded on the company's books but not yet bank

Which of the following is considered an intangible asset

An oil well

The sales receivables by a business

Can be a quick way to generate cash for operating needs

A change in the estimated useful life of equipment requires

That the amount of periodic depreciation be changed in the current year, and in future years

The book value of an asset is equal to the

Assets cost less accumulated depreciation

A characteristic of a plant asset is that it is

Used in the operations of a business

Land improvements should be depreciated over the useful life of

The land improvements

Under allowance method, bad debt expense is recorded

For an amount that the company estimates it will not collect

Goodwill can be recorded

Only when there is an exchange transaction involving the purchase of an entire business

Which of the following methods of computing depreciation is production based

Units of activity

Which of the following is not properly classified as property, plant and equipment

A truck held for resale by an automobile dealership

Which of the following assets does not decline in service potential over the course of its useful life


Which of the following items is not considered part of the cost of a truck purchased for business use

Truck license

Which of the following items is not a consideration when recording periodic depreciation expense of plant assets

Cash needed to replace plant assets

Which one of the following is not an objective of a system of internal control?

fairness of financial statements

In computing depreciation, salvage value is

an estimate of a plant's assets value at the end of its useful life

The deprecation method that applies a constant percentage to depreciable costs in calculating depreciation is

straight line

If disposal of a plant asset occurs during the year, depreciation is

recorded for the fraction of the year to the date of the disposal

A gain or loss on disposal of a plant asset is determined by comparing the

book value of the asset with the proceeds received from its sale

Which of the following methods will result in the highest depreciation in the first year?

Declining- balance

When as asset is sold, a gain occurs when the

sale price exceeds the book value of the asset sold

When a company receives an interest- bearing note receivable, it will

debit Notes Receivable for the face value of the note

Of the following employees, who should prepare the bank reconciliation?

Frank, the purchasing agent, because he does not work in the accounting department

Allowance for Doubtful Accounts on the balance sheet

is deducted from accounts receivable

The face value of a note refers to the amount

at which the note receivable is recorded

The cost of land does not include

annual property taxes

Intangible Assets

should be reported as a separate classification on the balance sheet

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions and try again


Reload the page to try again!


Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

Voice Recording