34 terms

Financial Accounting Notes

Which of the following is false regarding the balance sheet?
The balance sheet reports the changes in specific account balances over a period of time
A business's balance sheet cannot be used to accurately predict what the business might be sold for because
assets are generally listed on the balance sheet at their historical cost, not their current value
what type of account is increased with a debit but is a decrease to retained earnings?
The operating cycle is best defined as
the length of time over which property, plant and equipment assets are expected to be used by the company in generating revenues
Which document/accounting tool lists all of the company's accounts, their respective ending balances, and if they are a debit or a credit?
Trial Balance
GAAP stands for what?
Generally accepted accounting principles
Which assumption or principle dictates that the activities of the business are seperate from the activities of the owners?
economic entity assumption
which assumption or principle dictates that all information sufficiently important to influence a decision is in the financial statements?
Full disclosure principle
which qualitative characteristic of accounting suggests that the capacity of information to make a difference in a decision exists?
Which if the following statements about inventory costing is false?
Sales returns and allowances is a contra-asset
The approach to financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:
Accrual basis accounting
A publishing company records the subscriptions paid in advance by its customers in an account called unearned subscription revenue. If the the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned, one effect will be:
an overstatement of liabilities
An account linked with another with another that has an opposite normal balance and that is subtracted from the balance of the related account is a(n)
Contra account
A debit to sales returns and allowances and a credit to accounts receivable:
recognizes that a customer returned merchandise and /or received an allowance
which of the following accounts would be closed out with a debit
The understatement of ending inventory balance causes
cost of goods to be overstated and net income to be understated
The inventory turnover ratio is calculated as:
cost of goods sold divided by average merchandise
The inventory valuation method that identifies the actual cost of each item in ending inventory to determine the cost assigned to that inventory is the:
specific identification method
A company uses the allowance method to account for accounts receivable. which of the following journal entries affects total assets?
Recording bad debt expense
The main purpose of recording depreciation is
allocate the cost of a tangible asset to the periods in which its use contributes to earning revenues
Goodwill is:
Checked for impairment at the end of the accounting period
The right to reproduce or sell a published work is a
Outstanding checks refer to checks that have been
written, then recorded on the company books and sent to the customer, supplier or creditor, but have not yet been paid by the bank
the maturity date of a note receivable
is the day the note is due to be paid
The useful life of a plant asset is
the length of time its is used productively in a company's operations
Both the straight-line depreciation method and the double-declining-balance depreciation method:
produce the same total depreciation over an asset's useful life
The matching principle requires
the use of the allowance method of accounting method for bad debts
The amount of bad debt expense can be estimated by:
The percent of sales method, the percent of accounts receivable method
The total cost of an asset less its accumulated depreciation is called
Book value
Which of the following statements concerning bonds is false?
term bonds retire in installments
The unammortized discount on a bond can always be found by the following equation:
Face value - carrying value
As a result of the stock dividend, stock holders' equity would
Remain the same
Which of the following represents the shares currently in the hands of investors?
Outstanding shares
Which statement regarding treasury stock is false?
Treasury stock has voting, dividend, and liquidation rights