56 terms
Test 3
The accounting environment does not change as a result of
the double entry system.
A student should recognize a need to study manual accounting systems because
the software and hardware of electronic systems vary greatly, which makes manual procedures more practical to study.
Accounts Receivable and Accounts Payable are examples of
controlling accounts.
A one column purchases journal indicates that
only purchases of merchandise on account can be recorded.
The one characteristic that all entries recorded in a multi-column purchases journal have in common is a
credit to the Accounts Payable account.
If merchandise from a cash sale is returned by a customer for a refund, the sales return is recorded in the
cash payments journal
Entries in a sales journal
a. are made from sales invoices.
b. will indicate the invoice number in the reference column of the sales journal.
c. will occupy two lines of the sales journal.
d. indicate either a cash debit or accounts receivable debit.
a. are made from sales invoices.
b. will indicate the invoice number in the reference column of the sales journal.
c. will occupy two lines of the sales journal.
d. indicate either a cash debit or accounts receivable debit.
are made from sales invoices.
Journalizing in a sales journal will not
a. require a debit to Accounts Receivable.
b. show a sales invoice number.
c. affect the reference column of the journal.
d. include a credit to the Sales account.
a. require a debit to Accounts Receivable.
b. show a sales invoice number.
c. affect the reference column of the journal.
d. include a credit to the Sales account.
c. affect the reference column of the journal.
If an owner withdraws cash for personal use, the transaction should be recorded in the
a. sales journal.
b. cash receipts journal.
c. general journal.
d. cash payments journal.
a. sales journal.
b. cash receipts journal.
c. general journal.
d. cash payments journal.
d. cash payments journal
Entries in a sales journal are
a. posted only to accounts in an accounts receivable subsidiary ledger.
b. posted only to accounts in the general ledger.
c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the general ledger.
d. never posted.
a. posted only to accounts in an accounts receivable subsidiary ledger.
b. posted only to accounts in the general ledger.
c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the general ledger.
d. never posted.
c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the general ledger
Posting a sales journal to the accounts in the general ledger requires a
a. debit to Cash and a credit to Sales.
b. debit to Sales and a credit to Inventory.
c. debit to Accounts Receivable and a credit to Inventory.
d. debit to Accounts Receivable and a credit to Sales.
a. debit to Cash and a credit to Sales.
b. debit to Sales and a credit to Inventory.
c. debit to Accounts Receivable and a credit to Inventory.
d. debit to Accounts Receivable and a credit to Sales.
d. debit to Accounts Receivable and a credit to Sales.
he entry to record the granting of credit to a customer for a sales return is posted to
a. the accounts receivable subsidiary ledger only.
b. the general ledger only.
c. both the accounts receivable subsidiary ledger and the general ledger.
d. both the accounts payable subsidiary ledger and the general ledger.
a. the accounts receivable subsidiary ledger only.
b. the general ledger only.
c. both the accounts receivable subsidiary ledger and the general ledger.
d. both the accounts payable subsidiary ledger and the general ledger.
d. both the accounts payable subsidiary ledger and the general ledger.
If a company records merchandise it returns to suppliers in the general journal, then
a. a posting must be made only to the accounts payable control account.
b. a posting must be made only to the accounts payable subsidiary ledger account.
c. a dual posting must be made.
d. there will be a debit to Merchandise Inventory.
a. a posting must be made only to the accounts payable control account.
b. a posting must be made only to the accounts payable subsidiary ledger account.
c. a dual posting must be made.
d. there will be a debit to Merchandise Inventory.
c. a dual postiing must be made.
Which of the following is not a true statement about the daily posting of the sales journal?
a. There is a debit posting to accounts in the accounts receivable subsidiary ledger.
b. There is no credit posting.
c. The reference column in the sales journal is checked when the posting is complete for each entry in the journal.
d. The invoice number supporting the sales transaction is posted to the reference column in the subsidiary ledger.
a. There is a debit posting to accounts in the accounts receivable subsidiary ledger.
b. There is no credit posting.
c. The reference column in the sales journal is checked when the posting is complete for each entry in the journal.
d. The invoice number supporting the sales transaction is posted to the reference column in the subsidiary ledger.
d. The invoice number supporting the sales transaction is posted to the reference column in the subsidiary ledger.
The "Other Accounts" column in a cash receipts journal is also referred to as the
a. miscellaneous column.
b. excess column.
c. sundry accounts column.
d. compound-entry column.
a. miscellaneous column.
b. excess column.
c. sundry accounts column.
d. compound-entry column.
sundry accounts column
Proving the postings of a one-column purchases journal would involve comparing the
a. general ledger posting to Accounts Payable to the debit postings of the accounts receivable subsidiary ledger.
b. general ledger debit posting to Accounts Payable to the general ledger credit posting to Merchandise Inventory.
c. general ledger credit posting to Accounts Payable to the general ledger debit posting to Merchandise Inventory.
d. debit postings to the accounts receivable subsidiary ledger to the credit postings to the accounts payable subsidiary ledger.
a. general ledger posting to Accounts Payable to the debit postings of the accounts receivable subsidiary ledger.
b. general ledger debit posting to Accounts Payable to the general ledger credit posting to Merchandise Inventory.
c. general ledger credit posting to Accounts Payable to the general ledger debit posting to Merchandise Inventory.
d. debit postings to the accounts receivable subsidiary ledger to the credit postings to the accounts payable subsidiary ledger.
c. general ledger credit posting to Accounts Payable to the general ledger debit posting to Merchandise Inventory.
The reference column of a multi-column cash payments journal after posting
a. will only contain check marks.
b. will be blank.
c. will only contain account numbers.
d. may contain either account numbers or check marks.
a. will only contain check marks.
b. will be blank.
c. will only contain account numbers.
d. may contain either account numbers or check marks.
d. may contain either account numbers or check marks.
The reference column of the accounts in the accounts payable subsidiary ledger after posting may show
a. only P references.
b. CP, P, or G references.
c. G, P, or S references.
d. only CP references.
a. only P references.
b. CP, P, or G references.
c. G, P, or S references.
d. only CP references.
b. CP, P, or G references
Credit sales of assets other than merchandise are recorded in the
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. sales journal.
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. sales journal.
general journal
When the totals of the sales journal are posted at the end of the month, there will be credits to
a. Sales and Merchandise Inventory and debits to Accounts Receivable and Cost of Goods Sold.
b. Accounts Receivable and Cost of Goods Sold and debits to Sales and Merchandise Inventory.
c. Sales and debits to each individual customer account.
d. the Sales account only, and no debits.
a. Sales and Merchandise Inventory and debits to Accounts Receivable and Cost of Goods Sold.
b. Accounts Receivable and Cost of Goods Sold and debits to Sales and Merchandise Inventory.
c. Sales and debits to each individual customer account.
d. the Sales account only, and no debits.
a. Sales and Merchandise Inventory and debits to Accounts Receivable and Cost of Goods Sold.
Companies record credit purchases of equipment or supplies in the
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. one-column purchases journal.
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. one-column purchases journal.
c. general journal.
In the expanded purchases journal, debits are made in which columns?
a. Accounts Payable, Merchandise Inventory, and Office Supplies
b. Merchandise Inventory, Office Supplies, and Store Supplies
c. Cash, Office Supplies, and Store Supplies
d. Accounts Payable, Cash, and Merchandise Inventory
a. Accounts Payable, Merchandise Inventory, and Office Supplies
b. Merchandise Inventory, Office Supplies, and Store Supplies
c. Cash, Office Supplies, and Store Supplies
d. Accounts Payable, Cash, and Merchandise Inventory
Merchandise Inventory, Office Supplies, and Store Supplies
If a customer takes a sales discount, an entry is made in the
a. cash receipts journal.
b. sales journal.
c. cash payments journal.
d. general journal.
a. cash receipts journal.
b. sales journal.
c. cash payments journal.
d. general journal.
cash receipts journal
The statement of cash flows should help investors and creditors assess each of the following except the
a. entity's ability to generate future income.
b. entity's ability to pay dividends.
c. reasons for the difference between net income and net cash provided by operating activities.
d. cash investing and financing transactions during the period.
a. entity's ability to generate future income.
b. entity's ability to pay dividends.
c. reasons for the difference between net income and net cash provided by operating activities.
d. cash investing and financing transactions during the period.
a. entity's ability to generate future income.
The statement of cash flows
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.
summarizes the operating, financing, and investing activities of an entity
Which one of the following items is not generally used in preparing a statement of cash flows?
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information
adjusted trial balance
The primary purpose of the statement of cash flows is to
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.
provide information about the cash receipts and cash payments during a period.
If a company reports a net loss, it
a. may still have a net increase in cash.
b. will not be able to pay cash dividends.
c. will not be able to get a loan.
d. will not be able to make capital expenditures.
a. may still have a net increase in cash.
b. will not be able to pay cash dividends.
c. will not be able to get a loan.
d. will not be able to make capital expenditures.
a. may still have a net increase in cash.
In addition to the three basic financial statements, which of the following is also a required financial statement?
a. the "Cash Budget"
b. the Statement of Cash Flows
c. the Statement of Cash Inflows and Outflows
d. the "Cash Reconciliation"
a. the "Cash Budget"
b. the Statement of Cash Flows
c. the Statement of Cash Inflows and Outflows
d. the "Cash Reconciliation"
b. the Statement of Cash Flows
The statement of cash flows will not report the
a. amount of checks outstanding at the end of the period.
b. sources of cash in the current period.
c. uses of cash in the current period.
d. change in the cash balance for the current period.
a. amount of checks outstanding at the end of the period.
b. sources of cash in the current period.
c. uses of cash in the current period.
d. change in the cash balance for the current period.
a. amount of checks outstanding at the end of the period.
Cash equivalents do not include
a. short-term corporate notes.
b. treasury bills.
c. money market funds.
d. 2-year certificates of deposit.
a. short-term corporate notes.
b. treasury bills.
c. money market funds.
d. 2-year certificates of deposit.
d. 2-year certificates of deposit.
Cash equivalents are generally investments with maturities of
a. $1,000 or more.
b. three months or less.
c. at least six months.
d. one year or the operating cycle, whichever is less.
a. $1,000 or more.
b. three months or less.
c. at least six months.
d. one year or the operating cycle, whichever is less.
b. three months or less.
The best measure of a company's ability to generate sufficient cash to continue as a going concern is net cash provided by
a. financing activities.
b. investing activities.
c. operating activities.
d. processing activities.
a. financing activities.
b. investing activities.
c. operating activities.
d. processing activities.
c. operating activities.
The acquisition of land by issuing common stock is
a. a noncash transaction which is not reported in the body of a statement of cash flows.
b. a cash transaction and would be reported in the body of a statement of cash flows.
c. a noncash transaction and would be reported in the body of a statement of cash flows.
d. only reported if the statement of cash flows is prepared using the direct method.
a. a noncash transaction which is not reported in the body of a statement of cash flows.
b. a cash transaction and would be reported in the body of a statement of cash flows.
c. a noncash transaction and would be reported in the body of a statement of cash flows.
d. only reported if the statement of cash flows is prepared using the direct method.
a. a noncash transaction which is not reported in the body of a statement of cash flows.
The order of presentation of activities on the statement of cash flows is
a. operating, investing, and financing.
b. operating, financing, and investing.
c. financing, operating, and investing.
d. financing, investing, and operating.
a. operating, investing, and financing.
b. operating, financing, and investing.
c. financing, operating, and investing.
d. financing, investing, and operating.
a. operating, investing, and financing.
Financing activities involve
a. lending money.
b. acquiring investments.
c. issuing debt.
d. acquiring long-lived assets.
a. lending money.
b. acquiring investments.
c. issuing debt.
d. acquiring long-lived assets.
c. issuing debt.
Investing activities include
a. collecting cash on loans made.
b. obtaining cash from creditors.
c. obtaining capital from owners.
d. repaying money previously borrowed.
a. collecting cash on loans made.
b. obtaining cash from creditors.
c. obtaining capital from owners.
d. repaying money previously borrowed.
a. collecting cash on loans made.
Generally, the most important category on the statement of cash flows is cash flows from
a. operating activities.
b. investing activities.
c. financing activities.
d. significant noncash activities.
a. operating activities.
b. investing activities.
c. financing activities.
d. significant noncash activities.
operating activities
The category that is generally considered to be the best measure of a company's ability to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
cash flows from operating activities
Cash receipts from interest and dividends are classified as
a. financing activities.
b. investing activities.
c. operating activities.
d. either financing or investing activities.
a. financing activities.
b. investing activities.
c. operating activities.
d. either financing or investing activities.
operating activities
Each of the following is an example of a significant noncash activity except
a. conversion of bonds into common stock.
b. exchanges of plant assets.
c. issuance of debt to purchase assets.
d. stock dividends.
a. conversion of bonds into common stock.
b. exchanges of plant assets.
c. issuance of debt to purchase assets.
d. stock dividends.
d. stock dividends.
If a company has both an inflow and outflow of cash related to property, plant, and equipment, the
a. two cash effects can be netted and presented as one item in the investing activities section.
b. cash inflow and cash outflow should be reported separately in the investing activities section.
c. two cash effects can be netted and presented as one item in the financing activities section.
d. cash inflow and cash outflow should be reported separately in the financing activities section.
a. two cash effects can be netted and presented as one item in the investing activities section.
b. cash inflow and cash outflow should be reported separately in the investing activities section.
c. two cash effects can be netted and presented as one item in the financing activities section.
d. cash inflow and cash outflow should be reported separately in the financing activities section.
cash inflow and cash outflow should be reported separately in the investing activities section.
Of the items below, the one that appears first on the statement of cash flows is
a. noncash investing and financing activities.
b. net increase (decrease) in cash.
c. cash at the end of the period.
d. cash at the beginning of the period.
a. noncash investing and financing activities.
b. net increase (decrease) in cash.
c. cash at the end of the period.
d. cash at the beginning of the period.
b. net increase (decrease) in cash.
Which of the following transactions does not affect cash during a period?
a. Write-off of an uncollectible account
b. Collection of an accounts receivable
c. Sale of treasury stock
d. Exercise of the call option on bonds payable
a. Write-off of an uncollectible account
b. Collection of an accounts receivable
c. Sale of treasury stock
d. Exercise of the call option on bonds payable
a. Write-off of an uncollectible account
Significant noncash transactions would not include
a. conversion of bonds into common stock.
b. asset acquisition through bond issuance.
c. treasury stock acquisition.
d. exchange of plant assets.
a. conversion of bonds into common stock.
b. asset acquisition through bond issuance.
c. treasury stock acquisition.
d. exchange of plant assets.
c. treasury stock acquisition.
In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in
a. the financing section.
b. the "extraordinary" section.
c. a separate schedule or note to the financial statements.
d. the stockholders' equity section.
a. the financing section.
b. the "extraordinary" section.
c. a separate schedule or note to the financial statements.
d. the stockholders' equity section.
c. a separate schedule or note to the financial statements.
Indicate where the event paid income taxes would appear, if at all, on the statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
a. Operating activities section
Indicate where the event common stock issued for cash would appear, if at all, on the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
c. Financing activities section
Indicate where the event purchased land for cash would appear, if at all, on the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
b. Investing activities section
Indicate where the event purchased land and a building with a mortgage would appear, if at all, on the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
d. Does not represent a cash flow
The third (final) step in preparing the statement of cash flows is to
a. analyze changes in noncurrent asset and liability accounts.
b. compare the net change in cash with the change in the cash account reported on the balance sheet.
c. determine net cash provided by operating activities.
d. list the noncash activities.
a. analyze changes in noncurrent asset and liability accounts.
b. compare the net change in cash with the change in the cash account reported on the balance sheet.
c. determine net cash provided by operating activities.
d. list the noncash activities.
b. compare the net change in cash with the change in the cash account reported on the balance sheet.
Which one of the following items is not necessary in preparing a statement of cash flows?
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing activities
d. Determine the cash in all bank accounts
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing activities
d. Determine the cash in all bank accounts
d. Determine the cash in all bank accounts
If accounts receivable have increased during the period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
c. revenues on an accrual basis are the same as revenues on a cash basis.
d. expenses on an accrual basis are greater than expenses on a cash basis.
a. revenues on an accrual basis are less than revenues on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
c. revenues on an accrual basis are the same as revenues on a cash basis.
d. expenses on an accrual basis are greater than expenses on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
If accounts payable have increased during a period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. expenses on an accrual basis are less than expenses on a cash basis.
c. expenses on an accrual basis are greater than expenses on a cash basis.
d. expenses on an accrual basis are the same as expenses on a cash basis.
a. revenues on an accrual basis are less than revenues on a cash basis.
b. expenses on an accrual basis are less than expenses on a cash basis.
c. expenses on an accrual basis are greater than expenses on a cash basis.
d. expenses on an accrual basis are the same as expenses on a cash basis.
c. expenses on an accrual basis are greater than expenses on a cash basis.
Which one of the following affects cash during a period?
a. Recording depreciation expense
b. Declaration of a cash dividend
c. Write-off of an uncollectible account receivable
d. Payment of an accounts payable
a. Recording depreciation expense
b. Declaration of a cash dividend
c. Write-off of an uncollectible account receivable
d. Payment of an accounts payable
d. Payment of an accounts payable
Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the
a. direct method.
b. indirect method.
c. working capital method.
d. cost-benefit method.
a. direct method.
b. indirect method.
c. working capital method.
d. cost-benefit method.
b. indirect method.