20 questions
Which of the following is not one of the four basic financial statements?
The balance sheet
The statement of cash flows
The audit report
The income statement
Which of the following statements is FALSE regarding the balance sheet?
The accounts shown in a balance sheet represent the basic accounting equation for a particular business.
The retained earnings account shown on a balance sheet must agree with the end retained earnings balance shown on the Statement of Retained Earnings.
The balance sheet summarizes the net changes in specific account balances over a period of time.
The balance sheet reports the amount of assets, liabilities, and stockholders equity a company has at a point in time.
Which of the following is FALSE regarding retained earnings
Retained Earnings is increased by Net Income
Retained Earnings is a component of Stockholders Equity on the balance sheet
Retained Earnings is an asset on the balance sheet
Retained earnings represents earnings not yet distributed to stockholders in the form of dividends
Which of the following is NOT one of the items required to be shown on the heading of a financial statement?
The financial statement preparer's name
The title of the financial statement
The financial reporting date or period
The name of the business entity
Which of the following regarding GAAP is true?
GAAP is an abbreviation for generally applied accounting principles
Changes in GAAP always affect the amount of income reported by a company
GAAP is the abbreviation for generally accepted accounting principles
Changes to GAAP must be approved by the Senate Finance Committee
Which of the following is NOT an asset account?
Cash
Land
Equipment
Common Stock
Which of the following statements describes transactions that would be recorded in the accounting system?
An exchange of an asset for a promise to pay
An exchange of a promise for another promise
Both of the above
None of the above
The T account is used to summarize which of the following?
Increases and decreases to a single account in the accounting system
Debits and credits to a single account in the accounting system
changes to a specific account balance over time
All of the above describe how T accounts are used by accountants
If a publicly traded company is trying to maximize its perceived value to decision makers external to the company, the company is most likely to report too small of a value for which of the following on its balance sheet?
Assets
Liabilities
Retained Earnings
Common Stock
Which of the following statements would be true regarding the balance sheet?
In any given transaction, the total dollar amount of the debits and the total dollar amount of the credits must be equal.
Debits decrease certain accounts and credits decrease certain accounts
Liabilities and stockholders' equity accounts usually end in credit balances, while assets usually end up in debit balances
All of the above are true
Which of the following accounts is not a specific account in a company's accounting records?
Accounts Payable
Supplies
Sales Revenue
Net Income
When would a company be required to report the cost of an insurance policy as an expense?
When the insurance policy is first signed
When the company receives payments from an insurance claim
When the company receives the benefits from the policy over its period of coverage
Insurance is not recorded as an expense
If a company incorrectly records a payment as an asset rather than as an expense, how will this affect net income for the current accounting period?
Net income will be overstated
Net income will be understated
This error will have no effect on net income
There is no way of knowing how this will affect net income
A law firm receives a payment from a new client for services that will be provided in the future. What is the journal entry for this transaction?
Debit Accounts Receivable, credit Service Revenue
Debit Deferred Revenue, credit Service Revenue
Debit Cash, credit Deferred Revenue
Debit Deferred Revenue, credit Cash
A company reported the following amounts on its income statement. Service revenues: $32,500; Utilities expense: $300; Net income: $1,600; and Income tax expense: $900. If the only other account on the income statement was selling expenses, what would the amount be?
$2,200
$30,000
$29,700
$30,900
On December 31st, an adjustment was made to reduce deferred revenue and report service revenue generated. How many accounts will be included in this adjusting journal entry?
None
One
Two
Three
Which account is least likely to appear on an adjusting journal entry?
Income tax expense
Cash
Interest receivable
Salaries and wages expense
Assume a company receives a bill for $10,000 for advertising done during the current year. If this bill has not yet been recorded at the end of the year, what will the adjusting journal entry include?
Debit to advertising expense for $10,000
Credit to advertising expense for $10,000
Debit to Accrued Liabilities for $10,000
No adjusting journal entry is needed for this transaction
When a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is affected?
Accounts Payable
Accounts Receivable
Prepaid Expense
Deferred Revenue
Assume the balance in prepaid insurance is $2,500, but needs to be $1,500. The adjusting journal entry should include which of the following:
Debit to prepaid insurance for $1,000
Credit to insurance expense for $1,000
Debit to insurance expense for $1,000
Debit to insurance expense for $1,500