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Accounting Tests Answer
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Accounting
04/29/2012

Additional Accounting Flashcards

 


 

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Term
For the basic accounting equation to stay in balance each transaction recorded must
Definition
Affect two or more accounts
Term
Calculate Current Ration
Definition
Current assets/Current liabilities
Term
One of the accounting concepts upon which adjustments for prepayments and accruals are based is?
Definition
Matching
Term
A trial balance proves …
Definition
The mathematical equality of debits + credits after the posting process
Term
Adjusting entries are required
Definition
Because some costs occur with the passage of time and have not yet been journalized
Term
In a service-type business, revenue is considered earned
Definition
When service is performed
Term
Generally accepted accounting principles are
Definition
General rules and standards that are recognized as guidelines for financial reporting
Term
The purchase of an asset on credit
Definition
Increases assets and liabilities
Term
An account is a part of the financial information system and is described by all except which one?
Definition
An account is a source document
Term
A person who wants to determine the balance of a particular account should refer to the
Definition
Ledger
Term
the time period assumption states
Definition
The life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared
Term
On a classified balance sheet, companies usually list current assets
Definition
In the order they are expected to be converted to cash
Term
Why do generally accepted accounting principles require the application of the revenue recognition principle?
Definition
Failure to apply the revenue recognition principle could lead to a misstatement of revenue earned in a period
Term
Debt to total assets
Definition
Total Liabilities/ Total Assets
Term
Liabilities are generally classified on a balance sheet as
Definition
Current Liabilities and long term liabilities
Term
The retained earnings statement would not show
Definition
Revenues and expenses
Term
Which of the following is the most appropriate and modern definition of accounting?
Definition
The Information system that identifies, records, and communicates the economic events of an organization to interested users
Term
Which of the following is an advantage of cooperation relative to partnership and proprietorships?
Definition
Reduce Legal Liabilities for investors
Term
Relevant accounting information
Definition
Is information that is capable of making a difference in a business decision
Term
All of the following are significant contribution that the – makes the recording process except
Definition
Keeps complete info about changes in a specific account balance in one place
Term
Recording a cash dividend will
Definition
decrease retained earnings
Term
The most important information needed to determine if companies can pay their current obligations is the
Definition
relationship between current assets + Current Liabilities
Term
A credit is not the normal balance of accounts for which accounts ?
Definition
Dividend account
Term
An adjusting entry affects?
Definition
The balance sheet account and an income statement account
Term
An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
Definition
A credit balance in an expense account
Term
Which of the following would not considered an internal user of accounting data for the xanda company?
Definition
Presidents of the employee’s labor union
Term
Stock holders’ equity includes
Definition
retained earnings and common stock
Term
Which activities involve acquiring the property, plant, and equipment assets to run the business?
Definition
Investing
Term
A debit to an asset account indicates
Definition
a increase in the asset
Term
In recording an accounting transaction in a double entry system..
Definition
The amount of the debits must equal the amount of the credits
Term
trademarks would appear in which balance sheet section?
Definition
Intangible assets
Term
A practical decision to expense small capital expenditures rather than record them as property, plant , and equipment and deprecate them probably is made in the basis of the characteristics of
Definition
Materiality
Term
A short term creditor is primarily interested in the
Definition
Liquidity of the buyer
Term
The advantages of obtaining long term funds by issuing bonds rather than issuing additional common stock, include which of the following?
Definition
- Interest payments and tax deductibles to the company while dividends are..
- Expansion is achieved without surrendering ownership control
Term
which of the following best describes credit sales?
Definition
Sales to customers on account
Term
The exclusive right to benefit from a creative work such as a film is a
Definition
Copyright
Term
Gains on the sale of fixed assets for cash
Definition
Are the excess of the cash received over the book value
Term
allowance for uncollectible account is
Definition
A contra asset account
Term
Research and development costs should be capitized when the …
Definition
None are correct as research and development costs are never capitalized under U.S. accouting rules
Term
Price reduction is an example of
Definition
Sales allowance
Term
A bond issued at a premium indicates that at the date of issues
Definition
Bonds were issues at a price greater than their face value
Term
20 million 10 year bond at a 10 percent interst rate …. What effect the financial statement?
Definition
assets and liabilities increase
Term
In recording accounting goodwill
Definition
May be recorded when the company purchases another business
Term
Bonds 1 and 2
Definition
Stated rate of return 5% and 7%
Market rate of return 7% and 8%
Term
Which of the following definitions describes a secured bond?
Definition
Supposed by specific assets pledged as collateral by the issuer
Term
Which of the following would be recorded as land improvement?
Definition
Adding a parking lot
Term
Straight line depreciation method
Definition
Gains/ losses
Term
Toms textiles shipped the wrong material to a customer, who refused to accept the order. This is an example of…?
Definition
Sales Return
Term
The primary difference between a note receivable and an account receivable is?
Definition
A note receivable is evidence by a written debt instrument
Term
the cash interest payment for a bond each period is calculated as the…
Definition
Face amount times the stated interest rate
Term
The depreciable cost used in calculation depreciation expense is calculated as the …
Definition
Face amount time the stated interest rate
Term
Straight line depreciation method is a…
Definition
Amortization expense
Term
Which of the following regarding the book value of an asset in correct?
Definition
It reflects the original cost of assets less accumulated depreciation
Term
Replacement of a major component increases the production capacity of equipment from 10 units per hour to 18 units per hour…. Expenditure for the replacement component should be debited to ?
Definition
Equipment
Term
Which accounting principle does the direct write-off method violate ?
Definition
Matching
Term
Straight line method depreciation
Definition
Record adjustments to journal entries
Term
Other revenues + Gains?
Definition
Gain on sale of display costs
Term
Factor in Physical inventory count?
Definition
Legal title
Term
When using a perpetual inventory system why are discounts credited to merchandeise inventory ?
Definition
The discounts reduce the cost of the merchandise inventory
Term
Which of the following is not an objective of a system of internal controls?
Definition
Fairness of the financial statements
Term
If a customer agrees to retain merchandisr that is defective because the seller is willing to reduce the selling price this transaction is known as a sales…
Definition
Allowance
Term
Which statement is false?
Definition
Companies that use a perpetual inventory system must take a physical inventory to be able to determine inventory on hand of the balance sheet date and to be able to determine cost of goods sold for accounting period’s
Term
Multiple step income statement?
Definition
Highlights the components of net income
Term
Which of the following would be deducted from the balance per books on a bank reconciliation
Definition
Service Charges
Term
Under the concept of establishment of responsibility how many people should have the ultimate responsibility ?
Definition
Only 1 person
Term
The entry to record a sale of $ 6,400 with terms of 2/10 n/30 will…
Definition
Credit to sales for $ 6,400
Term
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit…
Definition
Merchandise Inventory
Term
Not to be included in the physical inventory of a company …
Definition
Goods held on consignment from another company
Term
Increase in inventoriable costs for the buyer of goods?
Definition
Freight charges paid by the purchaser
Term
A/P clerk also has access to the approved supplier master file for purchases. This principle is…
Definition
Separation of duties
Term
Which of the following is an inventory casting method?
Definition
Specific Identification
Term
In periods of rising prices , which is an advantage of using Lifo inventory costing method?
Definition
Cost of goods will include latest( most recent) costs and thus will be more realistic
Term
which of the following bank reconciliation items would not result in an adjusting entry?
Definition
Outstanding Checks
Term
the accounting principle that requires the cost flow assumption to be consistent with the physical movement of goods is….
Definition
Non-existent because there is no such accounting requirement
Term
Which of the following items on items on a bank reconciliation would require an adjusting entry on the companys books?
Definition
A bank service charge
Term
Inventory becomes part of COGS when a company …
Definition
Sells inventory
Term
which of the following account has a normal credit balance
Definition
Purchase Returns