The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)
Question 1 The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)
prior period statement
statement of owner’s equity
income statement
balance sheet
Question 2 The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients for what period after their last audit of the client?
Indefinitely
One year
Two years
There is no such prohibition.
Question 3 Revenues are reported when
a contract is signed
cash is received from the customer
work is begun on the job
work is completed on the job
Question 4 A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing
the Income Statement.
the Balance Sheet.
the Statement of Cash Flows.
cannot be determined.
Question 5 Earning revenue
increases assets, increases owner’s equity.
increases assets, decreases owner’s equity
increases one asset, decreases another asset
decreases assets, increases liabilities
Question 6 Liabilities are reported on the
income statement
statement of owner’s equity
statement of cash flows
balance sheet
Question 7Which of the following is not an asset?
Investments
Cash
Inventory
Owner’s Equity
Question 8 A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to
increase one asset, decrease another asset
decrease an asset, decrease a liability
increase an asset, increase a liability
increase an asset, increase owner’s equity
Question 9 Which of the following best describes accounting?
records economic data but does not communicate the data to users according to any specific rules.
is an information system that provides reports to users regarding economic activities and condition of a business.
is of no use by individuals outside of the business.
is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements.
Question 10In accordance with the debit and credit rules, which of the following is true?
Debits increase assets.
Credits increase assets.
Debits increase both assets and capital.
Credits increase both assets and liabilities.
Question 11A chart of accounts is
the same as a balance sheet
usually a listing of accounts in alphabetical order
usually a listing of accounts in financial statement order
used in place of a ledger
Question 12March10Accounts Payable 3,300 Cash 3,300 Paid creditors on account
What effect does this journal entry have on the accounts?
Decrease accounts payable, increase cash
Increase cash, decrease accounts payable
Increase accounts payable, increase cash
Decrease accounts payable, decrease cash
Question 13The debit side of an account
depends on whether the account is an asset, liability or owner’s equity
can be either side of the account depending on how the accountant set up the system
is the right side of the account
is the left side of the account
Question 14A debit signifies a decrease in
assets
expenses
drawing
revenues
Question 15April23Cash
14,000 Jim Xu, Capital
14,000 Invest cash in Xu Co.
The journal entry will:
Increase Capital and decrease Cash
Increase Cash and decrease Capital
Increase Cash and increase Capital
Decrease Cash and decrease Capital
Question 16Which of the following entries records the payment of rent for the current month?
Cash, debit; Rent Expense, credit
Rent Expense, debit; Cash, credit
Rent Expense, debit; Accounts Receivable, credit
Accounts Payable, debit; Rent Expense, credit
Question 17Which of the following entries records the collection of cash from cash customers?
Fees Earned, debit; Cash, credit
Fees Earned, debit; Accounts Receivable, credit
Cash, debit; Fees Earned, credit
Accounts Receivable, debit; Fees Earned, credit
Question 18Which of the following entries records the receipt of cash from patients on account?
Accounts Payable, debit; Fees Earned, credit
Accounts Receivable, debit; Fees Earned, credit
Accounts Receivable, debit; Cash, credit
Cash, debit; Accounts Receivable, credit
Question 19One of the accounting concepts upon which deferrals and accruals are based is
matching
cost
price-level adjustment
conservatism
Question 20When is the adjusted trial balance prepared?
Before adjusting journal entries are posted
After adjusting journal entries are posted.
After the adjusting journal entries are journalized
Before the adjusting journal entries are journalized.
Question 21A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
debit Salaries Payable, $8,000; credit Cash, $8,000
debit Salary Expense, $8,000; credit Drawing, $8,000
debit Salary Expense, $8,000; credit Salaries Payable, $8,000
debit Drawing, $8,000; credit Cash, $8,000
Question 22Deferred expenses have
not yet been recorded as expenses or paid
been recorded as expenses and paid
been incurred and paid
not yet been recorded as expenses
Question 23The adjusting entry to record the depreciation of equipment for the fiscal period is
debit Depreciation Expense; credit Equipment
debit Depreciation Expense; credit Accumulated Depreciation
debit Accumulated Depreciation; credit Depreciation Expense
debit Equipment; credit Depreciation Expense
Question 24Using accrual accounting, expenses are recorded and reported only
when they are incurred, whether or not cash is paid
when they are incurred and paid at the same time
if they are paid before they are incurred
if they are paid after they are incurred
Question 25Which of the accounting steps in the accounting process below would be completed last?
preparing the adjusted trial balance
posting
preparing the financial statements
journalizing
Question 26The account type and normal balance of Prepaid Expense is
revenue, credit
expense, debit
liability, credit
asset, debit
Question 27The matching concept
addresses the relationship between the journal and the balance sheet
determines whether the normal balance of an account is a debit or credit
requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
determines that expenses related to revenue be reported at the same time the revenue is reported
Question 28The classified Balance Sheet will divide its Liabilities Section as the following subsections
Current Liabilities and Long-Term Liabilities
Current Liabilities and Other Liabilities
Other Liabilities and Long-Term Liabilities
Present Liabilities and Tomorrow’s Liabilities
Question 29In the accounting cycle, the last step is
preparing the financial statements
journalizing and posting the adjusting entries
preparing a post-closing trial balance
journalizing and posting the closing entries
Question 30Short-term liabilities are those liabilities that
will be paid in less than one year
are due to paid in 5 to 10 years
are due to be paid in more than one year
are liabilities owed to the owner and will never be paid
Question 31The worksheet
is an integral part of the accounting cycle
eliminates the need to rewrite the financial statements
is a working paper that is required
is used to summarize account balances and adjustments for the financial statements
Question 32The following are steps in the accounting cycle. Of the following, which would be prepared last?
An adjusted trial balance is prepared.
Transactions are posted to the ledger.
An unadjusted trial balance is prepared.
Adjusting entries are journalized and posted to the ledger.
Question 33A fiscal year
ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
for a business is determined by the federal government
always begins on January 1 and ends on December 31 of the same year
should end at the height of the business’s annual operating cycle
Question 34After all of the account balances have been extended to the Income Statement columns of the work sheet, the totals of the debit and credit columns are $77,500 and $85,300, respectively. What is the amount of the net income or net loss for the period?
$7,800 net income
$7,800 net loss
$85,300 net income
$77,500 net loss
Question 35There are four closing entries. The first one is to close ____, the second one is to close ____, the third one is to close ____, and the last one is to close ____.
Revenues, expenses, income summary, drawing account
Expenses, assets, income summary, capital account
Capital account, drawing account, income summary, assets
Drawing account, income summary, expenses, revenues
Question 36The Statement of Owner’s Equity should be prepared
before the income statement and after the balance sheet
before the income statement and balance sheet
after the income statement and balance sheet
after the income statement and before the balance sheet
Question 37In credit terms of 3/15, n/45, the “3” represents the
number of days in the discount period
full amount of the invoice
number of days when the entire amount is due
percent of the cash discount
Question 38Merchandise inventory is classified on the balance sheet as a
Current Liability
Current Asset
Long-Term Asset
Long-Term Liability
Question 39In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is
debit Cost of Merchandise Sold; credit Sales
debit Cost of Merchandise Sold; credit Merchandise Inventory
debit Merchandise Inventory; credit Cost of Merchandise Sold
debit Accounts Receivable; credit Merchandise Inventory
Question 40The primary difference between a periodic and perpetual inventory system is that a
periodic system determines the inventory on hand only at the end of the accounting period
periodic system keeps a record showing the inventory on hand at all times
periodic system provides an easy means to determine inventory shrinkage
periodic system records the cost of the sale on the date the sale is made
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