Final Exam

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1.The accounting process involves all of the following except a.identifying economic transactions that are relevant to the business. b.communicating financial information to users by preparing financial reports. c.recording nonquantifiable economic events.

d.analyzing and interpreting financial reports.

2.Financial accounting provides economic and financial information for all of the following except a.creditors.
b.investors.
c.managers.
d.other external users.

3.Generally accepted accounting principles are
a.income tax regulations of the Internal Revenue Service.
b.standards that indicate how to report economic events.
c.theories that are based on physical laws of the universe. d.principles that have been proven correct by academic researchers.

4.Stockholders' equity is best depicted by the following:
a.Assets = Liabilities.
b.Liabilities + Assets.
c.Residual equity + Assets.
d.Assets – Liabilities.

5.A T-account is
a.a way of depicting the basic form of an account.
b.what the computer uses to organize bytes of information.
c.a special account used instead of a trial balance.
d.used for accounts that have both a debit and credit balance.

6.Which of the following correctly identifies normal balances of accounts? a.AssetsDebit
LiabilitiesCredit
Stockholders' EquityCredit
RevenuesDebit
ExpensesCredit
b.AssetsDebit
LiabilitiesCredit
Stockholders' EquityCredit
RevenuesCredit
ExpensesCredit
c.AssetsCredit
LiabilitiesDebit
Stockholders' EquityDebit
RevenuesCredit
ExpensesDebit
d.AssetsDebit
LiabilitiesCredit
Stockholders' EquityCredit
RevenuesCredit
ExpensesDebit

7.Which of the following statements is true?
a.Debits increase assets and increase liabilities.
b.Credits decrease assets and decrease liabilities.
c.Credits decrease assets and increase liabilities.
d.Debits decrease liabilities and decrease assets.

8.The revenue recognition principle dictates that revenue should be recognized in the accounting records a.when cash is received.
b.when it is earned.
c.at the end of the month.
d.in the period that income taxes are paid.

9.Under accrual-basis accounting
a.cash must be received before revenue is recognized.
b.net income is calculated by matching cash outflows against cash inflows. c.events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d.the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles

10.Expenses incurred but not yet paid or recorded are called a.prepaid expenses.
b.accrued expenses.
c.interim expenses.
d.unearned expenses.

11.Accumulated Depreciation is
a.an expense account.
b.a stockholders' equity account.
c.a liability account.
d.a contra asset account.

12.Sue Smiley has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sue make? a.Debit Cash and credit Unearned Revenue

b.Debit Accounts Receivable and credit Unearned Revenue
c.Debit Accounts Receivable and credit Service Revenue
d.Debit Unearned Revenue and credit Service Revenue

13.After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the a.adjusted trial balance.
b.post-closing trial balance.
c.the general journal.
d.adjustments columns of the worksheet.

14.The net income (or loss) for the period
a.is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet. b.cannot be found on the...
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