Accounting. Theory of Accounts

Topics: Balance sheet, Asset, Generally Accepted Accounting Principles Pages: 7 (1863 words) Published: June 15, 2013
Theory of Accounts
1.The fundamental qualitative characteristic of faithful representation has the components of a.Predictive value and confirmatory value
b.Comparability, consistency, and confirmatory value
c.Understandability, predictive value, and reliability
d.Completeness, neutrality, and freedom from error
2.The amount reported as “Cash” on a company’s balance sheet normally should exclude a.Postdated checks that are payable to the company
b.Cash in a payroll account
c.Undelivered checks written and signed by the company
d.Petty cash
3.Which of the following reconciling items would require an adjusting journal entry on the company’s books?
a.Outstanding checks
b.Non-sufficient fund checks
c.Deposits in transit
d.Cash on hand
4.In preparing a monthly bank reconciliation, which of the following items would be deducted from the balance reported on the bank statement to arrive at the correct cash balance?
a.Outstanding checks
b.Bank service charges
c.Deposit in transit
d.A customer’s note collected by the bank on behalf of the depositor 5.On October 1, 2011, a company received a one-year note receivable, bearing interest at market rate. The face of amount of the note receivable and the entire amount of the interest are due on September 30, 2012. The interest receivable account at December 31, 2011 would consist of the amount representing

a.three months of accrued interest income
b.nine months of accrues interest income
c.twelve months of accrued income
d.the excess on October 1, 2011 of the present value of the note receivable over its face value 6.Net realizable value of inventory is defined as the net amount that an enterprise expects to realize from the sale of inventory a.In the ordinary course of operations less estimated costs of completion and costs necessary to make a sale; b.Plus estimated costs of completion plus estimated costs necessary to make a sale c.In a forced sale

d.Plus estimated costs of completion
7.Which of the following statement is incorrect concerning biological assets? a.Biological assets are living animals and living plants
b.Agricultural activity is the management by an entity of the biological transformation of biological asset into agricultural produce or additional biological asset c.Biological assets are measured at fair value less costs to sell d.Agricultural produce is measured at fair value less costs to sell at the point of harvest less normal profit margin

8.Significant changes in the market value of trading securities occurring after the balance sheet date should a.Be considered in the valuation of the securities at the balance sheet date and disclosed in the notes to financial statements b.Be treated as a prior period error in next year’s financial statements c.Not be considered in the valuation of the securities at balance sheet date but disclosed in the notes to financial statements d.Result in an adjustment of the market value used in the lower of cost or market valuation at balance sheet date. 9.An investment property should be measured initially at

b.Cost less accumulated impairment losses
c.Depreciable cost less accumulated impairment losses
d.Fair value less accumulated impairment losses

10.The carrying amount of property, plant, and equipment subsequent to the acquisition is the a.Historical costs less accumulated depreciation
b.Revalued amount less accumulated depreciation and accumulated impairment losses thereon c.Amount at which an asset is recognized in balance sheet less accumulated depreciation and accumulated impairment losses thereon d.Fair value less accumulated impairment losses thereon

11.What is the acceptable approach in accounting for government grants? a.Government grants should be deferred and amortized over a maximum period of 20 years b.Government grants should be recognized as income over the periods necessary to match them with the related costs...
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