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Financial Accounting Fundamentals Chapter 1-4

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Multiple Choice
Natalie Balzert
Quiz by Natalie Balzert, updated more than 1 year ago
Natalie Balzert
Created by Natalie Balzert over 9 years ago
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Question 1

Question
What is the accounting equation?
Answer
  • Assets + Liabilities = Shareholder's Equity
  • Assets = Liabilities - Shareholder's Equity
  • Assets = Liabilities + Shareholder's Equity

Question 2

Question
Which of these is NOT one of the 5 steps in recording all accounting transactions?
Answer
  • Is it a business transaction? Yes or No?
  • What board type of accounts are affected?
  • What specific type of accounts are affected?
  • Which specific accounts has increased or decreased?
  • Which accounts are recorded in to journal entries?
  • Record all transactions in the Journal.

Question 3

Question
Which of these is NOT one of the 4 basic principles of accounting (GAAP) ?
Answer
  • Income principle
  • Measurement principle
  • Revenue recognition
  • Expense recognition
  • Full disclosure principle

Question 4

Question
What are the Rules for debits and credits?
Answer
  • Debit means right, Credit means left
  • Credit means left, Debit means left
  • Debit means left, Credit means no change
  • Debit means left, Credit means right

Question 5

Question
What are the 4 basic assumptions of accounting (GAAP) ?
Answer
  • Monetary assumption, Integrity assumption, Expense assumption, Business Entity assumption
  • Monetary assumption, Time period assumption, On going assumption, Business Entity assumption
  • Money assumption, Time period assumption, On going assumption, Business Enterprise assumption
  • Monetary assumption, Time travel assumption, On going assumption, Business Entity assumption

Question 6

Question
What are the 2 basic constraints of accounting?
Answer
  • Materiality Constrains and Cost Benefit Constraints
  • Materialistic Constraints and Cost Effective Constraints
  • Material Constraints and Cost Revenue Constraints
  • Materiality Constraints and Cost Effective Constraints

Question 7

Question
What is the definition of Assets?
Answer
  • Economic resource that used to have a benefit
  • Economic resource that has a future benefit

Question 8

Question
Define Liabilities.
Answer
  • Economic obligation that requires the use of an asset to pay it off.
  • Economic obligation that requires the shareholders to pay it off.

Question 9

Question
Define Equity
Answer
  • Is the excess of an asset over liabilities.
  • Is the expense of an asset over revenue.

Question 10

Question
What are the 5 types of accounts in all of accounting?
Answer
  • Asses, Liabilities, Shareholder's Equity, Revenue, Expense
  • Assets, Liabilities, Receivables, Equity, Revenue
  • Assets, Receivables, Shareholder's Equity, Revenue, Expense
  • Assets, Liabilities, Shareholder's Equity, Revenue, Expense

Question 11

Question
Define Revenue.
Answer
  • Is the amount received for selling an asset or the release (i.e. forgiveness) of debt and increases shareholder's dividends.
  • Is the amount received for selling an asset or the release (i.e. forgiveness) of debt and increases shareholder's equity.

Question 12

Question
Define expense.
Answer
  • Is an expired asset, which required an asset or another liability to pay it off and decreases shareholder's common stock value.
  • Is an expired asset, which required an asset or another liability to pay it off and decreases shareholder's equity.

Question 13

Question
Define accounting.
Answer
  • Is the process of accounting for anything of value or expense that needs to be accounted for in an accounting general ledger.
  • It is the counting of something that can be accounted for.
  • Consists of 3 basic activities. It identifies, records and hides the economic events of an organization to interested users.
  • Consists of 3 basic activities. It identifies, records and communicates the economic events of an organization to interested users.

Question 14

Question
What are 4 examples of accounting source documents recording all accounting transactions?
Answer
  • Bank statement, Receipt Pay Slip, A check.
  • Bank statement, Sales Invoice, Pay Slip, A check.
  • Federal statement, Sales Invoice, Pay Slip, A check.
  • Federal statement, Sales Invoice, Pay Slip, Money.

Question 15

Question
What is an account?
Answer
  • An account is an individual accounting record of increases and decreases in a specific asset, liability, shareholder's equity, unearned revenue and expense item.
  • An account is an individual accounting record of increases and decreases in a specific asset, liability, shareholder's equity, revenue and expense item.
  • An account is an individual accounting record of increases and decreases in a specific asset, liability, common stock and dividends, revenue and expense item.
  • An account is an individual accounting record of increases and decreases in a specific asset, liability, common stock, unearned revenue and expense item.

Question 16

Question
Debit always mean increase and credit always means decrease.
Answer
  • True
  • False

Question 17

Question
Why are accounting systems called double-entry?
Answer
  • A system that records in appropriate accounts the unique effect of each transaction.
  • A system that records in appropriate accounts the single effect of each transaction.
  • A system that records in appropriate accounts the dual effect of each transaction.

Question 18

Question
Monthly and quarterly time periods are called
Answer
  • calendar periods.
  • fiscal periods.
  • interim periods.
  • quarterly periods.

Question 19

Question
The time period assumption states that
Answer
  • a transaction can only affect one period of time.
  • estimates should not be made if a transaction affects more than one time period.
  • adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations.
  • the economic life of a business can be divided into artificial time periods.

Question 20

Question
An accounting time period that is one year in length, but does not begin on January 1st, is referred to as
Answer
  • a fiscal year.
  • an interim period.
  • the time period assumption.
  • a reporting period.

Question 21

Question
Adjustments would not be necessary if financial statements were prepared to reflect net income from
Answer
  • monthly operations.
  • fiscal year operations.
  • interim operations.
  • lifetime operations.

Question 22

Question
Management usually desires________________ financial statements and the IRS requires all businesses to file _______________ tax returns.
Answer
  • annual, annual
  • monthly, annual
  • quarterly, monthly
  • monthly, monthly

Question 23

Question
The time period assumption is also referred to as the
Answer
  • calendar assumption.
  • cyclicity assumption.
  • periodicity assumption.
  • fiscal assumption.

Question 24

Question
In general, the shorter the time period, the difficulty of making the proper adjustments to accounts
Answer
  • is increased.
  • is decreased.
  • is unaffected.
  • depends on if there is a profit or loss.

Question 25

Question
Which of the following is NOT common time period chosen by businesses as their accounting period?
Answer
  • Daily.
  • Monthly.
  • Quarterly.
  • Annually.

Question 26

Question
Which of the following time periods would NOT be referred to as an interim period?
Answer
  • Monthly
  • Quarterly
  • Semi-annually
  • Annually

Question 27

Question
The fiscal year of a business is usually determined by
Answer
  • the IRS.
  • a lottery.
  • the business.
  • the SEC.

Question 28

Question
Which of the following are in accordance with generally accepted accounting principles?
Answer
  • Accrual basis accounting.
  • Cash basis accounting.
  • Both accrual basis and cash basis accounting.
  • Neither accrual basis nor cash basis accounting.

Question 29

Question
The revenue recognition principle dictates that revenue should be recognized in the accounting period
Answer
  • in which cash is received.
  • in which the performance obligation is satisfied.
  • at the end of the month.
  • in which income taxes are paid.

Question 30

Question
In a service-type business, revenue is recognized
Answer
  • at the end of the month.
  • at the end of the year.
  • when the service is performed.
  • when cash is received.

Question 31

Question
The expense recognition principle matches
Answer
  • customers with businesses.
  • expenses with revenues.
  • assets with liabilities.
  • creditors with businesses.

Question 32

Question
Which one of the following is not a justification for adjusting entries?
Answer
  • Adjusting entries are necessary to ensure that the revenue recognition principle is followed.
  • Adjusting entries are necessary to ensure that the expense recognition principle is followed.
  • Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.
  • Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Question 33

Question
An adjusting entry
Answer
  • affects two balance sheet accounts.
  • affects two income statement accounts.
  • affects a balance sheet account and an income statement account.
  • is always a compound entry.

Question 34

Question
The preparation of adjusting entries is
Answer
  • straight forward because the accounts that need adjustment will be out of balance.
  • often an involved process requiring the skills of a professional.
  • only required for accounts that do not have a normal balance.
  • optional when financial statements are prepared.

Question 35

Question
If a resource has been consumed but a bill has not been received at the end of the accounting period, then
Answer
  • an expense should be recorded when the bill is received.
  • an expense should be recorded when the cash is paid out.
  • an adjusting entry should be made recognizing the expense.
  • is is optional whether to record the expense before the bill is received.

Question 36

Question
Accounts often need to be adjusted because
Answer
  • there are never enough accounts to record all the transactions.
  • many transactions affect more then one time period.
  • there are always errors made in recording transactions.
  • management can' decide what they want to report.

Question 37

Question
Adjusting entries are
Answer
  • not necessary if the accounting system is operating properly.
  • usually required before financial statements are prepared.
  • made whenever management desires to change an account balance.
  • made to balance sheet accounts only.

Question 38

Question
All of the following statements are correct except
Answer
  • adjusting entries ensure that the revenue recognition and expense recognition principles are followed.
  • a company must make adjusting entries every time is prepares financial statements.
  • adjusting entries are made to balance sheet accounts only.
  • companies often prepare adjusting entries after the balance sheet date, but date them as of the balance sheet date.

Question 39

Question
Accountants refer to an economic event as a
Answer
  • purchase.
  • sale.
  • transaction.
  • change in ownership.

Question 40

Question
The process of recording transactions has become more efficient because
Answer
  • fewer events can be quantified in financial terms.
  • computers are used in processing business events.
  • more people have been hired to record business transactions.
  • business events are recorded only at the end of the year.

Question 41

Question
Communication of economic events is the part of the accounting process that involves
Answer
  • identifying economic events.
  • quantifying transactions into dollars and cents.
  • preparing accounting reports.
  • recording and classifying information.

Question 42

Question
The use of computers in recording business events
Answer
  • has made the recording process more efficient.
  • does not use the same principles as manual accounting systems.
  • has greatly impacted the identification stage of the accounting process.
  • is economical only for large businesses.

Question 43

Question
Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?
Answer
  • The appointment of a new CPA firm to perform an audit.
  • The purchase of a new computer.
  • The sale of store equipment.
  • Payment of income taxes.

Question 44

Question
The accounting process involves all of the following except
Answer
  • identifying economic transactions that are relevant to the business.
  • communicating financial information to users by preparing financial reports.
  • recording non-quantifiable economic events.
  • analyzing and interpreting financial reports.

Question 45

Question
The accounting process is correctly sequenced as
Answer
  • identification, communication, recording.
  • recording, communication, identification.
  • identification, recording, communication.
  • communication, recording, identification.

Question 46

Question
Which of the following techniques are NOT used by accountants to interpret and report financial information?
Answer
  • Graphs.
  • Special memos for each class of external users.
  • Charts.
  • Ratios.

Question 47

Question
Accounting consists of three basic activities which are related to economic events of an organization. These include
Answer
  • identifying, recording and communicating.
  • identifying, calculating and responding.
  • classifying, numbering and reporting.
  • issuing, reporting and classifying.

Question 48

Question
All of the following statements are correct except
Answer
  • Good decision-making depends on good information.
  • A vital element in communicating economic events is the accountant's ability to analyze and interpret reported information.
  • The origins of accounting are generally attributed to Socrates, a classical Greek philosopher, who promoted accounting as a social contract.
  • The information that a user of financial information needs depends upon the kinds of decisions the user makes.

Question 49

Question
An account consists of
Answer
  • one part.
  • two parts.
  • three parts.
  • four parts.

Question 50

Question
The left side of an account is
Answer
  • blank.
  • a description of the account.
  • the debit side.
  • the balance of the account.

Question 51

Question
Which of the following is NOT part of an account?
Answer
  • Credit side.
  • Trial balance.
  • Debit side.
  • Title.

Question 52

Question
An account is a part of the financial information system and is described by all except which one of the following?
Answer
  • An account has a debit and credit side.
  • An account is a source document.
  • An account may be part of a manual or a computerized accounting system.
  • An account has a title.

Question 53

Question
The right side of an account
Answer
  • is the correct side.
  • reflects all transactions for the accounting period.
  • shows all the balances of the accounts in the system.
  • is the credit side.

Question 54

Question
An account consists of
Answer
  • a title, a debit balance and a credit balance.
  • a title, a left side and a debit balance.
  • a title, a debit side and a credit side.
  • a title, a right side and and debit balance.

Question 55

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

Question 56

Question
Credits
Answer
  • decrease both assets and liabilities.
  • decrease assets and increase liabilities.
  • increase both assets and liabilities.
  • increase assets and decrease liabilities.

Question 57

Question
A debit to an asset account indicates
Answer
  • an error.
  • a credit was made to a liability account.
  • a decrease in the asset.
  • an increase in the asset.

Question 58

Question
The normal balance of any account is the
Answer
  • left side.
  • right side.
  • side which increases that account.
  • side which decreases that account.

Question 59

Question
The double-entry system requires that each transaction must be recorded
Answer
  • in at least two different accounts.
  • in two sets of books.
  • in a journal and in a ledger.
  • first as a revenue and then as an expense.

Question 60

Question
A credit is not the normal balance for which account listed below?
Answer
  • Common stock account.
  • Revenue account.
  • Liability account.
  • Dividends account.

Question 61

Question
Which of the following represents the expanded basic accounting equation?
Answer
  • Assets = Liabilities + Common stock + Retained Earnings + Dividends - Revenues - Expenses
  • Assets + Dividends + Expenses = Liabilities + Common Stock + Retained Earnings + Revenues
  • Assets - Liabilities - Dividends = Common Stock + Retained Earnings + Revenues - Expenses
  • Assets = Revenues + Expenses - Liabilities

Question 62

Question
Preparing a worksheet involves
Answer
  • two steps
  • three steps
  • four steps
  • five steps

Question 63

Question
The adjustments entered in the adjustments columns of a worksheet are
Answer
  • not journalized.
  • posted to the ledger but not journalized.
  • not journalized until after the financial statements are prepared.
  • journalized before the worksheet is completed.

Question 64

Question
The information for preparing a trial balance on a worksheet is obtained from
Answer
  • financial statements.
  • general ledger accounts.
  • general journal entries.
  • business documents.

Question 65

Question
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
Answer
  • adjusted trial balance.
  • post-closing trial balance.
  • the general journal.
  • adjustments columns of the worksheet.

Question 66

Question
If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has
Answer
  • earned net income for the period.
  • an error because debits do not equal credits.
  • suffered a net loss for the period.
  • to make and adjusting entry.

Question 67

Question
A worksheet is a multiple column form that facilitates the
Answer
  • identification of events.
  • measurement process.
  • preparation of financial statements.
  • analysis process.

Question 68

Question
Which of the following companies would be least likely to use a worksheet to facilitate the adjustment process?
Answer
  • Large company with numerous accounts.
  • Small company with numerous accounts.
  • All companies, since worksheets are required under generally accepted accounting principles.
  • Small company with few accounts.

Question 69

Question
A worksheet can be thought of as a(n)
Answer
  • permanent accounting record.
  • optional device used by accountants.
  • part of the general ledger.
  • part of the journal.

Question 70

Question
The account, Supplied, will appear in the following debit columns of the worksheet.
Answer
  • Trial Balance.
  • Adjusted Trial Balance.
  • Balance Sheet.
  • All of these.

Question 71

Question
When constructing a worksheet, accounts are often needed that are not listed in the trial balance already entered on the worksheet from the ledger. Where should that additional accounts be shown on the worksheet?
Answer
  • They should be inserted in alphabetical order into the trial balance accounts already given.
  • They should be inserted in chart of account order into the trial balance already given.
  • They should be inserted on the lines immediately below the trial balance totals.
  • They should not be inserted on the trial balance until the next accounting period.
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