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Accounting Test 1
Accounting Test 1
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Questions
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Answers
1
Without the time period assumption companies could not compare multiple years of accounting records
False
True
2
Financial Statements can be prepared
Quarterly and annually
once a month
Quarterly
Annually
3
Which of the following statements does not give users an accurate picture of a companies financial situation
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash flows
4
The income statement validates the matching principle
False
True
5
Assets, liabilities, and stockholders’ equity are found on what financial statement?
Statement of Retained Earnings
Income Statement
Statement of Cash Flows
Balance Sheet
6
A partnership
Is a legal organization separate from its owners
Has unlimited liability.
Has to have a written agreement in order to be legal
Is also called a sole proprietorship.
7
The following is a liability where money has been received before services have been performed
Accounts receivable
Unearned revenue
Accrued Expense
Depreciation
8
A return on assets ratio
measures a companies profitability
how efficiently a company is using its assets
The amount of of assets a company has
The operating, investing and fiancing activities of a company
9
The statement of retained earnings
Reports how retained earnings changes over a period of time.
Reports on cash flows for operating, financing, and investing activities
Reports how expenses have been spent by the company
Reports on amounts for assets, liabilities, and equity at a point in time
10
When revenues exceed expenses, which of the following is true?
A net loss occurs
A Net income occurs
assets =liabilties
equity is decreased
11
Prepaid Expense are a
Only and Expense
Asset and Liability
liability
asset
12
An example of an investing activity is
buying another company
selling land
purchasing land
developing a product in another country
13
Accrued Expense is a
Equity Account
Asset
Liability
Expense
14
Which of the following is NOT one of the 3 main accounting activities
Analyzing
Recording
Identifying
Communicating
15
The operating functions of a business include:
All of the Above
Research
Marketing
Purchasing
16
Internal users of accounting information always include
shareholders
managers
lenders
suppliers
17
Bonds payable are used by companies to raise funds for new products, expansions or pay off debt
True
False
18
The time period assumption assumes that the life of a company can be divided over months and years
False
True
19
This type of income statement shows different sources of income
asset part of income statement
expense part of income statement
single step income statement
multistep income statement
20
Retained Earnings
decrease equity
increase equity
increase assests
increase expenses
21
An example of a financing activity is
issuing bonds and obtaining a long term loan
issuing bonds
buying office supplies
obtaining a long term loan
22
This type of expense is when a business uses a service one month but does not pay to the next month
inventory
unearned revenue
prepaid expense
accrued expense
23
Generally accepted accounting principles:
Arise from the rulings of authoritative bodies.
Are based on long used accounting practices.
Are basic assumptions, concepts, and guidelines for preparing financial sta
All of the above
24
Financial Statement are only issued
quarterly
all of the above
during an audit
annually
25
Which of the following financial statements reports information as of a point in time?
Income statement
Cash Flow Statement
Balance Sheet
Statement of Retained Earnings
26
The primary objective of financial accounting is:
To assist external users in analyzing a companies finances
to assist in preventing fraud
To serve as internal controls
To serve the decision-making needs of internal users.
27
Assets created by selling goods and services on credit are:
Accounts payable
notes payable
Expense
Accounts receivable
28
The matching principe states that you must match
Depreciation and Equity
Assets and Net Income
Revenues and expenses
Assets and Liabilites
29
Net income is used in the calculation of
Ending Retained Earnings
Net loss
Dividends
depreciation
30
Notes payables are short term liabilities
False
True
31
The full disclosure principle emphasizes
that companies tell the truth about company finances
that companies stay in business
that companies maintain adequate cash flow
that companies are objective
32
The Revenue Recognition Principle says to record transactions
when a transaction is completed
when you have time to
after financial statements are prepared
immediately
33
This financial statement measures how much money a kept has held back and not distributed to shareholders
Statement of Cash Flows
Income Statement
Balance sheet
Retained Earnings Statement
34
Which of the following is a more reliable indicator of a companies financial position
Income Statement
Balance Sheet
Statement of Cash Flows
Retained Earnings Statement
35
An IPO is the process by which public companies become private companies
True
False
36
The private governing body of accounting in the U.S
FIASB
IASB
FASB
BASI
37
The first step in working with the accounting equation is determining what category an item fits into
True
False
38
The financial statement that reports whether the business earned a profit
Statement of Cash Flows
Statement of Retained Earnings
Income Statement
Balance Sheet
