Basic Arithmetic Quiz

1.

The accounting equation can be stated as

Assets = Liabilities + Owners' Equity

Stockholders

FASB (Financial Accounting Standards Board).

Provide information for decision making

2.

An entry made to the right side of an account is called a

Satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.

Income Statement.

Operating, financing, and investing.

Credit

3.

An entry made to the left side of an account is called

A debit

Operating, financing, and investing.

Income Statement.

Satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.

4.

The organization primarily responsible for setting accounting principles (GAAP) today is the:

Stockholders

Assets = Liabilities + Owners' Equity

Provide information for decision making

FASB (Financial Accounting Standards Board).

5.

One of the purposes of the notes to financial statements is to

$15,000.

$139,000.

Satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.

Income Statement.

6.

Which of the following items is reported as a current asset on a classified balance sheet?

Provide information for decision making

To those willing to spend the time to understand it.

Accounts receivable

Relevant

7.

Adjustments are necessary only if

Subscriptions Received in Advance, $1,200; Magazine Revenue, $3,800.

Meal is served

$25,700.

8.

A trial balance is

Accounts receivable; accounts payable

Objective; verifiable.

A double-entry system

A list of accounts and their balances (used to prove the equality of debits and credits).

9.

Working capital is defined as

Current assets minus current liabilities.

To those willing to spend the time to understand it.

Relevant

Accounts receivable

10.

If total assets were $50,000 and total liabilities were $35,000, then stockholders' equity would be

$139,000.

$15,000.

Accounts receivable

To those willing to spend the time to understand it.

11. The original/historical cost is used to record asset purchases because it is __________ and __________.

Meal is served.

Objective; verifiable.

Accounts receivable; accounts payable

12.

The financial statement that lists the revenues and expenses is referred to as the

Income Statement.

Accounts receivable

$139,000.

Satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.

13.

Although businesses engage in a wide variety of activities, all of these activities can be categorized into three types. These three types of business activities are

Operating, financing, and investing.

Accounts receivable

Building a manufacturing plant

Income Statement.

14.

If Sales equal $357,000, Cost of Goods Sold equals $218,000, and Operating Expenses equal $98,000, what is Gross Profit?

$139,000.

Current assets minus current liabilities.

$15,000.

To those willing to spend the time to understand it.

15.

Services are provided for customers and they are sent bills for the amount they owe. How does this affect the accounting equation?

To those willing to spend the time to understand it.

Assets increase and owners' equity increases

$15,000.

$139,000.

16. Which of the following groups would be considered an internal user of financial statements?

Stockholders

Factory managers supervising production line workers for Westinghouse

Assets = Liabilities + Owners' Equity

FASB (Financial Accounting Standards Board).

17.

Which of the following is the primary objective of financial reporting?

Provide information for decision making

Factory managers supervising production line workers for Westinghouse

Stockholders

Assets = Liabilities + Owners' Equity

18.

You are a banker and Phillip Morris, Inc., a tobacco company, has given you its most recent annual report in an effort to get a sizeable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time television last night, you are aware the company is a defendant in lawsuits from several states and by other parties that have been adversely impacted by cigarettes. The information presented on television is an example of financial information that is

To those willing to spend the time to understand it.

Relevant

Accounts receivable

Provide information for decision making

19.

The process of recording the economic effects of business transactions in a book of original entry is called

Accounts receivable; accounts payable

Journalizing

A double-entry system

Operating, financing, and investing.

20.

The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is called

A double-entry system

Journalizing

A list of accounts and their balances (used to prove the equality of debits and credits).

Accounts receivable; accounts payable

21. If the business has an _________ from a customer, then the customer has an ________ to the business

Objective; verifiable.

A list of accounts and their balances (used to prove the equality of debits and credits).

Accounts receivable; accounts payable

Earned; when the costs are incurred.

22.

Bart invested $15,000 in his business. How does this affect the accounting equation?

Factory managers supervising production line workers for Westinghouse

Provide information for decision making

To those willing to spend the time to understand it.

Assets increase and owners' equity increases

23.

Which of the following would be classified as external users of financial statements?

Factory managers supervising production line workers for Westinghouse

Stockholders

FASB (Financial Accounting Standards Board).

Assets = Liabilities + Owners' Equity

24.

Which of the following is a financing activity of a business?

Selling stock to investors

Building a manufacturing plant

Assets increase and owners' equity increases

25.

The accrual basis of accounting recognizes revenues when __________, and expenses __________.

Accounts receivable; accounts payable

Objective; verifiable.

Earned; when the costs are incurred

26.

CPA Monthly Company received advance payments from customers during 2006 of $5,000. At December 31, 2006, $1,200 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2006, the balances in the Subscriptions Received in Advance and Magazine Revenue accounts will be

Subscriptions Received in Advance, $1,200; Magazine Revenue, $3,800

$25,700.

Meal is served.

27.

The preparation of financial statements require that the information be understandable

To those willing to spend the time to understand it.

Relevant

Provide information for decision making

Factory managers supervising production line workers for Westinghouse

28.

Which of the following is an operating activity of a business?

Selling product for cash

Assets increase and owners' equity increases

Building a manufacturing plant

A debit

29.

Lizzie's Lunches operates a catering service. Conceptually, Lizzie should recognize revenue from its catering service at the date the (HINT: think about your answer to question 27)

Meal is served.

$2,100

Agencies

30.

Which of the following is an investing activity of a business?

Income Statement.

Selling stock to investors

Satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.

Building a manufacturing plant