Fucking Financial Accounting Test 1

103 Questions

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Financial Accounting Quizzes & Trivia

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Questions and Answers
  • 1. 
    Accounting
    • A. 

      An information system that measures, processes, and communicates financial information about an economic entity

    • B. 

      Asset = liabilities + stock holders equity

    • C. 

      The amount over par value in a corporations contributed capital

  • 2. 
    Financial accounting
    • A. 

      The recording of all business transaction in terms of money

    • B. 

      The most important body for developing rules on accounting practice

    • C. 

      The process of generating and communicating accounting information in the form of financial statements to those outside the organization

  • 3. 
    Dividends
    • A. 

      Competence and diligence in carrying professional responsibilities

    • B. 

      Distributions to stockholders of assets (usually cash) generated by past earnings

    • C. 

      The economic resources of a company that are expected to benefit future operations

  • 4. 
    Management accounting
    • A. 

      The people who have overall responsibility for operating a business and meeting its goals

    • B. 

      The process of producing accounting information for internal use by managers

    • C. 

      The process of producing accounting information for external use by managers

  • 5. 
    Financial accounting standards board (fasb) is the most important body for developing rules on accounting practice; it issues statements of financial accounting standards
    • A. 

      True

    • B. 

      False

  • 6. 
    Public company accounting oversight board (pcaob) is a governmental body created by the sarbanes-oxley act to regulate the accounting profession
    • A. 

      True

    • B. 

      False

  • 7. 
    Balance sheet
    • A. 

      The most common form of stock

    • B. 

      The financial statement that shows a business's assets, liabilities, and stock holders equity as of specific date. also called the statement of financial position

    • C. 

      The value of one currency in terms of another

  • 8. 
    Accounting equation
  • 9. 
    Assets
    • A. 

      The economic resources of a company that are expected to benefit future operations

    • B. 

      The inflows and outflows of cash into and out of a business

    • C. 

      The most common form of stock

  • 10. 
    Liabilities
    • A. 

      Activities undertaken by management to spend capital in productive ways that will help a business achieve its objectives

    • B. 

      Having enough cash available to pay debts when they are due

    • C. 

      A business's present obligations to pay cash, transfer assets, or provide services to other entities in the future

  • 11. 
    Equity
    • A. 

      The oversight of a corporation's management and ethics by the board of directors

    • B. 

      A code of conduct that addresses whether actions are right or wrong

    • C. 

      Represents the claims of the owners of a corporation (the shareholders) to the assets of the business.

  • 12. 
    Revenues
    • A. 

      Decreases in stockholders equity that result from operating a business

    • B. 

      Increases in stockholders equity that result from operating a business

  • 13. 
    Expenses
    • A. 

      Increases in stockholders equity that result from operating a business

    • B. 

      Decreases in stockholders equity that result from operating a business

  • 14. 
    Retained earnings
    • A. 

      Stockholders' equity that has been generated by business operations and kept for use in the business

    • B. 

      Impartiality and intellectual honesty

    • C. 

      The recording of all business transactions in terms of money

  • 15. 
    Partnership
    • A. 

      A business that is owned by two or more people and that is incorporated

    • B. 

      A business that is owned by two or more people and that is not incorporated

  • 16. 
    Corporation
    • A. 

      A business unit granted a state charter recognizing it as separate legal entity having it own rights, privileges, and liabilities distinct from those of its owners.

    • B. 

      The economic resources of a company that are expected to benefit future operations

  • 17. 
    Disadvantages of partnership vs corporation: a partnership is the unlimited liability of its owners. unlimited liability can be avoided by organizing the business as a corporation or, in some states, by forming what is known as a limited liability partnership.
    • A. 

      True

    • B. 

      False

  • 18. 
    Advantages of partnership vs corporation: it is a part partnership, the owners share the profits and losses of the business, and their personal resources can be called on to pay the obligations of the business.
    • A. 

      True

    • B. 

      False

  • 19. 
    Investors
    • A. 

      Stockholders, who invest or may invest in a business and acquire a part ownership in it are interested in its past success and its potential earnings.

    • B. 

      Most companies borrow money for both long and short-term operating needs. those who lend money or deliver goods and services before being paid, are interested mainly in whether a company will have the cash to pay interest charges and to repay the debts at the appropriate time.

  • 20. 
    Creditors
    • A. 

      Stockholders, who invest or may invest in a business and acquire a part ownership in it are interested in its past success and its potential earnings.

    • B. 

      Most companies borrow money for both long and short-term operating needs. those who lend money or deliver goods and services before being paid, are interested mainly in whether a company will have the cash to pay interest charges and to repay the debts at the appropriate time.

  • 21. 
    Recognition
    • A. 

      The determination of when a business transaction should not be recorded

    • B. 

      The determination of when a business transaction should be recorded

    • C. 

      The simplest form of account, which is used to analyze transactions

  • 22. 
    Journal entry is a journal notation that records multiple transactions
    • A. 

      True

    • B. 

      False

  • 23. 
    General journal
    • A. 

      A book or file that contains all of a companys accounts arranged in the order of the chart of accounts.

    • B. 

      The practice of recording transactions at cost

    • C. 

      The simplest and most flexible type of journal

  • 24. 
    Debit is on the right side of an account
    • A. 

      True

    • B. 

      False

  • 25. 
    Credit is on the right side of an account
    • A. 

      True

    • B. 

      False

  • 26. 
    Posting
    • A. 

      The process of transferring journal entry information from the journal to the ledger

    • B. 

      The determination of when a business transaction should be recorded

  • 27. 
    General ledger
    • A. 

      The simplest and most flexible type of journal

    • B. 

      A book or file that contains all of a companys accounts arranged in the order of the chart of accounts.

    • C. 

      Is also called the ledger

    • D. 

      B and c

    • E. 

      None of the above

  • 28. 
    Accounting cycle: first 4 steps
    • A. 

      Analyzing business transactions from source documents; recording the transactions by entering them in the journal; adjusting the accounts and then preparing an adjusted trial balance; an preparing the financial statements

    • B. 

      Analyzing business transactions from source documents; recording the transactions by entering them in the journal; posting the entries to the ledger, and preparing a trial balance; and adjusting the accounts and preparing an adjusted trial balance

    • C. 

      Analyzing business transactions from source documents; recording the transactions by entering them in the journal; preparing the financial statements; and closing the accounts and preparing a post closing trial balance

  • 29. 
    Accrual accounting
    • A. 

      The recognition of an expense or revenue that has arisen but has not yet been recorded

    • B. 

      A series of six steps whose ultimate purpose is to provide useful information to decision makers

    • C. 

      Recording transactions in the periods in which they occur, rather than in the periods in which cash is received or paid; all the techniques that accountants use to apply the matching rule.

  • 30. 
    Closing entries
    • A. 

      Journal entries made at the end of a period that set the stage for the next period by clearing the temporary accounts of their balances and transferring them to retained earnings the summarize a period's revenues and expenses

    • B. 

      Journal entries made at the end of a period that set the stage for the next period by clearing the permanent accounts of their balances and transferring them to retained earnings the summarize a period's revenues and expenses

  • 31. 
    Adjusting journal entries
    • A. 

      Entries made to apply accrual accounting to transactions that does not span accounting periods

    • B. 

      Entries made to apply accrual accounting to transactions that span accounting periods

  • 32. 
    Going concern is the assumption that unless there is evidence to the contrary, a business will continue to operate indefinitely
    • A. 

      True

    • B. 

      False

  • 33. 
    Periodicity is the assumption that although the life time of a business is uncertain, it is still useful to estimate its net income in terms of accounting periods.
    • A. 

      True

    • B. 

      False

  • 34. 
    Matching rule is the principle that revenues must be NOT assigned to the accounting period in which the goods are sold or the services performed, and expenses must be assigned to the accounting period in which they are used to produce revenue
    • A. 

      True

    • B. 

      False

  • 35. 
    Temporary accounts-accounts that show the accumulation of revenues and expenses over an accounting period and hat at the end of the period are transferred to stockholders equity. also called nominal accounts
    • A. 

      True

    • B. 

      False

  • 36. 
    Permanent accounts are balance sheet accounts whose balances extend into the next accounting period. also called real accounts
    • A. 

      True

    • B. 

      False

  • 37. 
    Deferral
    • A. 

      The postponement of the recognition of an expense already paid or of a revenue received in advance

    • B. 

      The portion of the cost of a long term asset allocated to any one accounting period

    • C. 

      The difficulty associated with not knowing how long a business will survive

  • 38. 
    Unearned revenues
    • A. 

      Received in advance for which the goods have been delivered or the services performed; a liability account

    • B. 

      Received in advance for which the goods have not yet been delivered or the services performed; a liability account

  • 39. 
    Accrual
    • A. 

      The recognition of an expense or revenue that has arisen but has not yet been recorded

    • B. 

      The recognition of an expense or revenue that has not arisen but has been recorded

  • 40. 
    Qualitative characteristics
    • A. 

      Standards for judging accounting information

    • B. 

      A company that makes and sells products

    • C. 

      The qualitative characteristic of information that has a direct effect on a decision

  • 41. 
    Comparability
    • A. 

      The convention of presenting information in a way that enables decision makers to recognize similarities, differences, and trends over different periods in the same company and among different companies

    • B. 

      The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income

    • C. 

      The convention that the benefits gained from providing accounting information should be greater than the costs of providing that information

  • 42. 
    Consistency
    • A. 

      The convention that the benefits gained from providing accounting information should be greater than the costs of providing that information

    • B. 

      The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income.

    • C. 

      The convention requiring that once a company has adopted an accounting procedure, it must use it from one period to the next unless a note to the financial statements informs users of a change in procedure

  • 43. 
    Conservatism principle
    • A. 

      The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income

    • B. 

      The convention requiring that once a company has adopted an accounting procedure, it must use it from one period to the next unless a note to the financial statements informs users of a change in procedure

    • C. 

      The convention that refers to the relative importance of an item or event in a financial statement and its influence on the decisions of the users of financial statements

  • 44. 
    Full disclosure principle
    • A. 

      The convention requiring that a companys financial statements and their notes present all information relevant to the users understanding of the statements

    • B. 

      The convention that refers to the relative importance of an item or event in a financial statement and its influence on the decisions of the users of financial statements

    • C. 

      The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income

  • 45. 
    Cost benefit principle
    • A. 

      The convention that the benefits gained from providing accounting information should be greater than the costs of providing that information

    • B. 

      The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income

    • C. 

      The convention of presenting information in a way that enables decision makers to recognize similarities, difference,s and trends over different periods in the same company and among different companies

  • 46. 
    Current assets
    • A. 

      Obligations due to be paid or performed within one year or within the normal operating cycle, whichever is longer

    • B. 

      Cash and other assets that a company can reasonably expect to convert to cash, sell, or consume within one year or its normal operating cycle, whichever is longer

  • 47. 
    Current liabilities
    • A. 

      Obligations due to be paid or performed within one year or within the normal operating cycle, whichever is longer

    • B. 

      Cash and other assets that a company can reasonably expect to convert to cash, sell, or consume within one year or its normal operating cycle, whichever is longer

  • 48. 
    Income before income taxes is the amount a company has earned from all activities--operating and non operating--AFTER taking into account the amount of income taxes incurred.
    • A. 

      True

    • B. 

      False

  • 49. 
    Gross margin
    • A. 

      Total sales for cash and on credit during an accounting period

    • B. 

      The difference between net sales and cost of goods sold.

    • C. 

      Also called gross profit

    • D. 

      B and c

    • E. 

      All of the above

  • 50. 
    Net income
    • A. 

      What remains of gross margin after operating expenses have been deducted, other revenues and expenses have been added or deducted, and income taxes have been deducted.

    • B. 

      The gross proceeds from sales of merchandise (gross sales) less sales returns and allowances and any discounts allowed.

  • 51. 
    Working capital
    • A. 

      A measure of liquidity that shows the net current assets on hand to continue business operational total current assets- total current liabilities

    • B. 

      A measure of liquidity; current assets / current liabilities

  • 52. 
    Reliability is the quantitative characteristic of information that represents what it is supposed to represent and is verifiable and neutral
    • A. 

      True

    • B. 

      False

  • 53. 
    Relevance is the qualitative characteristic of information that has a direct effect on a decision
    • A. 

      True

    • B. 

      False

  • 54. 
    Operating income
    • A. 

      Expenses incurred in running a business other than the cost of goods sold

    • B. 

      The difference between gross margin and operating expenses

  • 55. 
    Liquidity
    • A. 

      Is the ability to earn enough income to attract and hold investment capital

    • B. 

      Is the ability to have enough cash to pay debts when they are due

  • 56. 
    Securities and exchange commission (sec) is an agency of the federal government that has the legal power to set and enforce accounting practices for companies hwose securities are offered for sale to the general public.
    • A. 

      True

    • B. 

      False

  • 57. 
    Balance sheet equation
    • A. 

      Assets = liabilities + equity

    • B. 

      Assets - liabilities = equity

    • C. 

      Assets - equity = liabilities

    • D. 

      All of the above

  • 58. 
    Income statement summarizes the revenues earned and expenses incurred by a business over an accounting period.
    • A. 

      True

    • B. 

      False

  • 59. 
    Unadjusted trial balance is the total of debits and credits in the t accounts must be equal.
    • A. 

      True

    • B. 

      False

  • 60. 
    Contra asset is an account whose balance is subtracted from an associated account in the financial statements
    • A. 

      True

    • B. 

      False

  • 61. 
    Six types of accounts
  • 62. 
    Income statement equation:revenues - expenses = net income
    • A. 

      True

    • B. 

      False

  • 63. 
    Retained earnings statement equation:beginning balance of retained earnings + net income - dividends = ending balance of retained earnings
    • A. 

      True

    • B. 

      False

  • 64. 
    Measurement means assign a value to an element of financial statement. what is the money value in the transaction.
    • A. 

      True

    • B. 

      False

  • 65. 
    Accounting cycle- steps 5, 6, and 7
    • A. 

      Adjusting journal entries, prepare the financial statement and adjusted trial balance

    • B. 

      Adjusting journal entries, adjusted trial balance, and prepare the financial statement

  • 66. 
    Accounting cycle- steps 8 and 9:preparing closing entries and preparing a post closing trial balance
    • A. 

      True

    • B. 

      False

  • 67. 
    Accounting can be best be described as
    • A. 

      A bookkeeping system used by business managers

    • B. 

      An information system used by decision makers

    • C. 

      A computer system used by employees

  • 68. 
    The kind of accounting that provides data to people outside of the business (stockholders, government agencies, creditors, etc) is called
    • A. 

      Management accounting

    • B. 

      Creative accounting

    • C. 

      Financial accounting

    • D. 

      Cost accounting

    • E. 

      None of these

  • 69. 
    Two important goals for all businesses are
    • A. 

      Liquidity and profitability

    • B. 

      Accuracy and independence

    • C. 

      Health and happiness

    • D. 

      Love and honor

    • E. 

      None of these

  • 70. 
    A business that is legally separate form the owners is
    • A. 

      A sole proprietorship

    • B. 

      A partnership

    • C. 

      A corporation

    • D. 

      All of these

    • E. 

      None of these

  • 71. 
    The group in a corporation that decides policy, declares dividends, and hires executives is the
    • A. 

      Managers

    • B. 

      Stockholders

    • C. 

      Board of directors

    • D. 

      None of these

  • 72. 
    The standard rules of guidelines that should be used by all businesses for recording business transactions and preparing financial reports are called
    • A. 

      Financial accounting regulations

    • B. 

      Generally accepted accounting principles

    • C. 

      Ten commandments of accounting

    • D. 

      None of these

  • 73. 
    If total assets amount to 10,000 dollars and total liabilities amount to $4000 then the value of owner's equity is
    • A. 

      14000

    • B. 

      10000

    • C. 

      6000

    • D. 

      None of these

  • 74. 
    The income statement for a business shows
    • A. 

      Revenues minus expenses

    • B. 

      Net income after income taxes

    • C. 

      The profitability for a period of time

    • D. 

      All of these

    • E. 

      None of these

  • 75. 
    The organization most responsible for the development of accounting principles is the
    • A. 

      Financial accounting standards board

    • B. 

      Securities and exchange commission

    • C. 

      Internal revenue service

    • D. 

      None of these

  • 76. 
    The basic storage unit for accounting data is called the
    • A. 

      Account

    • B. 

      Journal

    • C. 

      Ledger

    • D. 

      Trial balance

    • E. 

      None of the above

  • 77. 
    A chronological record of all transactions is recorded in the
    • A. 

      Account

    • B. 

      Journal

    • C. 

      Ledger

    • D. 

      Trial balance

    • E. 

      None of these

  • 78. 
    Services fees earned would be
    • A. 

      An asset

    • B. 

      A liability

    • C. 

      A revenue

    • D. 

      An expense

    • E. 

      None of these

  • 79. 
    Prepaid rent would be
    • A. 

      An asset

    • B. 

      A liability

    • C. 

      A revenue

    • D. 

      An expense

    • E. 

      None of these

  • 80. 
    In a double entry accounting system, debit means
    • A. 

      To increase an account

    • B. 

      To decrease an account

    • C. 

      The left side of an account

    • D. 

      The right side of an account

    • E. 

      None of these

  • 81. 
    Using the rules of double entry accounting
    • A. 

      A debit would increase an asset account

    • B. 

      A credit would increase a liability account

    • C. 

      A credit would increase a revenue account

    • D. 

      All of these

    • E. 

      None of these

  • 82. 
    To show that the total debit balances equal the total credit balances, you would use a form called the
    • A. 

      W-2

    • B. 

      W-4

    • C. 

      1040ez

    • D. 

      Trial balance

    • E. 

      None of these

  • 83. 
    The normal balance of the rent expense account is
    • A. 

      Debit

    • B. 

      Credit

    • C. 

      Right side

    • D. 

      None of these

  • 84. 
    Posting is the process of transferring data from
    • A. 

      The ledger to the trial balance

    • B. 

      The journal to the ledger

    • C. 

      The trial balance to the financial statements

    • D. 

      The journal to the trial balance

    • E. 

      None of thee

  • 85. 
    Accrual accounting follows the
    • A. 

      General rule

    • B. 

      Matching rule

    • C. 

      Golden rule

    • D. 

      None of these

  • 86. 
    Adjusting entries are needed
    • A. 

      To bring all account balances up to date

    • B. 

      To properly match revenues and expenses

    • C. 

      Because of accrual accounting

    • D. 

      All of these

    • E. 

      None of these

  • 87. 
    The balance in the accumulated depreciation account represents
    • A. 

      The purchase price of a long term asset

    • B. 

      The total amount of depreciation related to a long term asset

    • C. 

      The book value of a long term asset

    • D. 

      All of these

  • 88. 
    A contra account
    • A. 

      Is a liability

    • B. 

      Has an opposite normal balance of the related account

    • C. 

      Always has a debit balance

    • D. 

      All of these

    • E. 

      None of these

  • 89. 
    Unearned revenue is
    • A. 

      A liability on the balance sheet

    • B. 

      An expense on the income statement

    • C. 

      A revenue on the income statement

    • D. 

      An asset on the balance sheet

    • E. 

      None of these

  • 90. 
    One prupose of closing entries it to clear (zero) the
    • A. 

      Asset, liabilities, and stockholders equity accounts

    • B. 

      Revenue, expense, and dividend accounts

    • C. 

      Retained earnings account

    • D. 

      Contra accounts

    • E. 

      None of these

  • 91. 
    The following accounts will have a zero balance after closing
    • A. 

      Rent income

    • B. 

      Dividends

    • C. 

      Insurance expense

    • D. 

      All of these

    • E. 

      None of these

  • 92. 
    Which of the following accounts is a permanent (real) account?
    • A. 

      Supplies expense

    • B. 

      Supplies

    • C. 

      Interest income

    • D. 

      Dividends

    • E. 

      None of these

  • 93. 
    After recording transactions in the journal, the next step in the accounting cycle is
    • A. 

      Recording closing entries

    • B. 

      Preparing financial statements

    • C. 

      Preparing an adjusted trial balance

    • D. 

      Posting data to the ledger

    • E. 

      None of these

  • 94. 
    Which one of the following is not an objective of financial reporting according to the FASB?
    • A. 

      To provide information to the CEO and other managers

    • B. 

      To provide information to investors and creditors

    • C. 

      To provide information about business resources

    • D. 

      To provide information about cash flows

  • 95. 
    Two major qualitative characteristics of accounting information are
    • A. 

      Creativity and originality

    • B. 

      Accuracy and clarity

    • C. 

      Understandability and usefulness

    • D. 

      Complex and detailed

  • 96. 
    Instead of a recording the purchase of supplies as an asset, a company records the purchase as an expense immediately because the amount is small. the procedure relates most closely to the standard of
    • A. 

      Comparability

    • B. 

      Materiality

    • C. 

      Conservatism

    • D. 

      Full disclosure

  • 97. 
    Which of the following is not a major category of a classified balance sheet?
    • A. 

      Intangible assets

    • B. 

      Property, plant, and equipment

    • C. 

      Long term liabilities

    • D. 

      Cost of goods sold

  • 98. 
    Which of the following is not a major category of a multi step income statement
    • A. 

      Gross margin

    • B. 

      Investments

    • C. 

      Net sales

    • D. 

      Operating expenses

  • 99. 
    The two major categories of operating expenses are
    • A. 

      Other expenses and cost of goods sold

    • B. 

      Cost of goods sold and selling expenses

    • C. 

      Selling and general and administrative expenses

    • D. 

      Other expenses and general expenses

  • 100. 
    An example of an intangible asset is
    • A. 

      Investments

    • B. 

      Equipments

    • C. 

      Retained earnings

    • D. 

      Copyrights

  • 101. 
    Gross margin equals net sales minus
    • A. 

      Cost of goods sold

    • B. 

      Operating expenses

    • C. 

      Income taxes

    • D. 

      Selling expenses

  • 102. 
    Liquidity is the ability of a company to
    • A. 

      Provide enough water to its employees

    • B. 

      Pay debts on time

    • C. 

      Earn a reasonable profit

    • D. 

      Increase sales

  • 103. 
    The current ratio equals
    • A. 

      Total assets divided by total liabilities

    • B. 

      Total assets multiplied by total liabilities

    • C. 

      Current assets divided by current liabilities

    • D. 

      Current assets multiplied by current liabilities