Accounting Quiz 2 2nd Period
Questions and Answers
- 1.
Is a list of all accounts with their balances at a point in time.
- A.
Temporary accounts
- B.
Trial balance
- C.
Tangible assets
Correct Answer
B. Trial balanceExplanation
A trial balance is a list of all accounts with their balances at a specific point in time. It is used to ensure that the debits and credits in the accounting system are equal and that the books are balanced. This allows accountants to identify any errors or discrepancies in the accounts before preparing financial statements. Temporary accounts and tangible assets are not directly related to the concept of a trial balance.Rate this question:
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- 2.
Are closed at the end of each period. These are mostly income statement accounts, except for a distribution account that is equity statement account.
- A.
Trial balance
- B.
Tangible assets
- C.
Temporary accounts
Correct Answer
C. Temporary accountsExplanation
Temporary accounts are accounts that are closed at the end of each accounting period. These accounts include income statement accounts, such as revenue and expenses, which track the company's financial performance during a specific period. The purpose of closing these accounts is to transfer their balances to the retained earnings account or the distribution account, which is an equity statement account. Tangible assets, on the other hand, are long-term assets that are not closed at the end of each period and are reported on the balance sheet. Therefore, the correct answer is temporary accounts.Rate this question:
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- 3.
Are those which one can touch and include natural recourses, machinery, tools, equipment, buildings and land, among others.
- A.
Temporary accounts
- B.
Trial balance
- C.
Tangible assets
Correct Answer
C. Tangible assetsExplanation
Tangible assets are physical assets that can be touched and include natural resources, machinery, tools, equipment, buildings, and land. These assets have a physical presence and can be seen and felt. Unlike intangible assets, such as patents or trademarks, tangible assets have a physical form and can be easily valued and accounted for. Examples of tangible assets include vehicles, furniture, inventory, and real estate.Rate this question:
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- 4.
Is portion of an asset cost that is expected to be recovered at the end of its useful life.
- A.
Salvage value
- B.
Product costs
- C.
Tangible assets
Correct Answer
A. Salvage valueExplanation
Salvage value refers to the portion of an asset's cost that is expected to be recovered at the end of its useful life. It represents the estimated residual value of the asset after depreciation. This value is important for calculating the depreciation expense and determining the overall cost of the asset over its useful life. It is commonly used in financial analysis and decision-making processes, such as determining whether to replace or repair an asset.Rate this question:
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- 5.
Are costs required to produce inventory and make it ready for sale. Such costs are directly associated with inventory production.
- A.
Account receivable
- B.
Cash inflows
- C.
Product costs
Correct Answer
C. Product costsExplanation
Product costs are the costs required to produce inventory and make it ready for sale. These costs include direct materials, direct labor, and manufacturing overhead. They are directly associated with the production of inventory and are necessary for the creation of the final product. Therefore, product costs are the correct answer in this context.Rate this question:
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- 6.
Is used to keep track of cash paid for insurance coverage that has not been expensed.
- A.
Product costs
- B.
Prepaid insurance
- C.
Notes receivable
Correct Answer
B. Prepaid insuranceExplanation
Prepaid insurance is used to keep track of cash paid for insurance coverage that has not been expensed. This account represents the amount of insurance premium that has been paid in advance but has not yet expired. As time passes and the insurance coverage is used up, the prepaid insurance is gradually expensed and transferred to the insurance expense account. This allows for accurate tracking of insurance expenses and ensures that they are recorded in the correct accounting period.Rate this question:
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- 7.
Is a collection of all accounts a business maintains in its accounting system.
- A.
External users
- B.
Ledger
- C.
Recognition
Correct Answer
B. LedgerExplanation
A ledger is a collection of all accounts a business maintains in its accounting system. It serves as a central repository for recording and organizing financial transactions. The ledger provides a comprehensive overview of the company's financial activities, including assets, liabilities, revenues, and expenses. It is an essential tool for both internal and external users, such as management, investors, and creditors, who rely on the ledger to analyze the financial health and performance of the business.Rate this question:
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- 8.
Is a liability account that shows future interest payments for using somebody's money
- A.
Retained earnings
- B.
Interest payable
- C.
Liabilities
Correct Answer
B. Interest payableExplanation
Interest payable is a liability account that shows future interest payments for using somebody's money. This account is used to record the amount of interest that a company owes to its creditors or lenders. It represents the company's obligation to pay interest on borrowed funds or outstanding debts. As interest is accrued over time, it is recorded as a liability until it is paid off. Therefore, interest payable is the correct answer as it accurately describes the nature and purpose of this account.Rate this question:
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- 9.
Are claims that require a formal instrument as proof of the debt and usually provide for payment of interest by the debtor.
- A.
Notes receivable
- B.
Source document
- C.
Tax
Correct Answer
A. Notes receivableExplanation
Notes receivable are claims that require a formal instrument as proof of the debt and usually provide for payment of interest by the debtor. This means that when a company lends money to another party, they issue a formal document called a promissory note, which serves as proof of the debt. The promissory note outlines the terms of the loan, including the amount borrowed, the interest rate, and the repayment schedule. The debtor is then obligated to make regular payments, including interest, to the lender according to the terms of the promissory note. Therefore, notes receivable are a type of financial asset for the lender.Rate this question:
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- 10.
May be represented by a piece of paper or document. The real value of such assets is the rights and privileges extended to their owners. Examples of intangible assets can be patents, trademarks and customer lists.
- A.
Interest payable
- B.
Ledger
- C.
Intangible assets
Correct Answer
C. Intangible assetsExplanation
Intangible assets are assets that do not have a physical form and cannot be touched or seen. They are represented by legal documents or records, such as patents, trademarks, and customer lists. The value of intangible assets lies in the rights and privileges they give to their owners, such as exclusive rights to use a patent or trademark. Unlike tangible assets, intangible assets do not have a physical presence but still hold significant value for a company.Rate this question:
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- 11.
Is the process of converting discounts on notes payable to interest expense over a specified period of time
- A.
Discount amortization
- B.
Intangible assets
- C.
Interest payable
Correct Answer
A. Discount amortizationExplanation
Discount amortization is the process of gradually allocating the discount on notes payable as interest expense over a specific period of time. When a company issues notes payable at a discount, it means that the notes were sold for less than their face value. This discount is treated as an additional cost of borrowing and needs to be amortized or spread out over the life of the note. By doing so, the company recognizes the cost of borrowing over time rather than all at once. This process is important for accurately reflecting the true cost of borrowing and for proper financial reporting.Rate this question:
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- 12.
Occur when only asset accounts are engaged in a transaction.
- A.
Discount amortization
- B.
Intangible assets
- C.
Asset exchange transactions
Correct Answer
C. Asset exchange transactionsExplanation
Asset exchange transactions occur when only asset accounts are engaged in a transaction. This means that one asset is exchanged for another asset, without any involvement of liabilities or equity accounts. In these transactions, the value of one asset is transferred to another asset, resulting in a change in the composition or nature of the assets held by an entity. This can include the exchange of tangible assets, such as machinery or vehicles, or intangible assets, such as patents or trademarks. Discount amortization and intangible assets are not directly related to asset exchange transactions.Rate this question:
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- 13.
Result in a decrease in an asset account and in one of the claim accounts (liability or equity accounts).
- A.
Asset use transactions
- B.
Equity
- C.
Cash accounting
Correct Answer
A. Asset use transactionsExplanation
Asset use transactions refer to activities that result in a decrease in an asset account and in one of the claim accounts, which can be either a liability or an equity account. These transactions involve the utilization or consumption of assets, such as selling inventory or using equipment. As a result, the asset account decreases because the assets are being used or consumed, while the corresponding claim account (liability or equity) also decreases to reflect the reduction in the company's ownership or obligations. This helps to maintain the balance between the asset and claim accounts in the accounting equation.Rate this question:
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- 14.
Result in an increase in an asset account and in one of the claim accounts (liability or equity accounts).
- A.
Discount amortization
- B.
Asset source transactions
- C.
Losses
Correct Answer
B. Asset source transactionsExplanation
Asset source transactions refer to transactions that result in an increase in an asset account and in one of the claim accounts, such as liability or equity accounts. This means that when an asset source transaction occurs, it leads to an increase in the value of an asset and also affects either the liability or equity side of the balance sheet. This could include activities such as borrowing money, issuing shares, or receiving payments from customers. These transactions contribute to the overall financial health and stability of a company.Rate this question:
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- 15.
Is a component of equity resulting from contributions of capital resources from owners.
- A.
Contributed capital
- B.
Cost of goods sold (COGS)
- C.
Double-entry bookkeeping rule
Correct Answer
A. Contributed capitalExplanation
Contributed capital refers to the equity component that arises from the contributions of capital resources made by the owners of a company. This can include investments in the form of cash, assets, or services provided by the owners. It represents the ownership interest of the shareholders in the company and is recorded in the company's balance sheet. Contributed capital is an important indicator of the financial health and stability of a company, as it represents the initial funding provided by the owners to start and operate the business.Rate this question:
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- 16.
Is the difference between the cost of goods available for sale and the cost of goods on hand at period end. This cost represents the cost of goods sold by the company during the period.
- A.
Cost of goods sold (COGS)
- B.
Contributed capital
- C.
Asset source transactions
Correct Answer
A. Cost of goods sold (COGS)Explanation
The correct answer is Cost of goods sold (COGS). This is because the cost of goods sold is the difference between the cost of goods available for sale and the cost of goods on hand at the end of the period. It represents the cost of goods that were sold by the company during the period. COGS is an important measure in determining the profitability of a company and is deducted from the revenue to calculate the gross profit.Rate this question:
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- 17.
States that any transaction is recorded at least twice.
- A.
Double-entry bookkeeping rule
- B.
Accounts receivable
- C.
Cash basis
Correct Answer
A. Double-entry bookkeeping ruleExplanation
The double-entry bookkeeping rule states that any transaction is recorded at least twice. This means that for every transaction, there will be a debit entry and a corresponding credit entry. This ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced. By recording transactions in this way, it provides a systematic and accurate method of tracking and monitoring financial transactions. This rule is a fundamental principle of accounting and is widely used in business and financial reporting.Rate this question:
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- 18.
Provides for the equality of total debits and total credits
- A.
Double-entry bookkeeping rule
- B.
Contributed capital
- C.
Double-entry recording system
Correct Answer
C. Double-entry recording systemExplanation
The correct answer is the double-entry recording system. This system is a fundamental principle of accounting that ensures that the total debits always equal the total credits in a financial transaction. It involves recording every transaction in at least two accounts, with one account debited and another credited. This ensures accuracy and helps to prevent errors or discrepancies in the financial records.Rate this question:
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- 19.
Is a process through which companies communicate information to the public.
- A.
Cost of goods sold (COGS)
- B.
Financial reporting
- C.
Contributed capital
Correct Answer
B. Financial reportingExplanation
Financial reporting is a process through which companies communicate information to the public. It involves the preparation and presentation of financial statements, including the income statement, balance sheet, and cash flow statement. These statements provide an overview of a company's financial performance and position, allowing investors, creditors, and other stakeholders to make informed decisions. Financial reporting also includes disclosures and footnotes that provide additional information about the company's operations, accounting policies, and risks. Overall, financial reporting plays a crucial role in promoting transparency and accountability in business operations.Rate this question:
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- 20.
Is the amount of interest earned. Interest revenue (or just interest) may be earned on an investment such as a savings account or certificate of deposit.
- A.
Interest payable
- B.
Asset source transactions
- C.
Interest revenue
Correct Answer
C. Interest revenueExplanation
Interest revenue refers to the amount of interest earned on investments such as savings accounts or certificates of deposit. It is a form of income that an individual or a company receives from lending money or having funds invested. This revenue is typically recorded on the income statement and contributes to the overall financial performance of the entity. It is an important source of income for financial institutions and individuals who have invested their money in interest-bearing assets.Rate this question:
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