Accounting Fundamentals
Exam Questions
Course Introduction
Accounting Fundamentals provides a comprehensive introduction to the basic principles and concepts of accounting. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation and interpretation of financial statements, and the role of accounting in business decision-making. Students will gain hands-on experience with recording transactions, classifying accounts, and understanding key financial documents, including balance sheets, income statements, and cash flow statements. Emphasis is placed on the relevance of accounting information in planning, controlling, and evaluating business operations, laying a strong foundation for advanced studies in accounting and related fields.
Recommended Textbook
Financial Accounting 4th Edition by Robert Kemp
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12 Chapters
1893 Verified Questions
1893 Flashcards
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Page 2
Chapter 1: Business, Accounting, and You
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Revenues, expenses and dividends are all a part of:
A)Assets.
B)Retained Earnings.
C)Liabilities.
D)Common Stock.
Answer: B
Q2) Business owners expect to be compensated for both time and risk.
A)True
B)False
Answer: True
Q3) In the financial accounting records, most assets should be reported at:
A)current replacement cost.
B)current market value.
C)historical cost.
D)inflation-adjusted cost.
Answer: C
Q4) Society is considered to be a stakeholder in a business.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Analyzing and Recording Business Transactions
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152 Flashcards
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Sample Questions
Q1) The Caesar Coffee Company pays wages in the amount of $12,000. This transaction includes a credit to Wages Expense.
A)True
B)False
Answer: False
Q2) Transactions are recorded in order of the dollar amount of the transaction.
A)True
B)False
Answer: False
Q3) Which of the following is NOT a revenue account?
A)Salaries
B)Sales
C)Fees Earned
D)Professional Fees
Answer: A
Q4) The purpose of the trial balance is to verify that all account balances are correct.
A)True
B)False Answer: False
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) The unadjusted trial balance shows a $15,000 balance for Prepaid Rent. At the end of the year, $3,000 of the rent had been used. The adjusted trial balance reflects a balance for Prepaid Rent of:
A)$12,000 debit.
B)$12,000 credit.
C)$3,000 debit.
D)$3,000 credit.
Answer: A
Q2) It does not matter when a fiscal year starts as long as it is twelve consecutive months long.
A)True
B)False
Answer: True
Q3) Which of the following accounts are NOT closed?
A)Rent Expense
B)rent revenue
C)Prepaid Rent
D)both A and B
Answer: C
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Page 5
Chapter 4: Accounting for a Merchandising Business
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) Which of the following credit terms allows a discount of 4% if payment is made within 20 days of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from the date of the invoice?
A)4/20, EOM
B)4/EOM, n/30
C)4/20, n/30
D)20/4, n/30
Q2) TLR Productions has received an invoice for $6,500 with terms of 3/15, n/50. If TLR pays the invoice on the seventeenth day, the Cash account will be:
A)credited for $6,500.
B)credited for $6,305.
C)debited for $6,305.
D)credited for $195.
Q3) When a merchandiser sells on account, which of the following accounts is NOT needed to record the transaction?
A)Cost of Goods Sold
B)Accounts Receivable
C)Inventory
D)Cash
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Page 6
Chapter 5: Inventory
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Sample Questions
Q1) Beginning inventory plus net purchases equals cost of goods sold.
A)True
B)False
Q2) A manufacturer uses ________ inventory to produce the goods it sells.
A)raw materials
B)purchases
C)finished goods
D)work-in-process
Q3) Ending inventory can be estimated by subtracting the estimated cost of goods available for sale from the Cost of Goods Sold.
A)True
B)False
Q4) Inventory is often the largest:
A)expense on the Income Statement.
B)long-term asset on the Balance Sheet.
C)current asset on the Balance Sheet.
D)part of general selling expenses.
Q5) Manufacturers have three different kinds of inventory.
A)True
B)False
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Chapter 6: The Challenges of Accounting: Standards, Internal
Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) Under US GAAP and IFRS, research and development costs are:
I. Research costs are expensed as incurred
II. Development costs are expensed as incurred
III. Research costs are capitalized and amortized over time
IV. Development costs are capitalized and amortized over time.
A)GAAP I and II; IFRS II and III
B)GAAP I and IV; IFRS III and IV
C)GAAP I and II; IFRS I and IV
D)GAAP II and III; IFRS II and III
Q2) Separation of duties is part of the control environment of an internal control system.
A)True
B)False
Q3) A person who reports unethical behavior is called a whistleblower.
A)True
B)False
Q4) Book value reports the past while market value focuses on the future.
A)True
B)False
Page 8
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) An 83-day note issued on November 13, 2014 will mature on:
A)February 2, 2015.
B)February 3, 2015.
C)February 4, 2015.
D)February 5, 2015.
Q2) If a company has n/90-credit terms, you would expect its Accounts Receivable turnover to be:
A)12.
B) 4.
C) 2.
D) 1.
Q3) The payee of a note is also called the creditor.
A)True
B)False
Q4) Another name for the quick ratio is the acid-test ratio.
A)True
B)False
Q5) A petty cash fund may be established for minor expenditures, such as postage.
A)True
B)False
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Research and development costs (R&D)are generally:
A)expensed and become part of the Income Statement.
B)listed as "other intangibles" on the Balance Sheet.
C)listed as "current assets" on the Balance Sheet.
D)listed as "long-term assets" on the Balance Sheet.
Q2) A patent has amortization this year of $2,300. The journal entry would be to:
A)debit amortization expense-patent, $2,300; credit Accumulated Depreciation-patent, $2,300.
B)debit accumulated amortization-patent, $2,300; credit patent, $2,300.
C)debit amortization expense-patent, $2,300; credit patent, $2,300.
D)debit accumulated amortization-patent, $2,300; credit amortization expense-patent, $2,300.
Q3) Charmed Inc. has net income of $50,000, sales of $250,000, beginning total assets of $150,000 and ending total assets of $200,000. The return on assets is (rounded)33%.
A)True
B)False
Q4) Long-term assets usually begin with the listing of natural resources first.
A)True
B)False
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) A $5,000 bond quoted at 104.4 will cost $5,220.
A)True
B)False
Q2) Which of the following would be considered a known liability?
A)Accounts payable
B)Warranties payable
C)Pending litigation
D)Possible contingency payable
Q3) On September 30, 2016, Illusions, Inc. recorded their semi-annual bond interest expense that contained a credit to Discount on bonds payable of $1,800. The adjusting entry on December 31, 2016 will show a credit to Discount on bonds payable of: (Round your final answer to the nearest dollar.)
A)$1,800
B)$900
C)$338
D)$450
Q4) Benefits are extra compensation that is paid directly to the employee.
A)True
B)False
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) If you own 1,200 shares (3% of a corporation's stock)and the corporation issues 11,000 new shares, how many total shares will you have after exercising your preemptive right?
A)0
B)330
C)1,164
D)1,530
Q2) The heading Paid-in Capital must appear on the balance sheet along with the heading Retained Earnings.
A)True
B)False
Q3) Stock that is held by stockholders is called:
A)issued stock.
B)authorized stock.
C)outstanding stock.
D)open stock.
Q4) A company can have a profit or loss when buying or selling its own stock. A)True
B)False
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Cash received from issuing stock would be included in investing activities.
A)True
B)False
Q2) Exchanging stock for a building under the direct method would be reported:
A)in the investing section of the cash flow statement.
B)in the operating section of the cash flow statement.
C)in the financing section of the cash flow statement.
D)as a separate disclosure.
Q3) Payments to suppliers include payments for which of the following?
A)Inventory
B)Employee compensation
C)Income taxes
D)All of the above.
Q4) An example of a cash outflow from financing activities is:
A)paying off note payable.
B)paying for 6 months rent in advance.
C)purchasing land.
D)making payment on accounts payable.
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Butterfly Tours has a cash balance of $75,000; short-term investments of $19,000; net receivables of $60,000; and inventory of $400,000. Current liabilities total $170,000. The quick ratio is: (Round your final answer to two decimal places.)
A)3.26 to 1.
B)2.91 to 1.
C)0.91 to 1.
D)0.79 to 1.
Q2) Determining the percentage changes in line items on financial statements for two consecutive years is called horizontal analysis.
A)True B)False
Q3) Inventory and prepaid expenses are NOT included in the computation of the: A)quick ratio. B)current ratio.
C)debt ratio.
D)working capital ratio.
Q4) Horizontal analysis is only done on the Balance Sheet.
A)True B)False
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