Accounting Fundamentals Practice Exam
Course Introduction
Accounting Fundamentals introduces students to the essential principles and practices of accounting, focusing on the systematic recording, analyzing, and reporting of financial transactions. The course covers foundational topics such as the accounting cycle, preparation and interpretation of financial statements, double-entry bookkeeping, and the role of ethics in accounting. Learners gain practical skills in using journals, ledgers, and trial balances to ensure accurate financial record-keeping for individuals and organizations. By the end of the course, students will understand the importance of accounting in decision-making and how to apply basic accounting concepts to real-world business scenarios.
Recommended Textbook
Financial Accounting 4th Canadian Edition by Robert; Libby
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13 Chapters
1686 Verified Questions
1686 Flashcards
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Chapter 1: Financial Statements and Business Decisions
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) The organization for which financial data are to be collected and reported is called an accounting entity.
A)True
B)False
Answer: True
Q2) During 20B,its second year in operation,Banner Company delivered goods to customers for which customers paid or promised to pay $5,850,000.The amount of cash collected from customers was $5,960,000.The amount of trade receivables at the beginning of 20B was $1,200,000.What is the amount of sales revenue that Banner should report on its income statement for 20B?
A)$4,650,000.
B)$4,760,000.
C)$5,850,000.
D)$5,960,000.
Answer: C
Q3) The AcSB is currently the body responsible for establishing accounting standards.
A)True
B)False
Answer: True
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3
Chapter 2: Investing and Financing Decisions and the Accounting System
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Which of the following defines liabilities?
A)Possible debts or obligations of an entity as a result of future transactions which will be paid with assets or services.
B)Possible debts or obligations of an entity as a result of past transactions which will be paid with assets or services.
C)Probable debts or obligations of an entity as a result of future transactions which will be paid with assets or services.
D)Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services.
Answer: D
Q2) Which of the following defines shareholders' equity?
A)Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services.
B)Assets plus liabilities.
C)Probable future economic benefits owned by an entity as a result of past transactions.
D)The financing provided by the owners and the operations of a business.
Answer: D
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Chapter 3: Operating Decisions and the Accounting System
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) A company receives a $25,000 cash deposit from a customer on March 15 but will not deliver the goods until April 20.Which of the following statements is false?
A)Cash will be reported on the statement of cash flows for the month of March.
B)Revenue will be recorded and reported on the income statement for April.
C)A liability will be reported on the statement of financial position at the end of March.
D)Revenue will be recorded and reported on the income statement for March.
Answer: D
Q2) Tony's Tune-Up Shop Ltd.follows the revenue recognition principle.Tony services a car on May 31.The customer picks up the vehicle on June 1 and mails the payment to Tony on June 5.Tony receives the cheque in the mail on June 6.When should Tony show that the revenue was earned?
A)May 31
B)June 5
C)June 1
D)June 6
Answer: A
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Page 5
Chapter 4: Adjustments,financial Statements,and the Quality of Earnings
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) To compute amortization expense using the straight-line formula,the cost of a depreciable asset (i.e.,equipment)must be reduced by any estimated residual or salvage value.
A)True
B)False
Q2) Which of the following accounts would most likely lead to a deferred adjustment?
A)Prepaid expenses
B)Wages payable
C)Subscriptions revenue receivable
D)All of these are deferral adjustments
Q3) Adjusting entries are used to update income statement accounts and statement of financial position accounts.
A)True
B)False
Q4) Adjusting entries are recorded in the journal (i.e.,journalized)but they are not posted to the ledger.
A)True
B)False
Q5) Is the adjusted trial balance a financial statement? Explain why or why not.
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Chapter 5: Communicating and Interpreting Accounting Information
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) The net cash inflow (or outflow)from operating activities is computed by adjusting the reported accrual profit for noncash revenue and noncash expense items.
A)True
B)False
Q2) The financial statements of Juliet Company show the following: How much cash was collected from customers?
A)$148,000.
B)$150,000.
C)$154,000.
D)$160,000.
Q3) The category that is generally considered to be the best measure of a company's ability to continue as a going concern is
A)cash flows from investing activities.
B)cash flows from financing activities.
C)cash flows from operating activities.
D)usually different from year to year.
Q4) Depreciation expense has the immediate effect of increasing the cash account. A)True B)False
7
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Chapter 6: Reporting and Interpreting Sales Revenue, receivables,
and Cash
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Quarterly reports are most likely unaudited and condensed reports.
A)True
B)False
Q2) A company's return on equity (ROE)that has been increasing over the past three years means the company has generated greater profit for the common share owners.
A)True
B)False
Q3) The users of accounting information are decision makers such as investors,creditors,and analysis experts who provide financial advice.
A)True
B)False
Q4) Because different financial analysts perform the same basic analysis of a company's financial reports,their conclusions on whether to buy,sell or hold a company's shares are consistent among the analysts.
A)True
B)False
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Page 8
Chapter 7: Reporting and Interpreting Cost of Goods Sold and Inventory
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) When do most companies usually recognize revenue as earned and record the revenue?
A)when the customer's order is received
B)when title and risks of ownership pass to the buyer
C)when the order is delivered
D)when payment is received
Q2) The receivable turnover ratio is computed by dividing net sales by net trade receivables at the end of the year.
A)True
B)False
Q3) The allowance for doubtful accounts normally has a debit balance after the year-end adjustment.
A)True
B)False
Q4) T Co.'s reported a deduction from profit of ($2,781)in thousands for the change in trade receivables on their 2012 cash flow statement.This was caused by an increase in trade receivable from 2011 to 2012.
A)True
B)False
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Chapter 8: Reporting and Interpreting Property, plant, and Equipment; Intangibles; and Natural Resources
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) When the weighted-average cost method is used,ending inventory and cost of goods sold are valued at a different cost per unit.
A)True
B)False
Q2) When the periodic inventory system is used,the year-end statement of financial position may easily be prepared without taking a physical inventory.
A)True
B)False
Q3) Wilburn Company reported the following data at year-end: Sales,$100,000; Beginning inventory,$8,000; Ending inventory,$6,000; Cost of goods sold,$60,000; and Gross margin,$40,000.What was the amount of merchandise purchases for the year?
A)$40,000
B)$46,000
C)$58,000
D)$68,000
Q4) Inventory is a tangible asset purchased for use in the company's operations.
A)True
B)False
Page 10
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Chapter 9: Reporting and Interpreting Liabilities
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) When an operational asset is acquired for non cash consideration,the cost of the asset received always is measured as the book value of the non cash consideration given up.
A)True
B)False
Q2) Use of an accelerated depreciation method would lead to a higher reported expense and lower profit in the first year of an asset's life in comparison to a non-accelerated method.
A)True
B)False
Q3) If an accountant calculates depreciation expense on an asset without taking into account the asset's residual value of $5,000,depreciation expense for the periods will be lower than it should have been.
A)True
B)False
Q4) One example of a capital expenditure is ordinary maintenance cost such as an oil change for a company truck.
A)True
B)False
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Chapter 10: Reporting and Interpreting Bond Securities
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) If a company uses cash to pay off a current liability,the amount of working capital will decrease.
A)True
B)False
Q2) The trade payables turnover ratio tests how quickly our credit customers pay their bills.
A)True
B)False
Q3) Freeman Inc.reported a profit of $40,000 for 20A.The income tax return excluded a revenue item of $3,000 (reported on the income statement)because under the tax laws the $3,000 would not be reported for tax purposes until 20B.Assuming a 30% income tax rate,this situation would cause a 20A Future tax amount of which of the following?
A)$3,000 (debit)
B)$3,000 (credit)
C)$900 (debit)
D)$900 (credit)
Q4) Analysts use the current ratio to assess the profitability of a company.
A)True
B)False
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Chapter 11: Reporting and Interpreting Stockholders Equity
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161 Flashcards
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Sample Questions
Q1) A corporation cannot retire bonds before their maturity date.
A)True
B)False
Q2) A bond with a face value of $100,000 and a quoted price of 96.50 has a selling price of
A)$96,500.
B)$100,000.
C)$103,359.
D)$90,650.
Q3) One thousand bonds with a face value of $1,000 each,are sold at 104.The entry to record the issue is
A)Choice A
B)Choice B
C)Choice C
D)Choice D
Q4) The times interest earned ratio is calculated by dividing
A)profit by interest expense.
B)profit before income taxes by interest expense.
C)profit before interest expense by interest expense.
D)profit before interest expense and income taxes by interest expense.
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) We call the very first sale of a company's share to the public a seasoned new issue.
A)True
B)False
Q2) Dunbar Inc.has 10,000 $2,noncumulative preferred shares and 150,000 common shares issued at December 31,2012.What is the annual total dividend on the preferred shares?
A)$10,000
B)$20,000
C)$150,000
D)$300,000
Q3) One of the preferences given to preferred share owners over common share owners is the right to vote on major corporate issues.
A)True
B)False
Q4) A small stock dividend is generally defined as one involving the distribution of additional shares that are more than 50% of the currently outstanding shares.
A)True
B)False
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Chapter 13: Analyzing Financial Statements
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Sample Questions
Q1) Ratio analysis only involves relationships within a single accounting period.
A)True
B)False
Q2) Teel Company's working capital was $40,000 and total current liabilities were 1/4 of that amount.What was the current (working capital)ratio?
A)1 to 1
B)3 to 1
C)5 to 1
D)7 to 1
Q3) Calculate C Co's financial leverage and identify whether it was positive or negative.
A)14.1% positive
B)15.2% positive
C)17.8% negative
D)19.9% negative
Q4) A high inventory turnover ratio indicates a large supply of inventory.
A)True
B)False
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