Accounting Fundamentals
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Course Introduction
Accounting Fundamentals provides students with a comprehensive introduction to the basic principles and concepts of accounting. The course covers essential topics such as the accounting cycle, recording financial transactions, preparation and analysis of financial statements, and understanding key accounting terminology. Students will develop foundational skills in bookkeeping, learn about the roles of assets, liabilities, equity, revenue, and expenses, and explore how accounting information supports effective decision-making in business environments. Through practical exercises and real-world examples, students gain the necessary knowledge to interpret financial data, maintain accurate records, and appreciate the significance of accounting in organizational success.
Recommended Textbook
Financial Accounting 15th Edition by Carl Warren
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Page 2
Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Explain the interrelationship between the balance sheet and the statement of cash flows.
Answer: The cash reported on the balance sheet is also reported as the end-of-period cash on the statement of cash flows.
Q2) Debts owed by a business are referred to as
A)accounts receivable
B)expenses
C)owner's equity
D)liabilities
Answer: D
Q3) Owned by two or more individuals
A)Proprietorship
B)Partnership
C)Corporation
D)Limited liability company (LLC)
Answer: B
Q4) Revenue is earned only when money is received.
A)True
B)False
Answer: False
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) The balance of an account can be determined by adding all of the debits,adding all of the credits,and adding the amounts together.
A)True
B)False
Answer: False
Q2) Which of the following abbreviations is correct?
A)Debit, "Dr"; Credit, "Cd"
B)Debit, "Db"; Credit, "Cr"
C)Debit, "Db"; Credit, "Cd"
D)Debit, "Dr"; Credit, "Cr"
Answer: D
Q3) Chris Clark,Drawing
A)Assets
B)Liabilities
C)Owner's Equity
D)Revenue
E)Expenses
Answer: C
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4
Chapter 3: The Adjusting Process
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Sample Questions
Q1) The net income reported on the income statement is $58,000.However,adjusting entries have not been made at the end of the period for supplies expense of $2,200 and accrued salaries of $1,300.Net income,as corrected,is
A)$56,700
B)$58,000
C)$55,800
D)$54,500
Answer: D
Q2) Accumulated depreciation is reported on the income statement.
A)True
B)False
Answer: False
Q3) The matching principle requires expenses be recorded in the same period that the related revenue is recorded.
A)True
B)False
Answer: True
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The current ratio is more useful than working capital in making comparisons across companies.
A)True
B)False
Q2) The accounting cycle requires three trial balances be done.In what order should they be prepared?
A)post-closing, unadjusted, adjusted
B)unadjusted, post-closing, adjusted
C)unadjusted, adjusted, post-closing
D)post-closing, adjusted, unadjusted
Q3) Real accounts are not permanent accounts.
A)True
B)False
Q4) The classified balance sheet will show which liability subsections?
A)current liabilities and long-term liabilities
B)current liabilities and other liabilities
C)other liabilities and long-term liabilities
D)present liabilities and tomorrow's liabilities
Q5) If end-of-period spreadsheets are not considered part of the formal accounting records,why are they used?
6
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Chapter 5: Accounting Systems
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Sample Questions
Q1) Briefly describe the three-step process of accounting system development.
Q2) An account for each supplier of merchandise will appear in the accounts payable subsidiary ledger.
A)True
B)False
Q3) Generally,subsidiary ledgers are used for general ledger accounts that consist of a large number of individual items.
A)True
B)False
Q4) Accounting systems evolve through a three-step process: analysis,design,and feedback.
A)True
B)False
Q5) The columns included in special journals are standardized for all businesses.
A)True
B)False
Q6) For each of the following businesses,explain how a purchases journal might be modified for the specific business.
Q7) What is a business segment? How can business segments be analyzed?
Page 7
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Chapter 6: Accounting for Merchandising Businesses
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Sample Questions
Q1) The inventory system employing accounting records that continuously disclose the amount of inventory is called
A)retail
B)periodic
C)physical
D)perpetual
Q2) The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include
A)only the list price
B)only the sales tax
C)the list price plus the sales tax
D)the list price less the sales tax
Q3) When merchandise is sold for $600 plus a 6% sales tax,the sales account should be credited for $636.
A)True
B)False
Q4) Freight is considered a cost of inventory under FOB shipping point.
A)True
B)False
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Chapter 7: Inventories
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Sample Questions
Q1) If ending inventory for the year is overstated,owner's equity reported on the balance sheet at the end of the year is understated.
A)True
B)False
Q2) Produces the same cost of merchandise sold under both the periodic and the perpetual inventory systems
A)FIFO
B)LIFO
C)Weighted average
Q3) Cost flow is in the order in which the costs were incurred.
A)Weighted average
B)First-in, first-out (FIFO)
C)Last-in, first-out (LIFO)
D)Specific identification
Q4) Under this system,only revenue is recorded when sales are made.
A)Perpetual
B)Periodic
Q5) A perpetual inventory system is an effective means of control over inventory.
A)True
B)False
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) A bank reconciliation should be prepared periodically because
A)the company's records and the bank's records are in agreement
B)the bank has not recorded all of its transactions
C)any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected
D)the bank must make sure that its records are correct
Q2) A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695.What entry is required in the company's accounts?
A)debit Accounts Payable; credit Cash
B)debit Cash; credit Accounts Receivable
C)debit Cash; credit Accounts Payable
D)debit Accounts Receivable; credit Cash
Q3) For efficiency of operations and better control over cash,a company should maintain only one bank account.
A)True
B)False
Q4) Describe the features of a voucher system and list typical supporting documents for a voucher.
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Page 10
Chapter 9: Receivables
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Sample Questions
Q1) A 60-day,9% note for $10,000,dated May 1,is received from a customer on account.The maturity value of the note is
A)$10,000
B)$10,150
C)$10,900
D)$9,100
Q2) In accounting for uncollectible receivables,the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying A)the direct write-off method
B)the percentage of sales method
C)the analysis of receivables method
D)both the percentage of sales and analysis of receivables methods
Q3) At the end of a period (before adjustment),Allowance for Doubtful Accounts has a credit balance of $250.The credit sales for the period total $500,000.If the company estimates uncollectible accounts expense at 1% of credit sales,the amount of bad debt expense to be recorded in an adjusting entry is $4,750.
A)True
B)False
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Page 11
Chapter 10: Long-Term Assets: Fixed and Intangible
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Sample Questions
Q1) Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined,the amounts cannot be changed.
A)True
B)False
Q2) Nike swoosh
A)Patent
B)Copyright
C)Trademark
D)Goodwill
Q3) Location of a company
A)Patent
B)Copyright
C)Trademark
D)Goodwill
Q4) Losses on the discarding of fixed assets are reported in the income statement. A)True
B)False
Q5) All property,plant,and equipment assets are depreciated over time.
A)True
B)False
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Most employers are required to withhold federal unemployment taxes from employee earnings.
A)True
B)False
Q2) For proper matching of revenues and expenses,the estimated cost of fringe benefits must be recognized as an expense of the period during which the employee earns the benefits.
A)True
B)False
Q3) Assuming a 360-day year,when a $50,000,90-day,9% interest-bearing note payable matures,the total payment will be
A)$51,125
B)$54,500
C)$1,125
D)$4,500
Q4) Quick assets include
A)cash, cash equivalents, receivables, prepaid expenses, and inventory
B)cash, cash equivalents, receivables, and prepaid expenses
C)cash, cash equivalents, receivables, and inventory
D)cash, cash equivalents, and receivables
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Chapter 12: Accounting for Partnerships and Limited Liability Companies
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Sample Questions
Q1) If not enough partnership cash or other assets are available to pay the withdrawing partner,a liability may be created for the amount owed the withdrawing partner.
A)True
B)False
Q2) Singer and McMann are partners in a business.Singer's original capital was $40,000 and McMann's was $60,000.They agree to salaries of $12,000 and $18,000 for Singer and McMann,respectively,and 10% interest on original capital.If they agree to share the remaining profits and losses in a 3:2 ratio,what will Singer's share of the income be if the income for the year is $15,000?
A)$9,000
B)$2,400
C)$1,000
D)$5,600
Q3) When a new partner is admitted to a partnership,there should be a (n)
A)increase in the total assets of the partnership
B)new capital account added to the ledger for the new partner
C)increase in the total owners' equity of the partnership
D)debit amount to the partner's capital account for the cash received by the current partner
Page 14
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Chapter 13: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) Cash dividends are normally paid on shares of treasury stock.
A)True
B)False
Q2) The entry to record the issuance of common stock at a price above par includes a debit to
A)Organizational Expenses
B)Common Stock
C)Cash
D)Paid-In Capital in Excess of Par-Common Stock
Q3) A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8.Subsequently,the company declared a 2% stock dividend on a date when the market price was $11 per share.What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?
A)$3,200
B)$6,400
C)$4,800
D)$8,800
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Page 15
Chapter 14: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) On the first day of the fiscal year,a company issues a $500,000,8%,10-year bond that pays semiannual interest of $20,000
($500,000 × 8% × 1/2),receiving cash of $530,000.Journalize the entry to record the issuance of the bonds.
Q2) One potential advantage of financing corporations through the use of bonds rather than common stock is
A)the interest on bonds must be paid when due
B)the corporation must pay the bonds at maturity
C)the interest expense is deductible for tax purposes by the corporation
D)a higher earnings per share is guaranteed for existing common shareholders
Q3) If bonds are issued at a discount,it means that the
A)bondholder will receive effectively less interest than the contractual rate of interest
B)market interest rate is lower than the contractual interest rate
C)market interest rate is higher than the contractual interest rate
D)financial strength of the issuer is suspect
Q4) The amortization of a premium on bonds payable decreases bond interest expense.
A)True
B)False
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Page 16
Chapter 15: Investments and Fair Value Accounting
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Sample Questions
Q1) An investor purchased 500 shares of common stock,$25 par,for $21,750.Subsequently,100 shares were sold for $49.50 per share.What is the amount of gain or loss on the sale?
A)$12,750 gain
B)$600 gain
C)$600 loss
D)$9,250 loss
Q2) The account Unrealized Gain (Loss)on Available-for-Sale Investments should be included on the
A)income statement as other revenue (expense)
B)balance sheet as an adjustment to the asset account
C)balance sheet as an adjustment to stockholders' equity
D)statement of retained earnings
Q3) Gerardo Company had a net income of $75,000 and other comprehensive income of $12,500 for the year.On January 1,the retained earnings balance was $525,000 and the accumulated other comprehensive income balance was $55,000.Determine the (a)comprehensive income for the year,
(b)retained earnings balance on December 31,and (c)the accumulated other comprehensive income on December 31.
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Page 17
Chapter 16: Statement of Cash Flows
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Sample Questions
Q1) If a gain of $11,000 is realized in selling (for cash)office equipment having a book value of $55,000,the total amount reported in the Cash flows from investing activities section of the statement of cash flows is
A)$44,000
B)$11,000
C)$55,000
D)$66,000
Q2) In preparing the Cash flows from operating activities section of the statement of cash flows by the indirect method,the amortization of bond discount for the period is deducted from the net income for the period.
A)True
B)False
Q3) When using the spreadsheet (work sheet)method to analyze noncash accounts,it is best to start with
A)cash
B)net income
C)retained earnings
D)revenue
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18
Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) A percentage analysis of increases and decreases in related items on comparative financial statements
A)Solvency
B)Leverage
C)Times interest earned
D)Horizontal analysis
E)Vertical analysis
F)Common-sized financial statements
G)Current position analysis
H)Profitability analysis
Q2) Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.
A)True
B)False
Q3) Using the data provided for Diane Company,what is the return on total assets?
A)10%
B)8%
C)0.1%
D)1%
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Page 19