Basic Accounting Concepts
Test Questions
Course Introduction
Basic Accounting Concepts introduces the fundamental principles and theories underlying the field of accounting. This course covers essential topics such as the accounting equation, double-entry bookkeeping, preparation and analysis of financial statements, and the recognition and measurement of revenues and expenses. Students will gain a solid understanding of key concepts including assets, liabilities, equity, and the accrual basis of accounting, providing a strong foundation for further study in accounting and finance. Through practical examples and exercises, learners will develop the skills to record financial transactions accurately and interpret basic financial information for business decision-making.
Recommended Textbook
Fundamental Financial Accounting Concepts 9th Edition by Thomas P Edmonds
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13 Chapters
1874 Verified Questions
1874 Flashcards
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Chapter 1: An Introduction to Accounting
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Expenses are shown on the A)income statement.
B)balance sheet.
C)statement of changes in stockholders' equity.
D)the income statement and the statement of changes in stockholders' equity.
Answer: A
Q2) Hazeltine Company issued common stock for $200,000 cash.As a result of this event, A)assets increased.
B)equity increased.
C)claims increased.
D)assets,claims,and equity all increased.
Answer: D
Q3) The amount of total assets on Lexington's 2015 balance sheet was
A)$11,000.
B)$12,000.
C)$1,600.
D)$7,600.
Answer: A
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3
Chapter 2: Understanding the Accounting Cycle
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149 Flashcards
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Sample Questions
Q1) Which of the following is an asset source transaction?
A)Issued common stock.
B)Paid a cash dividend to stockholders.
C)Received a payment on accounts receivable.
D)Accrued salary expense.
Answer: A
Q2) Describe the purpose of the closing process.
Answer: The purpose of the closing process is to bring the balance of the temporary accounts to zero at the end of an accounting period and to update the retained earnings account.By closing temporary accounts,they will be ready to capture revenue,expense,and dividend information for the next period.
Q3) What does the balance in accounts receivable represent?
Answer: The balance in accounts receivable represents the amount of future cash receipts that are due from customers.In other words,it is the amount to be collected from customers who previously received goods or services on account.
Q4) When is revenue recognized under accrual accounting?
Answer: Revenue is recognized when it is earned;i.e.when the services are performed.
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4
Chapter 3: The Double-Entry Accounting System
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157 Flashcards
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Sample Questions
Q1) What is the meaning of the terms "debit" and "credit" and what is the effect on specific account types?
Answer: "Debit" means the left side of an account and refers to increases in asset,expense,and dividend accounts and decreases in revenue,liability,and equity accounts."Credit" means the right side of the account and refers to increases in revenues,liabilities,and equity accounts and decreases in asset,expense,and dividend accounts.
Q2) A debit entry
A)increases assets.
B)increases expenses.
C)decreases liabilities.
D)increases assets,expenses,and liabilities.
Answer: D
Q3) Which company is the most profitable from the owners' perspective?
A)Grumpy
B)Happy
C)Doc
D)Cannot be determined
Answer: A
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Explain the computation and the meaning of each of the following:
a.Gross margin percentage
b.Return on sales
Q2) Explain the major difference between a merchandising business and a service business.
Q3) At the beginning of the year,Superior Sales had $7,500 of merchandise inventory.During the year,the company purchased $72,000 of inventory.At the end of the year,a count of the inventory revealed that the business had $11,640 of inventory on hand.Superior uses the periodic inventory system.
a)What is cost of goods sold for the year?
b)What is the amount of goods available for sale?
c)What amount of inventory will be shown on the year-end balance sheet?
Q4) In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.
A)True
B)False
Q5) Give an example of a product cost.At what time are product costs recognized as expenses? What is the name of the expense account?
Q6) If goods are shipped FOB destination,who is responsible for the shipping costs?
Page 6
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Chapter 5: Accounting for Inventories
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134 Flashcards
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Sample Questions
Q1) Bell Company has provided the following figures as of December 31,2016: Sales,$600,000;cost of goods sold,$320,000;net income,$120,000;inventory,$64,000.Indicate whether each of the above statements pertaining to the Bell Company is true or false.
_____ a)Bell's inventory turnover is 5.0.
_____ b)Bell's average number of days to sell inventory ratio is 39.5.
_____ c)Bell could increase its inventory turnover by increasing prices.
_____ d)Bell's gross margin as a percentage of sales was 46.7%.
_____ e)A local competitor in the same line of business has an inventory turnover of 3.5.Assuming each firm has approximately the same gross margin rate,Bell Company is likely to be more profitable than the competitor.
Q2) Anton Co.uses the perpetual inventory method.Anton purchased 400 units of inventory that cost $12.00 each.At a later date the company purchased an additional 600 units of inventory that cost $16.00 each.If Anton uses the FIFO cost flow method and sells 700 units of inventory,the amount of cost of goods sold will be:
A)$11,200.
B)$10,400.
C)$8,400.
D)$9,600.
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Chapter 6: Internal Control and Accounting for Cash
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) What is a fidelity bond and what is its purpose?
Q2) How will a certified check be treated in a company's bank reconciliation?
A)As a deduction to the company's unadjusted book balance.
B)As an increase to the bank's unadjusted bank balance.
C)As a deduction to the bank's unadjusted bank balance.
D)There is no adjustment when preparing the bank reconciliation.
Q3) A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.
A)True
B)False
Q4) For a business,Cash generally includes currency,customers' checks,and some savings accounts.
A)True
B)False
Q5) List three of the five primary roles of the independent auditor (CPA).
Q6) What term is used for a customer's check that is returned by the bank on which it was drawn because the customer did not have enough funds to pay the check?
Q7) What is the purpose of establishing a petty cash fund?
Page 8
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Chapter 7: Accounting for Receivables
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144 Flashcards
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Sample Questions
Q1) Indicate whether each of the following statements is true or false.
_____ a)A benefit of making credit card sales is that there is no cost to the merchant.
_____ b)A benefit of accepting credit cards is that increased sales may be generated.
_____ c)Recording a credit card sale increases total assets and increases total liabilities.
_____ d)Recording the collection of cash from the credit card company increases cash and increases revenue.
_____ e)The income statement is not affected at the time the cash receipt is recorded.
Q2) On June 1,2016,Carolina Company collected a $24,000 note receivable that had been issued on June 1,2015.The note carried a 6% interest rate.The interest revenue recognized on the maturity date is $1,440.
A)True
B)False
Q3) What is aging of accounts receivable,and how is it used to account for uncollectible accounts?
Q4) Discuss briefly the costs of making sales on account.
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Page 9
Chapter 8: Accounting for Long-Term Operational Assets
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Sample Questions
Q1) In choosing a depreciation method for financial reporting,a company should use the method that most closely approximates the amount of depreciation on the tax return.
A)True
B)False
Q2) On January 1,2016,Phillips Company made a basket purchase including land,a building and equipment for $380,000.The appraised values of the assets are $20,000 for the land,$340,000 for the building and $40,000 for equipment.Phillips uses the double declining balance method of depreciation for the equipment which is estimated to have a useful life of four years and a salvage value of $5,000.The depreciation expense for 2016 for the equipment is:
A)$17,000.
B)$20,000.
C)$9,500.
D)$19,000.
Q3) Why do some say that the GAAP treatment of research and development puts the US at a competitive disadvantage compared to businesses in other countries?
Q4) State the reason that goodwill is not amortized as some other intangible assets are.
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Chapter 9: Accounting for Current Liabilities and Payroll
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) In September of 2016,Hansen Company issued a note payable to borrow money from its bank.Principal and interest on the note would come due in June 2017.Interest expense on this note must be accrued at the end of 2016 for the period from issuance of the note to the last day of the accounting period.
A)True
B)False
Q2) When is warranty expense usually recognized?
Q3) Why does the recording of a taxable sale increase a company's liabilities?
Q4) The current ratio is computed as follows:
A)Current assets divided by total assets.
B)Current assets minus current liabilities.
C)Current assets divided by current liabilities.
D)Retained earnings divided by current liabilities.
Q5) What factor distinguishes an employee from an independent contractor?
A)The amount of the pay.
B)Whether or not the company supervises and controls the work.
C)Whether or not the work is performed on company property.
D)Whether the individual chooses to be treated as an independent contractor.
Q6) When a warranty repair job is completed,what is the effect on the accounting equation?
Page 11
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Chapter 10: Accounting for Long-Term Debt
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) Based on the above,how much interest expense will Hanover report on its income statement on December 31,2016?
A)$423
B)$2,115
C)$5,640
D)$6,063
Q2) Alexander Corporation issued 20-year bonds payable at a discount in 2016.Will Alexander's net income for 2016 be higher,lower,or the same as it would have been had the bonds been issued at face value? Why?
Q3) On January 1,2016,Sheffield Co.issued bonds with a face value of $200,000,a term of ten years,and a stated interest rate of 6%.The bonds were issued at 105,and interest is payable each December 31.Sheffield uses the straight-line method to amortize the bond discount.The carrying value of the bonds that would be reported on the December 31,2019 balance sheet is:
A)$204,000.
B)$200,000.
C)$205,000.
D)$206,000.
Q4) Explain the concept of financial leverage.
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Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) For 2016,the Sacramento Corporation had beginning and ending Retained Earnings balances of $208,054 and $231,012 respectively.Also during 2016,the corporation declared and paid cash dividends of $29,000 and issued stock dividends valued at $16,000.Total expenses were $32,916.Based on this information,what was the amount of total revenue for 2016?
A)$68,158
B)$143,154
C)$100,874
D)$179,132
Q2) Which of the following is a negative or contra stockholders' equity account?
A)Retained Earnings
B)Paid-in Capital in Excess of Par
C)Treasury Stock
D)Appropriated Retained Earnings
Q3) When the Common Stock account is disclosed on the balance sheet,it is reported at:
A)current market value
B)average issue price
C)par or stated value
D)lower of cost or market
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Page 13
Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) The Mercury Company rents out a portion of its office space to another company.At the beginning of 2016 the balance in the Unearned Rent Revenue account was $3,400.During 2016,Mercury recognized $16,600 of rent revenue.If the ending balance of Unearned Rent Revenue is $2,600,how much cash was received from the tenant for rent during 2016?
A)$14,000
B)$16,600
C)$17,400
D)$15,800
Q2) Which of the following transactions would be disclosed on a schedule of noncash investing and financing activities?
A)A mortgage liability accepted in exchange for title to a building.
B)Writing off an uncollectible account receivable.
C)The issuance of bonds for cash.
D)A mortgage liability accepted in exchange for title to a building and also writing off an uncollectible account receivable.
Q3) Why are financial analysts interested in the statement of cash flows?
Q4) List the three categories of cash inflows and outflows shown on the statement of cash flows.
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Gleason Company and Henry Company are similar and similar-sized companies operating in the same industry.At the end of the most recent year,Gleason's price/earnings ratio was 22.0,and Henry's price/earnings ratio was 14.2.What conclusion would you draw based on the difference in price/earnings ratios for the two companies?
Q2) The study of an individual financial statement item over several accounting periods is called:
A)Horizontal analysis.
B)Vertical analysis.
C)Ratio analysis.
D)Time and motion analysis.
Q3) The accounting concept or principle that is perhaps the greatest single culprit in distorting the results of financial statement analysis is the:
A)Historical cost concept.
B)Matching principle.
C)Conservatism principle.
D)Time value of money concept.
Q4) Describe the factors involved in communicating useful financial information.
Q5) Discuss the limitations that affect financial statement analysis.
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