Basic Financial Accounting Test
Bank
Course Introduction
Basic Financial Accounting introduces students to the fundamental principles and concepts underlying the accounting process. The course covers essential topics such as the accounting cycle, preparation and interpretation of financial statements, recording of business transactions, and the role of accounting in decision-making. Through practical exercises and real-life applications, students will gain a foundational understanding of how financial information is generated, reported, and used by various stakeholders. The course provides a solid grounding for further study in accounting and finance, equipping students with the necessary skills to analyze and interpret basic financial data.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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13 Chapters
1246 Verified Questions
1246 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Borrowing cash from the bank is an example of which type of transaction?
A)Asset source
B)Claims exchange
C)Asset use
D)Asset exchange
Answer: A
Q2) What was the amount of total liabilities reported on the balance sheet as of the end of the current year?
A)$27,500
B)$31,500
C)$35,000
D)$42,500
Answer: A
Q3) The stockholders of a business have a priority claim to its assets in the event of liquidation.
A)True
B)False
Answer: False
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3
Chapter 2: Accounting for Accruals and Deferrals
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92 Flashcards
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Sample Questions
Q1) On January 1,Year 2,the Supplies account of Sheldon Company had a balance of $1,200.During the year,the company purchased $3,400 of supplies on account and made partial payments totaling $3,000 on those accounts.On December 31,Year 2,Sheldon determined that there were $1,400 of supplies on hand.Which of the following would be reported on Sheldon's Year 2 financial statements?
A)$1,600 of supplies;$200 of supplies expense
B)$1,400 of supplies;$2,000 of supplies expense
C)$1,400 of supplies;$3,200 of supplies expense
D)$1,600 of supplies;$3,400 of supplies expense
Answer: C
Q2) Accounts that are closed include expenses,dividends,and unearned revenues.
A)True
B)False
Answer: False
Q3) Providing services to customers on account is an asset exchange transaction.
A)True
B)False
Answer: False
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4
Chapter 3: The Double-Entry Accounting System
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) To record an asset source transaction,an asset account would be debited and a liability or stockholders' equity credited.
A)True
B)False
Answer: True
Q2) Which of the following statements about the entry to record depreciation is true?
A)The entry involves a credit to a liability.
B)The entry involves a credit to Depreciation Expense.
C)The entry involves a credit to the asset being depreciated.
D)The entry involves a credit to a contra-asset account.
Answer: D
Q3) Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that have debit balances on that particular financial statement).
A)Account numbers 1,3,and 5 normally have debit balances.
B)Account numbers 2,4,and 5 normally have debit balances.
C)Account numbers 2,5,and 8 normally have debit balances.
D)Account numbers 4,5,and 6 normally have debit balances.
Answer: A
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Under a periodic system,the account debited for freight costs on goods received from the vendor is called:
A)Merchandise Inventory
B)Cost of Goods Sold
C)Transportation-out
D)Transportation-in
Q2) Common size financial statements are prepared by converting dollar amounts to percentages.
A)True
B)False
Q3) Jake Co.purchased on account merchandise with a list price of $90,000.Payment terms were 1/15,n/45.If collection occurs within 18 days,what discount will Jake Co.recognize on the merchandise?
A)$13,500
B)$900
C)$500
D)$0
Q4) Sales discounts do not affect a company's gross margin percentage.
A)True
B)False
Page 6
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Chapter 5: Accounting for Inventories
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Sample Questions
Q1) How is inventory turnover calculated?
A)Cost of goods sold divided by inventory
B)Sales divided by inventory
C)Beginning inventory divided by the ending inventory
D)Inventory divided by cost of goods sold
Q2) The lower-of-cost-or-market rule can be applied to which of the following?
A)Major classes or categories of inventory
B)The entire stock of inventory in the aggregate
C)Each individual inventory item
D)All of these answer choices are correct.
Q3) Stubbs Company uses the perpetual inventory method and the weighted-average cost flow method.On January 1,Year 2,Stubbs purchased 400 units of inventory that cost $8.00 each.On January 10,Year 2,the company purchased an additional 600 units of inventory that cost $9.00 each.If the company sells 700 units of inventory for $16.00 each,what is the amount of gross margin reported on the income statement?
A)$5,180
B)$5,250
C)$5,000
D)$6,020
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Page 7
Chapter 6: Internal Control and Accounting for Cash
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82 Flashcards
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Sample Questions
Q1) After the adjustments identified on the bank reconciliation have been recorded,the ending cash (book)balance reflected in the company's records will equal the true cash balance.
A)True
B)False
Q2) Typical adjustments to the unadjusted book balance on a bank reconciliation include bank service charges,customer NSF checks,and certified checks.
A)True
B)False
Q3) Which of the following adjustments reflected on a bank reconciliation would not require an adjusting journal entry?
A)An error in which the company's accountant recorded a check as $235 that was written correctly for $253.
B)A check for $37 deposited during the month,but returned for non-sufficient funds.
C)An error in which the bank charged the company $83 for a check that had been written by another account holder.
D)All of these answer choices would require adjusting journal entries.
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8
Chapter 7: Accounting for Receivables
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83 Flashcards
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Sample Questions
Q1) The collection of an account receivable is an asset source transaction.
A)True
B)False
Q2) Which of the following is a true statement about a company that uses the allowance method?
A)Uncollectible Accounts Expense is recorded when a receivable is written off.
B)Uncollectible accounts are not recorded until the amount becomes significant.
C)The net realizable value of its accounts receivable is shown on the balance sheet.
D)None of these answer choices are correct.
Q3) Elliston Company accepted credit card payments for $10,000 of services provided to customers.The credit card company charges a 3% fee for handling the transaction.Which of the following describes the effect of this transaction?
A)Increase revenue by $9,700
B)Increase assets by $10,000
C)Increase stockholders' equity (retained earnings)by $9,700
D)Increase net income by $10,000
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9
Chapter 8: Accounting for Long-Term Operational Assets
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110 Flashcards
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Sample Questions
Q1) Which of the following terms is used to identify the expense recognition associated with intangible assets?
A)Allocation
B)Depletion
C)Depreciation
D)Amortization
Q2) Expenditures that extend the useful life of a plant asset are debited to the asset account.
A)True
B)False
Q3) How is depreciation expense reported in the financial statements?
A)Long-term liabilities section of the statement of stockholder's equity
B)Financing activities section of the statement of cash flows
C)Current assets section of the balance sheet
D)Operating expenses section of the income statement
Q4) Which of the following is considered an accelerated depreciation method?
A)Double-declining balance
B)Units-of-production
C)MACRS
D)Both double-declining-balance and MACRS
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Chapter 9: Accounting for Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet?
A)Interest payable
B)Salaries payable
C)Accounts payable
D)All of these answer choices are correct.
Q2) Which of the following is not an item deducted from salary expense to arrive at net pay?
A)FICA tax for Social Security
B)FICA tax for Medicare
C)Federal unemployment tax
D)These answer choices are all deducted from salary expense to arrive at net pay
Q3) Which of the following describes the effect of remitting the sales tax to the tax authority?
A)Decreases liabilities.
B)A claims exchange transaction.
C)Decreases stockholders' equity.
D)All of these answer choices are correct.
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Chapter 10: Accounting for Long-Term Debt
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105 Flashcards
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Sample Questions
Q1) If a company chooses to call some of its callable bonds before their maturity,generally it will have to pay an amount that is greater than the carrying value of the bonds.
A)True
B)False
Q2) If a bond issuer's bond ratings drop,the company probably will have to pay higher interest rates on bonds that have already been issued.
A)True
B)False
Q3) Which of the following conditions indicate a company has a relatively high level of financial risk?
A)A low times-interest-earned ratio
B)A low debt to assets ratio
C)A high return on equity
D)A high current ratio
Q4) The after-tax interest cost of debt equals total interest expense multiplied by the tax rate.
A)True
B)False
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Chapter 11: Proprietorships,partnerships,and Corporations
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92 Flashcards
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Sample Questions
Q1) Establishing a sole proprietorship generally requires the owner to get a charter from the state government.
A)True
B)False
Q2) Franklin Corporation reported net income of $75,000 in Year 1.The company had 100,000 shares of $12 par value common stock outstanding and a market price of $18 per share.What is Franklin's price-earnings ratio?
A)2.4
B)24
C)16.6
D)1.5
Q3) Powell Corporation had $10 par stock with a market price of $60,when it declared a 2-for-1 stock split.After the stock split,the number of shares outstanding will double,and the market price of the stock should drop to about $30.
A)True
B)False
Q4) A separate capital account is maintained for each partner in a partnership.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Which of the following transactions is a use of cash?
A)Short-term borrowing of cash
B)Acquisition of land by issuing a short-term note payable
C)Issuance of a stock dividend
D)Purchase of treasury stock
Q2) For the year ended December 31,Year 1,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.What is the net cash used by investing activities for Year 1?
A)$114,000
B)$64,000
C)$20,500
D)$134,500
Q3) Which section of the statement of cash flows is prepared using either the direct or indirect method?
A)Operating activities
B)Investing activities
C)Financing activities
D)All of these answer choices are correct
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Chapter 13: Financial Statement Analysis
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108 Flashcards
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Sample Questions
Q1) Horizontal analysis is also known as:
A)Liquidity analysis.
B)Trend analysis.
C)Revenue analysis.
D)Variance analysis.
Q2) Which of the following statements regarding ratio analysis is not true?
A)Ratio analysis is a specific form of horizontal analysis.
B)There are many different ratios available for evaluating a firm's performance.
C)Some ratios involve an account from the balance sheet and one from the income statement.
D)Ratio analysis involves making comparisons between different accounts in the same set of financial statements.
Q3) Miller Company reported gross sales of $850,000,sales returns and allowances of $15,000 and sales discounts of $5,000.The company has average total assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?
A)3.32 times
B)1.67 times
C)1.66 times
D)1.70 times
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