Business Accounting Exam Preparation Guide
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of accounting within a business context. This course covers the recording, classification, and interpretation of financial transactions, focusing on the preparation and analysis of key financial statements such as the balance sheet, income statement, and cash flow statement. Students will learn about the accounting cycle, internal controls, the role of ethics in accounting, and the use of accounting information for decision-making.
Emphasis is placed on practical applications, equipping students with the skills needed to understand business performance and support management in planning, control, and financial reporting.
Recommended Textbook
Corporate Financial Accounting 12th Edition by Carl
S. Warren
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15 Chapters
2628 Verified Questions
2628 Flashcards
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Chapter 1: Introduction to Accounting and Business
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Sample Questions
Q1) Paying an account payable increases liabilities and decreases assets.
A)True
B)False
Answer: False
Q2) Which of the following is not true of accounting principles?
A)Financial accountants follow generally accepted accounting principles (GAAP).
B)Following GAAP allows accounting information users to compare one company to another.
C)A new accounting principle can be adopted with stockholders approval.
D)The Financial Accounting Standards Board (FASB)has primary responsibility for developing accounting principles.
Answer: C
Q3) An example of an external user of accounting information is the federal government.
A)True
B)False
Answer: True
Q4) What are the three sections of the statement of cash flows?
Answer: Operating Activities,Investing Activities,and Financing Activities
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Chapter 2: Analyzing Transactions
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Sample Questions
Q1) Which of the following entries records the acquisition of office supplies on account?
A)Office Supplies,debit;Cash,credit
B)Cash,debit;Office Supplies,credit
C)Office Supplies,debit;Accounts Payable,credit
D)Accounts Receivable,debit;Office Supplies,credit
Answer: C
Q2) Which of the following entries records the payment of rent for the current month?
A)Cash,debit;Rent Expense,credit
B)Rent Expense,debit;Cash,credit
C)Rent Expense,debit;Accounts Receivable,credit
D)Accounts Payable,debit;Rent Expense,credit
Answer: B
Q3) On January 8th,JumpStart purchased $20,000 worth of office equipment.Prepare the journal entry to record this transaction. Answer: 11ea906a_d1c4_0937_aec7_0b3a01d72d2a_TB2051_00
Q4) Prepare a journal entry on October 12 for the fees earned on account,$14,600. Answer: 11ea906a_d1c4_575a_aec7_59d824a6a683_TB2051_00
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) A contra asset account for Land will normally appear in the balance sheet.
A)True
B)False
Answer: False
Q2) Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)
A)asset
B)liability
C)contra asset
D)expense
Answer: A
Q3) Deferred expenses have
A)not yet been recorded as expenses or paid
B)been recorded as expenses and paid
C)been incurred and paid
D)not yet been recorded as expenses
Answer: D
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) The chart of accounts,the journal,and the ledger are essential parts of the accounting system.
A)True
B)False
Q2) An indication that the work sheet columns are in balance and the work sheet is completed is
A)the word "Total" is written at the bottom of each pair of columns
B)each pair of columns is double underlined
C)each pair of columns has the totals circled
D)the final figures are written in ink
Q3) The difference between a classified balance sheet and one that is classified is that the classified one has subheadings.
A)True
B)False
Q4) Journalizing and posting the adjustments and closing entries updates the ledger for the new accounting period.
A)True
B)False
Q5) Explain how net income or loss is determined by using the work sheet.
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Chapter 5: Accounting for Merchandising Businesses
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217 Flashcards
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Sample Questions
Q1) Merchandise subject to terms 1/10,n/30,FOB shipping point,is sold on account to a customer for $25,000.The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment.What is the amount of the cash discount allowable?
A)$170
B)$150
C)$130
D)$250
Q2) The abbreviation FOB stands for Free On Board.
A)True
B)False
Q3) Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10,n/30,FOB destination.Freight costs paid by the seller totaled $200.What is the cost of the merchandise if paid on September 12,assuming the discount is taken?
A)$3,140
B)$3,136
C)$2,744
D)$2,940
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Chapter 6: Inventories
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Sample Questions
Q1) During August,the first month of the fiscal year,sales totaled $875,000 and the cost of merchandise available for sale totaled $700,000.Estimate the cost of the merchandise inventory as of August 31,based on an estimated gross profit rate of 45%.
Q2) A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor.
A)True
B)False
Q3) The three inventory costing methods will normally each yield different amounts of net income.
A)True B)False
Q4) If a fire destroys the merchandise inventory,the gross profit method can be used to estimate the cost of merchandise destroyed.
A)True
B)False
Q5) The lower of cost or market is a method of inventory valuation.
A)True
B)False
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Chapter 7: Sarbanes-Oxley, internal Control, and Cash
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175 Flashcards
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Sample Questions
Q1) Businesses who have several bank accounts,petty cash,and cash on hand,would maintain a separate ledger account for each type of cash.
A)True
B)False
Q2) In preparing a bank reconciliation,the amount indicated by a debit memo for bank service charges is added to the balance per company's records.
A)True
B)False
Q3) Credit memos from the bank
A)decrease a bank customer's account
B)are used to show a bank service charge
C)show that a company has deposited a customer's NSF check
D)show the bank has collected a note receivable for the customer
Q4) The notification accompanying a check that indicates the specific invoice being paid is called a
A)remittance advice
B)voucher
C)debit memo
D)credit memo
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Chapter 8: Receivables
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Sample Questions
Q1) The term "receivables" includes all A)money claims against other entities.
B)merchandise to be collected from individuals or companies.
C)cash to be paid to creditors.
D)cash to be paid to debtors.
Q2) When companies sell their receivables to other companies,the transaction is called factoring.
A)True
B)False
Q3) Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment),and an analysis of accounts in the customers ledger indicates uncollectible receivables of $13,000.Which of the following entries records the proper adjusting entry for bad debt expense?
A)debit Bad Debt Expense,$600;credit Allowance for Doubtful Accounts,$600
B)debit Bad Debt Expense,$12,400;credit Allowance for Doubtful Accounts,$12,400
C)debit Allowance for Doubtful Accounts,$600;credit Bad Debt Expense,$600
D)debit Bad Debt Expense,$13,600;credit Allowance for Doubtful Accounts,$13,600
Q4) When a note is written to settle an open account,no entry is necessary.
A)True
B)False
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Chapter 9: Fixed Assets and Intangible Assets
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Sample Questions
Q1) The exclusive right to use a certain name or symbol is called a
A)goodwill
B)patent
C)trademark
D)copyright
Q2) Which intangible assets are amortized over their useful life?
A)trademarks
B)goodwill
C)patents
D)all of the above
Q3) Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.
A)True
B)False
Q4) When minor errors occur in the estimates used in the determination of depreciation,the amounts recorded for depreciation expense in the past should be corrected.
A)True
B)False
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Chapter 10: Current Liabilities and Payroll
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Sample Questions
Q1) The payroll summary for December 31 for Waters Co.revealed total earnings of $80,000.Earnings subject to 6% social security tax were $60,000;earnings subject to 1.5% Medicare tax were $80,000;and earnings of $3,000 were subject to 4.3% state and 0.8% federal unemployment compensation tax.Journalize the entry to record the accrual of payroll taxes.
Q2) The accounting for defined benefit plans is usually very easy and straight forward.
A)True B)False
Q3) The payroll register is a multicolumn form used to assemble the data related for all employees.
A)True B)False
Q4) For paying their payroll,most employers use payroll checks drawn on a special bank account.
A)True B)False
Q5) All long-term liabilities eventually become current liabilities. A)True B)False
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Chapter 11: Corporations: Organization, stock Transactions, and Dividends
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Sample Questions
Q1) Carmen Company a publicly traded company with preferred and common stock issued.As of January 1st,it had 50,000 shares of $100 par,2% preferred stock outstanding and 250,000 shares of $10 par common stock outstanding.
(a)On January 31st,the Board of Directors issues a requirement to purchase 5,000 shares of its common stock at market price.The shares are purchased at a market price of $22 per share.Journalize the purchase utilizing the cost concept.
(b)On March 15th,Carmen declares a dividend on preferred stock of $2.75 per share.The date of record is March 25th and the date of payment is March 31st.Journalize these events.
(c)On December 1st,Carmen declares a cash dividend on common stock of $0.12 per share.The date of record is December 15th and the date of payment is December 21st.Journalize these events.
(d)On December 27th the board orders that 2,500 shares of treasury stock be sold.The sale price is $25 per share.Journalize this event.
Q2) A corporation is a separate entity for accounting purposes but not for legal purposes.
A)True B)False
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Chapter 12: Long-Term Liabilities: Bonds and Notes
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Sample Questions
Q1) If $1,000,000 of 8% bonds are issued at 103 1/2,the amount of cash received from the sale is
A)$1,080,000
B)$965,000
C)$1,000,000
D)$1,035,000
Q2) The interest expense recorded on an interest payment date is increased
A)only if the market rate of interest is less than the stated rate of interest on that date.
B)by the amortization of premium on bonds payable.
C)by the amortization of discount on bonds payable.
D)only if the bonds were sold at face value.
Q3) The amortization of a premium on bonds payable decreases bond interest expense.
A)True
B)False
Q4) If bonds are issued at a premium,the stated interest rate is
A)higher than the market rate of interest.
B)lower than the market rate of interest.
C)too low to attract investors.
D)adjusted to a higher rate of interest.
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Chapter 13: Investments and Fair Value Accounting
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Sample Questions
Q1) An equity investment in less than 20% of another company's stock is accounted for using the cost method.
A)True
B)False
Q2) Under the equity method,the receipt of cash dividends on an investment in common stock of Vallerio Corporation is accounted for as a debit to Cash and a credit to
A)Investment in Vallerio
B)Retained Earnings
C)Dividend Revenue
D)Dividend Receivables
Q3) Investment in Bonds is listed on the balance sheet after Bonds Payable.
A)True
B)False
Q4) Trading securities should be reported on the financial statements at fair market value.
A)True
B)False
Q5) Compare and contrast why companies invest cash in short-term temporary investments vs.long-term investments.
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Chapter 14: Statement of Cash Flows
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Sample Questions
Q1) Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year.Cash payments for income tax reported on the cash flow statement using the direct method is
A)$175,000
B)$165,000
C)$205,000
D)$215,000
Q2) The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.
A)True
B)False
Q3) Free cash flow is
A)all cash in the bank
B)cash from operations
C)cash from financing,less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
D)cash flow from operations,less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Factors which reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.
A)True
B)False
Q2) A clean audit opinion is the same as a qualified audit opinion.
A)True
B)False
Q3) In a common size income statement,the 100% figure is:
A)net cost of goods sold.
B)net income.
C)gross profit.
D)net sales.
Q4) Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?
A)ratio of fixed assets to long-term liabilities
B)ratio of net sales to assets
C)number of days' sales in receivables
D)rate earned on stockholders' equity
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