Business Accounting
Study Guide Questions
Course Introduction
Business Accounting provides students with a comprehensive introduction to the fundamental principles and practices of accounting as applied in the business world. The course covers key topics such as financial statement preparation and analysis, the accounting cycle, double-entry bookkeeping, and the role of accounting in decision making. Students will develop the ability to record financial transactions, understand accrual and cash accounting, and interpret financial information to assess business performance. Emphasis is placed on the ethical and regulatory framework of accounting, preparing students for further study or careers in finance, management, or entrepreneurship.
Recommended Textbook
Financial And Managerial Accounting Principles International Edition 9th Edition by Crosson
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29 Chapters
4463 Verified Questions
4463 Flashcards
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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170 Verified Questions
170 Flashcards
Source URL: https://quizplus.com/quiz/72011
Sample Questions
Q1) Companies whose securities are sold to the general public must adhere to standards established by the Securities and Exchange Commission.
A)True
B)False
Answer: True
Q2) The International Accounting Standards Board is the primary and most important determinant of generally accepted accounting principles.
A)True
B)False
Answer: False
Q3) Distinguish between profitability and liquidity.
Answer: Profitability is the ability to earn enough income to attract and hold investment capital,whereas liquidity means having enough funds on hand to pay debts when they fall due.
Q4) The management of a corporation is responsible for electing the board of directors.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Analyzing Business Transactions
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Sample Questions
Q1) In a journal entry,the Post.Ref.column is left blank until the entry has been posted.
A)True
B)False
Answer: True
Q2) The account most recently posted is determined most efficiently by referring to the
A) Post. Ref. column of the ledger.
B) balance column of the ledger.
C) date column of the general journal.
D) Post. Ref. column of the general journal.
Answer: D
Q3) Which of the following is a business event that is considered a recordable transaction?
A) A company hires a new employee.
B) A customer purchases merchandise.
C) A company orders a product from a supplier.
D) An employee sends a purchase requisition to the purchasing department.
Answer: B
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Which of the following accounts would be found on the credit side of the adjusted trial balance?
A) Accumulated Depreciation-Equipment
B) Prepaid Insurance
C) Dividends
D) Depreciation Expense
Answer: A
Q2) If a company is expected to survive,it is considered a going concern.
A)True
B)False
Answer: True
Q3) A company recorded office supplies in an asset account when the supplies were purchased.Failure to take inventory and make an adjusting entry will result in an
A) understatement of liabilities.
B) understatement of stockholders' equity.
C) understatement of assets.
D) overstatement of stockholders' equity.
Answer: D
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Chapter 3: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) A work sheet is more useful for a small company than for a large one.
A)True
B)False
Q2) The work sheet is prepared after the formal adjusting and closing entries.
A)True
B)False
Q3) Closing entries may be prepared by referring solely to the Income Statement columns of the work sheet.
A)True
B)False
Q4) The work sheet should be prepared after the formal financial statements have been prepared.
A)True
B)False
Q5) In a manual system which uses a work sheet,the preparation of adjusting entries
A) typically precedes the preparation of the financial statements.
B) typically precedes preparation of the work sheet.
C) is easy because they are simply copied from the work sheet.
D) is difficult, and therefore they must first be entered into the general journal in pencil.
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Chapter 4: Financial Reporting and Analysis
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Sample Questions
Q1) Sales returns and allowances are deducted from gross sales on the balance sheet.
A)True
B)False
Q2) The relevance of accounting information is also an indication of its reliability.
A)True
B)False
Q3) The Sarbanes-Oxley Act requires a company to guarantee that its financial statements are 100 percent accurate.
A)True
B)False
Q4) The owner's capital for a sole proprietorship is similar in nature to which of the following for corporations?
A) Stockholders' equity
B) Retained earnings
C) Common stock
D) Dividends
Q5) Freight paid on goods shipped to customers is classified as a selling expense.
A)True
B)False
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Chapter 5: The Operating Cycle and Merchandising Operations
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) All systems of internal control are identical and,once established,do not need to be changed.
A)True
B)False
Q2) A sale takes place when title to the goods transfers to the buyer.
A)True
B)False
Q3) Which of the following documents is prepared by to a company's accounting department?
A) Receiving report
B) Check authorization
C) Bank statement
D) Invoice
Q4) Ending merchandise inventory is included in the calculation of goods available for sale.
A)True
B)False
Q5) Why is the separation of duties an important control activity in a good system of internal control?
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Chapter 6: Inventories
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Sample Questions
Q1) When the cost of inventory is written down due to a market decline,a loss must be recorded.
A)True
B)False
Q2) A fur dealer probably would use which of the following inventory methods?
A) Specific identification
B) FIFO
C) Average-cost
D) LIFO
Q3) How is the matching rule applied when accounting for merchandise inventory?
Q4) The term cost flow refers to the association of costs with their assumed flow in the operation of a business.
A)True
B)False
Q5) Goods in transit shipped FOB shipping point should be included in the seller's ending inventory.
A)True
B)False
Q6) What is a LIFO liquidation,and what is its effect on income before income taxes?
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Q7) What is the chief objective of supply-chain management? How is it accomplished?
Chapter 7: Cash and Receivables
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179 Flashcards
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Sample Questions
Q1) If the amount of uncollectible accounts expense is overstated at year end,
A) Allowance for Uncollectible Accounts will be understated.
B) net income will be overstated.
C) net Accounts Receivable will be understated.
D) total liabilities and stockholders' equity will be overstated.
Q2) Under the allowance method,when a specific account is written off,
A) total assets will be unchanged.
B) total assets will decrease.
C) net income will decrease.
D) total assets will increase.
Q3) When Company A discounts,with recourse,a note to Company B,Company B has a contingent liability until the note is paid.
A)True B)False
Q4) Excess cash should be kept in a checking account. A)True B)False
Q5) What is a contingent liability,and how does it relate to the discounting of a note receivable at the bank?
Q6) What is a compensating balance? By whom is it required?
Page 10
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Chapter 8: Current Liabilities and Fair Value Accounting
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184 Flashcards
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Sample Questions
Q1) Product warranties are an expense of the period in which the product must be repaired or replaced.
A)True B)False
Q2) If an accrued liability for salaries is not recorded,income for the following period will be overstated.
A)True B)False
Q3) In a deferred payment arrangement,interest is charged only if it is stated. A)True B)False
Q4) Accrued liabilities often arise as a result of the passage of time. A)True B)False
Q5) Ronald Company has current assets of $115,000 and current liabilities of $75,000 of which accounts payable are $65,000.Arnold's cost of goods sold is $420,000,its merchandise inventory increased by $20,000,and accounts payable were $45,000 the prior year.Calculate Ronald's working capital,payables turnover,and days' payable.
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Chapter 9: Long Term Assets
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242 Flashcards
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Sample Questions
Q1) On January 1,2009,Pung Manufacturing Company purchased for $94,000 a machine that will produce an estimated 75,000 units of Product X.The machine has an estimated useful life of five years and an estimated residual value of $4,000.Calculate the following amounts: (a)the carrying value of the machine after it has been used for three and one-half years,under the straight-line method; (b)depreciation expense for 2010,under the production method (assume that 13,000 units were produced that year); and (c)accumulated depreciation at the end of 2010,under the double-declining-balance method.(Show your work.)
Q2) Equipment is purchased for $80,000.It has an eight-year useful life and a $39,250 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?
A) $11,250
B) $5,250
C) $5,750
D) $6,250
Q3) Free cash flow is a good measure of a company's ability to finance long-term assets.
A)True
B)False
Q4) What is goodwill and when may it be recorded?
Page 12
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Chapter 10: Long-Term Liabilities
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202 Flashcards
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Sample Questions
Q1) Serial bonds are bonds that A) mature on several different dates.
B) all have the same maturity date. C) must be secured.
D) are also called term bonds.
Q2) When bonds are sold at face value between interest dates,the result is a debit to the Cash account that
A) equals face value.
B) depends on the circumstances.
C) is less than face value.
D) exceeds face value.
Q3) When determining the value of a bond using present value,what are the two components used in the calculation?
Q4) Bonds that contain a provision that allows the holders to exchange the bonds for other securities of the issuing corporation are called A) debenture bonds.
B) secured bonds.
C) callable bonds.
D) convertible bonds.
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Chapter 11: Contributed Capital
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190 Flashcards
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Sample Questions
Q1) Outstanding shares of stock are
A) authorized shares that have not yet been issued.
B) also called treasury shares.
C) shares of stock owned by unknown individuals.
D) issued shares that are still in circulation.
Q2) Stockholders who own preferred stock usually have voting rights,whereas stockholders who own common stock usually do not have voting rights.
A)True
B)False
Q3) The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14,2010.The dividend is to be paid on July 15,2010,to shareholders of record on July 1,2010.The effects of the entry to record the declaration of the dividend on June 14,2010,are to
A) decrease stockholders' equity and increase liabilities.
B) increase stockholders' equity and increase liabilities.
C) decrease stockholders' equity and decrease assets.
D) increase stockholders' equity and decrease assets.
Q4) Why must a corporation have sufficient retained earnings before it may declare cash dividends?
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Chapter 12: Investments
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163 Flashcards
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Sample Questions
Q1) When the cost-adjusted-to-market method is used to account for an investment in stock,dividends received are accounted for as a reduction in the Investment account.
A)True
B)False
Q2) Another term for short-term investments is marketable securities.
A)True
B)False
Q3) Gains and losses on the sale of investments appear as adjustments within the operating activities section of the statement of cash flows.
A)True
B)False
Q4) When the equity method is used to account for a long-term investment in stock of another company,the carrying value of the investment is affected by A) declines in the market value of the stock.
B) the earnings and dividends of the investee.
C) an excess of market price over cost.
D) neither the earnings nor the dividends of the investee.
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Chapter 13: The Corporate Income Statement and the Statement of Stockholders Equity
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175 Flashcards
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Sample Questions
Q1) A corporation should account for the declaration of a 10 percent stock dividend by
A) transferring from retained earnings to contributed capital an amount equal to the legal capital represented by the dividend shares.
B) transferring from retained earnings to contributed capital an amount equal to the market value of the dividend shares.
C) transferring from retained earnings to contributed capital whatever amount the board of directors deems appropriate.
D) making only a memorandum entry in the general journal.
Q2) A stock split normally increases total stockholders' equity.
A)True
B)False
Q3) Income tax allocation procedures are applied to comply with the matching principle.
A)True
B)False
Q4) Non-operating items will generally reduce a company's quality of earnings.
A)True
B)False
Page 16
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Chapter 14: The Statement of Cash Flows
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149 Flashcards
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Sample Questions
Q1) Royer Corporation engaged in this transaction: Received dividends on securities held. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.
A) Schedule of noncash investing and financing transactions
B) Operating activities section
C) Financing activities section
D) Investing activities section
Q2) It is unethical,and considered a form of manipulation,to classify a cash flow as an investing or financing activity,when it really is an operating activity.
A)True
B)False
Q3) Repayment of bonds payable would be reflected as a cash outflow in the investing activities section of the statement of cash flows.
A)True
B)False
Q4) When preparing a statement of cash flows using the indirect method,why is depreciation added back to net income within the operating activities section?
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17
Chapter 15: The Changing Business Environment - a Managers Perspective
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Financial accounting usually involves analyses of various segments of a business,such as cost centers,profit centers,or departments,or of some specific aspect of its operations.
A)True
B)False
Q2) Management accounting is not a subordinate activity to financial accounting.
A)True
B)False
Q3) Activity-based management's primary goal is to reduce A) nonvalue-adding costs.
B) defects.
C) inventory size.
D) machine setup time.
Q4) The overall guideline or limit for management accounting information is that the report or analysis must be meaningful and must answer the questions or issues under review.
A)True
B)False
Page 18
Q5) What steps would a company using TQM take to improve product or service quality?
Q6) Give two examples of each stage in the management process.
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Page 19
Chapter 16: Cost Concepts and Cost Allocation
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Sample Questions
Q1) Period cost and product cost are synonymous terms.
A)True
B)False
Q2) Which of the following is not a reason to classify costs as either product or period costs?
A) To determine unit manufacturing costs
B) To determine if the costs are fixed or variable
C) To analyze costs for control purposes
D) To report production costs on the income statement
Q3) Costs that are identified with and traced to one product or a batch of products are called
A) overhead costs.
B) indirect costs.
C) direct costs.
D) fixed costs.
Q4) Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.
A)True
B)False
Page 20
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Chapter 17: Costing Systems- Job Order Costing
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Sample Questions
Q1) Pretty Pillows,Mfg.,manufactures silk throw pillows.Last month the company produced 3,890 pillows.Using job order costing,determine the product unit cost for one pillow based on the following costs: production facility utilities,$1,600; depreciation on production equipment,$650; indirect materials,$400; direct materials,$5,300; indirect labor,$1,000; direct labor,$3,500; sales commissions,$4,000; president's salary,$8,000; insurance on production facility,$1,000; advertising expense,$900; rent on production facility,$6,000; rent on sales office,$4,000; and legal expense,$600.Carry your answer to two decimal places.
Q2) Job order cost cards for incomplete jobs make up the subsidiary ledger for the Finished Goods Inventory account.
A)True
B)False
Q3) A zero balance in Finished Goods Inventory at the start of the period means all previously completed products have been shipped.
A)True
B)False
Q4) Explain the similarities and differences between job order costing and process costing.Focus on the characteristics of each type of system.
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Page 21
Chapter 18: Costing Systems- Process Costing
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Sample Questions
Q1) Why are equivalent units of production used in process costing?
A) To allocate overhead costs
B) To determine the value of work in process and finished goods inventories
C) To aid in determining costs per unit and costs of inventories in each process
D) To determine the cost per finished unit
Q2) Direct materials costs and conversion costs for the current period on a process cost report are divided by their respective units of equivalent production to arrive at the A) ending inventory unit cost.
B) transferred-in cost per unit.
C) beginning inventory cost per unit.
D) cost per equivalent unit.
Q3) Process costing information can inform managers about the amounts and types of products ordered by specific customers.
A)True
B)False
Q4) Only one Work in Process Inventory account is used with the process costing system.
A)True
B)False
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Chapter 19: Value-Based Systems- Abm and Lean
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Sample Questions
Q1) In order for a manager to reduce throughput time,it is necessary for the accounting system to focus on calculating units produced per direct labor hour.
A)True
B)False
Q2) For a manufacturer,the final customer is part of the supply chain and customer service is part of the value chain.
A)True
B)False
Q3) Which of the following activities would be part of the supply chain of a manufacturer?
A) Shipping
B) Customer service
C) Parts manufacturing
D) Research and development
Q4) Activity costs per unit equal total activity costs divided by total volume.
A)True
B)False
Q5) How do managers measure an activity's performance?
Q6) Why is process value analysis not part of the general ledger accounting system?
Page 23
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Chapter 20: Cost Behavior Analysis
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Sample Questions
Q1) Depreciation calculated using the production or units of output method is an example of a fixed cost.
A)True
B)False
Q2) A project breaks even when total revenue less all costs is equal to zero.
A)True
B)False
Q3) The Raquet Business is considering the manufacture of a new type of tennis ball.Each tennis ball would sell for $3.75 and would require $1.75 in variable costs.In addition,annual fixed costs associated with the project would total $64,000.
a. Use the contribution margin approach to calculate: (1) the breakeven point in units (2) the breakeven point in dollars
b. Determine the operating income or loss at a sales volume of 30,000 tennis balls.
c. Determine the number of tennis balls that must be sold to earn a profit of $80,000.
Q4) Explain what cost-volume-profit analysis is and how managers use it.Give examples of some purposes for which it might be used.
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Chapter 21: The Budgeting Process
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Sample Questions
Q1) Which budgets must managers prepare before they can prepare a direct materials purchases budget?
A) Labor budget
B) Overhead budget
C) Production budget
D) Cost of goods manufactured budget
Q2) XYZ Company expects to sell 37,000 units of its product in the coming year.Each unit sells for $45.Sales brochures and supplies for the year are expected to cost $7,000.Three sales representatives cover the Southeast region.Each one's base salary is $25,000,and each earns a sales commission of 5 percent of the selling price of the units he or she sells.The sales representatives supply their own transportation; they are reimbursed for travel at a rate of $0.40 per mile.The company estimates that the sales representatives will drive a total of 75,000 miles next year.From the information provided,calculate XYZ Company's budgeted selling expenses for the coming year.
A) $195,250
B) $145,250
C) $120,250
D) $83,250
Q3) Describe three benefits budgeting provides to an organization's success.
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Page 25
Chapter 22: Performance Management and Evaluation
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Sample Questions
Q1) Standard costing would most often require which type of performance evaluation?
A) Flexible budgeting
B) Zero-based budgeting
C) Variable costing
D) Any of these choices
Q2) Like ROI,residual income is a performance measure displayed as a ratio.
A)True
B)False
Q3) Employer-provided health insurance is a common type of incentive compensation.
A)True
B)False
Q4) For residual income figures to be comparable on a companywide basis,all investment centers must have equal access to resources and similar asset investment bases.
A)True B)False
Q5) Manufacturing companies rarely utilize responsibility accounting.
A)True B)False
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Chapter 23: Standard Costing and Variance Analysis
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Sample Questions
Q1) Using the labor time standard of 0.5 labor hour per unit and a labor cost standard of $10 per labor hour for a 10 pound bag of chocolate and the following actual cost and usage data,compute the direct labor rate variance. \(\begin{array}{ll}
\text { Direct labor hours used } & 4,950 \text { hours } \\ \text { Total cost of direct labor } & \$ 53,460 \\ \text { Number of good units produced } & 9,000 \text { units } \end{array}\)
A) $4,500 (U)
B) $4,500 (F)
C) $3,960 (F)
D) $3,960 (U)
Q2) The static budget can be adjusted automatically for changes in the level of output. A)True B)False
Q3) Even if a variance is insignificant,corrective action should be taken. A)True B)False
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Chapter 24: Short Run Decision Analysis
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Sample Questions
Q1) The term incremental cost refers to
A) the difference in total costs between alternatives.
B) a cost that does not entail any dollar outlay but that is relevant to the decision-making process.
C) the profit forgone by selecting one choice instead of another.
D) a cost that constitutes expenses to be incurred even though there is no activity.
Q2) Which of the following could not be a relevant cost in deciding whether or not to eliminate a producing department?
A) The current residual value of the department's equipment
B) The salary of a supervisor who would be laid off
C) The carrying value of the department's equipment
D) Revenue that could be generated by renting out the department's space
Q3) There are products or services that can be either sold in a basic form or be processed further.
A)True
B)False
Q4) "Variable costs are relevant and fixed costs are irrelevant." Explain why you agree or disagree with this statement.
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Chapter 25: Capital Investment Analysis
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Sample Questions
Q1) If an equipment replacement decision would not affect revenue,its benefits could still be measured by analyzing its
A) cost savings.
B) net cash flows.
C) effect on net income.
D) net cash outflows.
Q2) Depreciation is a unique expense because it
A) does not require a cash outlay.
B) does not affect income taxes.
C) is the same amount every accounting period.
D) has to be calculated.
Q3) In the capital investment decision process,the management accountant's responsibilities lie in the area of
A) methods of computation and final screening.
B) final selection of alternatives.
C) detection of facility need.
D) initial screening.
Q4) A project with a net present value of zero should not be accepted. A)True B)False
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Chapter 26: Pricing Decisions, incltarget Costing and Transfer Pricing
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Sample Questions
Q1) Lethal Industries has recently patented a new product called MaxiDrive,an automobile oil for maximum engine performance.The following annual information was developed by the company's controller for use in price determination: \(\begin{array}{lr}
\text { Variable production costs } & \$ 1,860,000 \\
\text { Fixed overhead } & 620,000 \\
\text { Selling expenses } & 420,000 \\
\text { General and administrative expenses } & 230,000 \\
\text { Desired profit } & 342,000 \end{array}\)
Annual demand for the product is expected to be 500,000 quarts.Round answers to nearest two decimal places.
a. Compute the projected unit cost for one quart of MaxiDrive.
b. Prepare the formulas for computing the markup percentage and the selling price for one quart using the gross margin pricing method.
Q2) The economic approach to pricing is based on microeconomic theory.
A)True
B)False
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Page 30
Chapter 27: Quality Management and Measurement
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Sample Questions
Q1) Benchmarking and process mapping are two methods to measure quality.
A)True
B)False
Q2) The key to good quality control is to have periodic inspection points staffed by qualified quality control personnel.
A)True
B)False
Q3) The award given to companies that achieve distinctive results in implementing total quality control is the
A) ISO.
B) Malcolm Baldrige Quality Award.
C) Deming Application Prize.
D) Kaizen Prize.
Q4) Cost control concerns have largely been replaced with concern for nonfinancial measures in JIT settings.
A)True
B)False
Q5) Identify and describe three traits that differentiate management information systems (MIS)from traditional management accounting techniques.
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Chapter 28: Financial Analysis of Performance
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) In a common-size financial statement,which of the following is given a designation of 100 percent?
A) Cost of goods sold
B) Total assets
C) Total liabilities
D) Net income
Q2) Days' payable measures the relative size of accounts payable.
A)True
B)False
Q3) Which of the following best describes the debt to equity ratio?
A) Average total assets divided by total liabilities
B) Average total assets divided by stockholders' equity
C) Stockholders' equity divided by total liabilities
D) Total liabilities divided by stockholders' equity
Q4) The receivable turnover and inventory turnover ratios are used to analyze
A) leverage.
B) long-term solvency.
C) profitability.
D) liquidity.
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