Business Accounting
Textbook Exam Questions
Course Introduction
Business Accounting provides students with a comprehensive understanding of the fundamental principles and practices involved in recording, classifying, and interpreting financial transactions within a business environment. The course covers key topics such as the accounting cycle, preparation and analysis of financial statements, internal controls, and the role of accounting information in management decision-making. Students will also explore the regulatory framework governing business accounting and develop practical skills in bookkeeping, budgeting, and financial reporting. This course lays a solid foundation for further study in accounting and related business disciplines.
Recommended Textbook
Financial Accounting 1st Canadian Edition by Jeffrey Waybright
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12 Chapters
1471 Verified Questions
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Page 2
Chapter 1: Business, Accounting, and You
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Sample Questions
Q1) In preparing financial statement, the order of preparation is important to ensure accuracy and reduce duplicate work. Put the financial statements below in the order you would prepare them.
Statement of cash flows
Statement of comprehensive income
Statement of financial position
Statement of retained earnings
Answer: Statement of comprehensive income, statement of retained earnings, statement of financial position, and the statement of cash flow
Q2) To manage a business effectively, an owner or manager would benefit greatly from having some knowledge of accounting.
A)True
B)False
Answer: True
Q3) Name the first financial statement prepared.
Answer: Income statement
Q4) How would the payment of expenses affect the accounting equation?
Answer: Decrease shareholders' equity and decrease assets.
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Page 3
Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) Accounts that increase on the credit side are assets, dividends, and expenses.
A)True
B)False
Answer: False
Q2) Items of value that a company owns are called shareholders' equity.
A)True
B)False Answer: False
Q3) A T-account has a $509 credit balance. This account is most likely:
A) common shares.
B) land.
C) advertising expense.
D) dividends.
E) cash.
Answer: A
Q4) Chronological order dictates the order in which transactions are journalized.
A)True
B)False Answer: True
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Chapter 3: Adjusting and Closing Entries
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Sample Questions
Q1) Net income or net loss can be determined by the adjusted trial balance figures.
A)True
B)False
Answer: True
Q2) Depreciation would be an example of a(n) __________.
Answer: deferred expense
Q3) It does not matter when a fiscal year starts as long as it is twelve consecutive months long.
A)True
B)False
Answer: True
Q4) Journalize the following entries for December 31. Explanations are not required.
a. Depreciation expense on office equipment was $639.
b. Used supplies for the year was $1,057.
c. Earned subscription revenue for the year was $875.
Answer: 11ea4bf1_a927_5552_a578_29d92d9a1e65_TB2774_00
Q5) Part of accrual accounting depends upon recording __________ entries at the end of the fiscal year.
Answer: adjusting
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Chapter 4: Ethics, Internal Control, and Cash
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Sample Questions
Q1) Differences between when a company records a transaction and when the bank records the same transaction are called "timing" differences.
A)True
B)False
Q2) In a bank reconciliation, the bank balance and the book balance must be adjusted to be reconciled.
A)True
B)False
Q3) The Audit Committee's responsibilities are assigned by the:
A) Chief Executive Officer.
B) Chief Financial Officer.
C) Board of Directors.
D) company Controller.
E) Finance Manager.
Q4) Separation of duties is essential for internal control over cash receipts and cash payments.
A)True
B)False
Q5) Attempting to justify your actions is an example of __________.
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Chapter 5: Accounting for a Merchandising Business
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Sample Questions
Q1) An invoice with the credit terms 3/10, n/30 means that the customer has 3 days to take a 10% discount off of the invoice total.
A)True
B)False
Q2) Tayler Corporation purchased merchandise from Brandon Corporation for cash. The journal entry for Tayler Corporation under a periodic inventory system will be:
A) debit Inventory; credit Cash.
B) debit Purchases; credit Cash.
C) debit Inventory; credit Accounts Payable-Brandon Corporation.
D) debit Inventory; credit Accounts Receivable-Taylor Corporation.
E) debit Purchases, credit Accounts Payable -Brandon Corporation.
Q3) Because of innovative and computerized methods of tracking inventory, most businesses today use the perpetual inventory method.
A)True
B)False
Q4) Purchase returns reduce the cost of inventory.
A)True
B)False
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Chapter 6: Inventory
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Sample Questions
Q1) An accounting department only needs to know:
A) how many units were sold, not which units were sold.
B) which units were sold, not how many units were sold.
C) the specific price of a specific unit.
D) the average price of a specific unit.
E) the physical flow of goods.
Q2) A company has $4,500 in net sales, $3,200 in gross profit, $1,300 in ending inventory, and $1,800 in beginning inventory. What is the company's cost of goods sold?
Q3) What can a poor or declining inventory turnover tell you?
Q4) When inventory prices are rising, what is the effect on Inventory, Cost of Goods Sold, and Net Income under the FIFO method?
Q5) The inventory system whereby the merchandise inventory account balance is merely a record of the most recent physical inventory count is called the:
Q6) Footnotes are used with what concept or principle of accounting?
Q7) A new car lot would probably cost its inventory using what method?
Q8) Goods available for sale are $25,000; beginning inventory is $8,000; ending inventory is $12,000; and cost of goods sold is $10,000. What is the inventory turnover?
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Chapter 7: Sales and Receivables
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Sample Questions
Q1) What are the most desirable form of sales?
Q2) How is the "net realizable value" of accounts receivable computed ?
Q3) What is the maturity date of a note that is signed on April 15, 2011 at 9% for 216 days?
Q4) Notes receivable generally include a charge for interest.
A)True
B)False
Q5) When a customer fails to pay on their account, it creates a(n):
A) Bad Debt Expense.
B) Uncollectible Account.
C) Account Receivable.
D) decrease in revenue.
E) decrease in expenses.
Q6) A company with an accounts receivable turnover of 11.78 would be collecting its receivables about __________.
Q7) What are the most common credit cards issued by financial institutions?
Q8) What is the expense called that reflects the estimate of uncollectible accounts receivable?
Page 9
Q9) A company has a quick ratio of 1.23. What does this mean?
Q10) What are the two methods of accounting for uncollectible accounts?
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Chapter 8: Long-Term Assets
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Sample Questions
Q1) Which of the following would NOT be considered as part of the cost of the land?
A) Survey
B) Realtor commissions
C) Paving
D) Unpaid property taxes on the land
E) Legal fees
Q2) The cost of removing unwanted buildings from land would be allocated to which account?
Q3) Journalize the following transactions:
Feb 21 Purchased machinery for $4,500 on account.
Feb 23 Paid the shipping company $400 to get the machinery delivered.
Aug 1 Paid for the outstanding invoice from February 21.
Dec 31 Recorded depreciation on the machinery assuming the company uses the units of production method, estimates total production to be 100,000 units, and has produced 12,000 units this year.
Dec 31 Paid $300 for minor repairs on the machine.
Q4) To which account are repairs and maintenance after start-up recorded?
Q5) A company has installed a piece of machinery for a total of $76,000. In its third month of operation, repairs of $1,300 had to be made on the machine. The $1,300 would be allocated to which account?
Page 10
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) Which of the following would be considered a known liability?
A) Federal income tax payable
B) Warranties payable
C) Pending litigation
D) Notes payable
E) Both federal income tax payable and notes payable
Q2) Identify the general ledger accounts that would be debited and credited when making a payment on account, such as a telephone bill.
Q3) Debenture bonds are the same as __________ bonds.
Q4) A $150,000 issue of bonds that sold at 93.8 will cost __________.
Q5) What is a major difference between an account payable and a note payable?
Q6) Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of $44,000; and long-term liabilities of $90,000. Jewell Company's debt ratio is:
A) 127.3%.
B) 78.6%.
C) 239.3%.
D) 70.2%.
E) 20.7%.
Q7) Is a high debt ratio a bad thing? Explain.
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Chapter 10: Corporations: Share Capital and Retained Earnings
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Sample Questions
Q1) Many companies raise capital by issuing shares directly to shareholders or by using an underwriter.
A)True
B)False
Q2) Treasury shares are recorded at __________.
Q3) Identify and explain the four basic rights of a shareholder.
Q4) Which of the following would NOT be share capital?
A) Capital earned by profitable operations
B) Contributed capital
C) Amounts received from shareholders
D) Common shares
E) Externally generated capital resulting from transactions with outsiders
Q5) Where is the Treasury Shares account reported on the Balance Sheet?
Q6) Explain how the recording of the purchase of treasury shares differs when cash paid is less than or greater than the average cost.
Q7) NDP Co. issues 750 preferred shares for $10 per share and 1,000 common shares for $15 per share. Identify the entry that would be recorded.
Page 12
Q8) ABC Co. issues 500 common shares for $10 per share. Identify the entry that would be recorded.
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Chapter 11: The Cash Flow Statement
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Sample Questions
Q1) Which of the following is NOT a part of financing activities?
A) Paying dividends
B) Issuing shares
C) Paying off loans
D) Buying land
E) Borrowing money
Q2) Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and an accounts payable turnover of 40 days. Casey's cash conversion cycle is:
A) 153 days.
B) 81 days.
C) 73 days.
D) 1 day.
E) 135 days.
Q3) When preparing the cash flow statement by the indirect method, if current liabilities increase, the difference is __________ to net income.
Q4) Why do gains and losses need to be removed from net income on the cash flow statement?
Q5) Gains on the sale of long-term assets are __________ from __________ activities.
Q6) What is the formula for inventory turnover in days?
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) Rick's Sporting Goods reported $23,400 in A/R in 2010 and $25,100 in A/R in 2009. The percentage change for A/R from 2009 to 2010 was __________.
Q2) Tayler Company's cash reported on the balance sheets for 2009 and 2010 was as follows: $235,000 in 2009; $245,300 in 2010. The percentage change for cash from 2009 to 2010 was __________.
Q3) Comparing your company with a leading company in the same category of business is called __________.
Q4) By using only percentages in common-size statements, the statements emphasize dollar value bias.
A)True
B)False
Q5) Knowing the dollar amount of change from year-to-year in an account is less relevant than knowing the percentage change.
A)True
B)False
Q6) If cash is $4,450 in 2010 and $3,670 in 2009, what is the percentage increase or decrease from 2009 to 2010?
Q7) Statements that are often used to compare similar businesses are called:
Page 15
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