Business Accounting
Textbook Exam Questions
Course Introduction
Business Accounting provides an introduction to the fundamental principles and practices of accounting within a business context. The course covers the preparation, interpretation, and analysis of financial statements, with a focus on understanding how accounting information supports decision-making, planning, and control in organizations. Students will learn the accounting cycle, basic bookkeeping techniques, and the role of accounting standards. Emphasis is placed on real-world application, including topics such as revenue recognition, expense matching, asset valuation, and the impact of financial transactions on an organization's performance. The course is designed to equip students with essential accounting skills needed for effective business management and communication with financial professionals.
Recommended Textbook
Survey of Accounting 5th Edition by Carl S. Warren
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Chapter 1: The Role of Accounting in Business
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Sample Questions
Q1) Over 90% of the total dollars of business receipts are received by proprietorships.
A)True
B)False Answer: False
Q2) The basic type of stock issued to owners is called common stock.
A)True
B)False Answer: True
Q3) Define accounting and its role in business.
Answer: Accounting provides information for managers to use in operating the business.Accounting provides information to external stakeholders to use in assessing the economic performance and condition of the business.
Q4) A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
A)True
B)False Answer: True
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Chapter 2: Basic Accounting Concepts
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Sample Questions
Q1) Miscellaneous expenses are expenses that have an undetermined amount to be paid.
A)True
B)False
Answer: False
Q2) The payment of $15,000 for expenses was recorded by Spears Co.as an increase in cash of $15,000 and a decrease in retained earnings of $15,000.What is the effect of this error on the accounting equation?
A)Total assets will exceed total liabilities and stockholders' equity by $15,000.
B)Total assets will exceed total liabilities and stockholders' equity by $30,000.
C)Total assets will be less than total liabilities and stockholders' equity by $30,000.
D)The error will not affect the accounting equation.
Answer: B
Q3) Dividends are an example of an expense.
A)True
B)False
Answer: False
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4
Chapter 3: Accrual Accounting Concepts
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Sample Questions
Q1) When an adjusting entry is made to record insurance expense and reduce the prepaid insurance account,which section of the statement of cash flows is affected?
A)Cash Flow from Operating Activities
B)Cash Flow from Investing Activities
C)Cash Flow from Financing Activities
D)There is no effect on the statement of cash flows.
Answer: D
Q2) XYZ Co.paid $1,000 in dividends to stockholders.How does this transaction affect the accounts of XYZ?
A)Cash will decrease by $1,000 and retained earnings will decrease by $1,000.
B)Cash will decrease by $1,000 and expenses will increase $1,000.
C)Cash will decrease by $1,000 and revenues will decrease $1,000.
D)Net income will decrease by $1,000.
Answer: A
Q3) The fixed asset section of a balance sheet may also be labeled as property,plant,and equipment.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Accounting for Merchandising Businesses
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Sample Questions
Q1) A sales invoice included the following information: merchandise price,$6,000;terms 2/10,n/eom.Assuming that a credit for merchandise returned of $600 is granted prior to payment,and that the invoice is paid within the discount period,what is the amount of cash received by the seller?
A)$5,880
B)$5,292
C)$5,586
D)$5,592
Q2) The sales discount account is a contra account to Sales.
A)True
B)False
Q3) Which expenses are subtracted from gross profit to arrive at income from operations?
A)All expenses
B)Cost of merchandise sold
C)Operating expenses
D)Sales expenses
Q4) Sales Returns and Allowances is a contra-asset account. A)True
B)False
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Chapter 5: Sarbanes-Oxley,internal Control,and Cash
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Sample Questions
Q1) Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item is a(n)
A)deduction from the balance per depositor's records.
B)addition to the balance per bank statement.
C)deduction from the balance per bank statement.
D)addition to the balance per depositor's records.
Q2) Internal controls are important because they A)prevent fraud and misleading financial statements.
B)eliminate fraud.
C)deter fraud and prevent theft and other abuses.
D)guarantee accurate financial statements.
Q3) In preparing a bank reconciliation,the amount of outstanding checks is deducted from the balance per depositor's records.
A)True
B)False
Q4) A debit memorandum from the bank indicates that the bank has deducted an amount from the depositor's account.
A)True
B)False
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Chapter 6: Receivables and Inventories
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Sample Questions
Q1) If merchandise inventory is being valued at cost and the price level is consistently rising,which method of costing will yield the largest gross profit?
A)Average cost
B)LIFO
C)FIFO
D)All methods will generate the same gross profit.
Q2) The party promising to pay a note at maturity is the payee.
A)True
B)False
Q3) The two most widely used methods for determining the cost of inventory are
A)FIFO and LIFO.
B)FIFO and average cost.
C)LIFO and average cost.
D)gross profit and average cost.
Q4) The net realizable value is used for purposes of valuing out-of-date merchandise in inventory.
A)True
B)False
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) Expenditures for research and development are generally recorded as
A)current operating expenses.
B)assets and amortized over their estimated useful life.
C)assets and amortized over 40 years.
D)current assets.
Q2) Equipment was purchased for $30,000.It has a useful life of 5 years and a residual value of $4,000.What is depreciation expense for year two under the double-declining-balance method?
A)$5,200
B)$6,000
C)$6,240
D)$7,200
Q3) Expenditures that add to the utility of fixed assets for more than one accounting period are
A)committed expenditures.
B)revenue expenditures.
C)current expenditures.
D)capital expenditures.
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Chapter 8: Liabilities and Stockholders Equity
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Sample Questions
Q1) Preferred stockholders must receive their current-year dividends before the common stockholders can receive any dividends.
A)True
B)False
Q2) A current liability is a debt that can reasonably be expected to be paid
A)between 6 months and 18 months.
B)out of currently recognized revenues.
C)within one year.
D)out of cash currently on hand.
Q3) Obligations that depend on future events and are based on past transactions are contingent liabilities.
A)True
B)False
Q4) The main source of paid-in-capital is from issuing stock.
A)True
B)False
Q5) Treasury stock is a contra-equity account.
A)True
B)False
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Solvency analysis focuses on the ability of a business to make a profit.
A)True
B)False
Q2) If a company has current assets totaling $56,000 and current liabilities totaling $40,500,then the company's working capital totals $15,500.
A)True
B)False
Q3) A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will
A)both decrease.
B)both increase.
C)increase and remain the same,respectively.
D)remain the same and decrease,respectively.
Q4) The rate earned on total common stockholders' equity for most thriving businesses will be less than the rate earned on total assets.
A)True
B)False
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Chapter 10: Accounting Systems for Manufacturing Businesses
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Sample Questions
Q1) Product costs include all of the following EXCEPT
A)CEO salary.
B)depreciation on factory equipment.
C)wages of an assembly worker.
D)direct materials.
Q2) Cambridge Corporation applied factory overhead costs of $205,000 to production during the current year.At the end of the year,total overapplied factory overhead is $17,000.What was the amount of actual factory overhead cost incurred during the year?
A)$222,000
B)$200,000
C)$205,000
D)$188,000
Q3) For a manufacturing business,inventory that is in the process of being manufactured Is referred to as
A)supplies inventory.
B)work in process inventory.
C)finished goods inventory.
D)direct materials inventory.
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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Sample Questions
Q1) Tucker Co.manufactures office furniture.During the most productive month of the year,3,600 desks were manufactured at a total cost of $192,000.In its slowest month,the company made 1,200 desks at a cost of $72,000.Using the high-low method of cost estimation,total fixed costs per month are
A)$120,000.
B)$12,000.
C)$72,000.
D)$11,600.
Q2) Monthly rent on a factory building that does NOT vary with the number of units produced is an example of a fixed cost.
A)True
B)False
Q3) Which of the following describes the behavior of the variable cost per unit?
A)Decreases with increasing production
B)Decreases with decreasing production
C)Remains constant with changes in production
D)Increases with increasing production
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) Manufacturers must conform to the Robinson-Patman Act,which prohibits price discrimination within the United States unless differences in prices can be justified by different costs of serving different customers.
A)True
B)False
Q2) Frank Co.is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit.The unit cost for Frank Co.to make the part is $30,which includes $3 of fixed costs.If 20,000 units of the part are normally purchased each year but could be manufactured using unused capacity,what would be the amount of differential cost increase or decrease for making the part rather than purchasing it?
A)$60,000 cost decrease
B)$40,000 cost decrease
C)$40,000 cost increase
D)$60,000 cost increase
Q3) In using the total cost concept of applying the cost-plus approach to product pricing,only profit is covered in the markup.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) An unfavorable volume variance may be due to a failure of supervisors to maintain an even flow of work.
A)True B)False
Q2) The standard price and quantity of direct materials are separated because
A)GAAP reporting requires this separation.
B)direct materials prices are controlled by the purchasing department,and quantity used is controlled by the production department.
C)standard quantities are more difficult to estimate than standard prices.
D)standard prices change more frequently than standard quantities.
Q3) The formula to compute direct material quantity variance is to calculate the difference between
A)actual costs - standard costs.
B)standard costs - actual costs.
C)(actual quantity * standard price)- standard costs.
D)actual costs - (standard price * standard costs).
Q4) The first budget to be prepared is usually the sales budget.
A)True B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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Sample Questions
Q1) The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of assets invested in the center.
A)True
B)False
Q2) Transfer prices may be used when decentralized units are organized as cost,profit,or investment centers.
A)True
B)False
Q3) The underlying principle of allocating operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.
A)True
B)False
Q4) The three common types of responsibility centers are referred to as cost centers,profit centers,and segment centers.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) The present value index for this investment is A).88.
B)1.45.
C)1.14.
D).70.
Q2) The anticipated purchase of a fixed asset for $400,000,with a useful life of 5 years and a $40,000 residual value,is expected to yield total net income of $500,000 for the 5 years.The expected average rate of return is 50%.
A)True B)False
Q3) A 5-year project is estimated to cost $700,000 and have no residual value.If the straight-line depreciation method is used and estimated total income is $231,000,determine the average rate of return giving effect to depreciation on the investment.
Q4) The process by which management plans,evaluates,and controls long- term investment decisions involving fixed assets is called cost-volume-profit analysis.
A)True B)False
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