Financial Accounting
Practice Questions
Course Introduction
Financial Accounting introduces students to the fundamental principles and procedures used to record, summarize, and report business transactions in accordance with generally accepted accounting principles (GAAP). The course covers key topics such as the accounting cycle, preparation and analysis of financial statements, valuation of assets and liabilities, income measurement, and the use of accounting information in decision-making. Through practical exercises and real-world examples, students will develop the ability to interpret and communicate financial information effectively, enabling them to understand the financial position and performance of organizations.
Recommended Textbook
Survey of Accounting 6th Edition by Carl S. Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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Page 2
Chapter 1: The Role of Accounting in Business
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) A list of assets, liabilities, and owners' equity as of a specific date is a(n):
A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.
Answer: B
Q2) The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or an year, is called a(n):
A) prior period statement.
B) statement of retained earnings.
C) income statement.
D) balance sheet.
Answer: C
Q3) Recording revenue when a sale is made most directly relates to which concept?
A) Going concern concept
B) Periodicity concept
C) Matching concept
D) Adequate disclosure concept
Answer: C
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Page 3
Chapter 2: Basic Accounting Concepts
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89 Flashcards
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Sample Questions
Q1) Johnson, Inc. purchased land for cash. What effect does this transaction have?
A) Increase in Cash and decrease in Land
B) Decrease in Cash and decrease in Land
C) Increase in Cash and increase in Land
D) Decrease in Cash and increase in Land
Answer: D
Q2) Philip Corporation purchased equipment on account. What is the effect of this transaction?
A) Cash will decrease and equipment will increase.
B) Total assets will remain unchanged.
C) Cash flow from Investing Activities will decrease.
D) Total assets and total liabilities will both increase.
Answer: D
Q3) The payment of a liability:
A) decreases assets and stockholders' equity.
B) increases assets and decreases liabilities.
C) decreases assets and increases liabilities.
D) decreases assets and decreases liabilities.
Answer: D
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Page 4
Chapter 3: Accrual Accounting Concepts
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) On April 1, Bear, Inc. paid $2,400 for an insurance premium on a three-year insurance policy. At the end of December, Bear's fiscal year-end, what should be the balance in the prepaid insurance account?
A) $2,700
B) $3,000
C) $2,400
D) $1,800
Answer: D
Q2) The process that begins with the analysis of transactions and ends with preparing the accounting records for the next accounting period is called the accounting cycle.
A)True
B)False
Answer: True
Q3) Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements.
A)True
B)False
Answer: True
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5
Chapter 4: Accounting for Merchandising Businesses
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) Revenue from sources other than the primary operating activity of a business is called other income.
A)True
B)False
Q2) If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?
A) $0
B) $200
C) $1,000
D) $400
Q3) Credit memorandum is issued by the seller to customers for return of damaged or defective merchandise.
A)True
B)False
Q4) Which of the following is not a subsection in a multiple-step income statement?
A) Purchase discounts
B) Gross profit
C) Operating income
D) Income before taxes
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Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) List the objectives of internal control and give an example of how each is implemented.
The objectives of internal control are to provide reasonable assurance that:
(1)Assets are safeguarded and used for business puposes.
(2)Business information is accurate.
(3)Employees comply with laws and regulations.
Q2) A business's organizational structure influences which of the following elements of internal control?
A) Control procedures
B) Risk assessment
C) Control environment
D) Information and communication
Q3) Internal control does not consist of policies and procedures that:
A) guarantee the company will not go bankrupt.
B) ensure that laws and regulations are being followed.
C) protect assets from misuse.
D) ensure that business information is accurate.
Q4) The bank reconciles its statement to the depositor's records.
A)True
B)False
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Chapter 6: Receivables and Inventories
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) Inventory costing methods place primary emphasis on assumptions about:
A) flow of goods.
B) flow of costs.
C) flow of goods or costs depending on the method.
D) flow of values.
Q2) The net realizable value is used for purposes of valuing out of date merchandise in inventory.
A)True
B)False
Q3) The person who is to be paid when a note matures is called the payee.
A)True
B)False
Q4) The difference between the total receivables and the balance in Allowance for Doubtful Accounts at the end of a period is referred to as the net realizable value of the receivables.
A)True
B)False
Q5) Lower-of-cost-or-market is a method of inventory valuation. A)True
B)False
8
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Chapter 7: Fixed Assets and Intangible Assets
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Sample Questions
Q1) An equipment was purchased for $18,000. It has a useful life of 5 years and a residual value of $2,000. Determine the depreciation expense for the first year using the double-declining-balance method?
A) $6,400
B) $3,200
C) $7,200
D) $3,600
Q2) The difference between a fixed asset's initial cost and its current market value is called the asset's depreciable cost.
A)True
B)False
Q3) Depreciable cost is computed as:
A) cost less accumulated depreciation.
B) book value less residual value.
C) cost less residual value.
D) market value less residual value.
Q4) If an asset is discarded, a loss is recognized equal to its salvage value.
A)True
B)False
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Chapter 8: Liabilities and Stockholders Equity
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Most employers are levied a tax on payrolls for:
A) sales tax.
B) medical insurance premiums.
C) federal unemployment compensation tax.
D) union dues.
Q2) If 50,000 shares are authorized, 37,000 shares are issued, and 2,000 shares are reacquired, the number of outstanding shares is 35,000.
A)True
B)False
Q3) When the market rate of interest is less than the contract rate of a bond, the bond will sell for a discount.
A)True
B)False
Q4) A bond is simply a form of an interest-bearing note.
A)True
B)False
Q5) Federal unemployment compensation tax is a tax that is paid only by employers. A)True
B)False
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Chapter 9: Financial Statement Analysis
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83 Flashcards
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Sample Questions
Q1) Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the income tax expenses as a percentage of net sales must be 90%.
A)True
B)False
Q2) Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.
A)True
B)False
Q3) The relationship of $225,000 to $100,000, expressed as a ratio, is:
A) 2.0 to 1.
B) 1.8 to 1.
C) 1.5 to 1.
D) 2.25 to 1.
Q4) The ratio computed by dividing current assets by current liabilities is called:
A) current ratio.
B) earnings ratio.
C) acid-test ratio.
D) quick ratio.
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Chapter 10: Accounting Systems for Manufacturing Businesses
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Upon completing a job, direct materials totaled $3,000; direct labor, $3,500; and factory overhead, $1,500. Units produced totaled 1,000. What is the per unit cost?
A) $8,000
B) $6,500
C) $6.50
D) $8
Q2) Pull manufacturing is driven by:
A) customer demand.
B) forecasting customers' requirements.
C) a production schedule rather than line status.
D) pushing inventory ahead to the next station.
Q3) Job order costing and process costing are:
A) pricing systems.
B) cost accounting systems.
C) cost flow systems.
D) inventory tracking systems.
Q4) The current year's advertising costs are normally considered as product costs.
A)True
B)False
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) If sales are $820,000, variable costs are 68% of sales, and operating income is $260,000, what is the contribution margin ratio?
A) 53%
B) 38%
C) 47%
D) 32%
Q2) The point in operations at which revenues and expenses are exactly equal is called the break-even point.
A)True
B)False
Q3) Which of the following conditions would cause the break-even point to increase?
A) Increase in total fixed costs
B) Increase in unit selling price
C) Decrease in unit variable cost
D) Decrease in total fixed costs
Q4) Which of the following describes the behavior of the fixed cost per unit?
A) Decreases with increase in production
B) Decreases with decrease in production
C) Remains constant with changes in production
D) Increases with increase in production
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) A practical approach that is frequently used by managers when setting normal selling price is the cost-plus approach.
A)True
B)False
Q2) If the total unit cost of manufacturing Product Y is currently $40 and the total unit cost after modifying the style is estimated to be $48, the differential cost for this situation is $48.
A)True
B)False
Q3) In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost amount to which the markup is added?
A) Total selling and administrative expenses plus desired profit
B) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
C) Total costs of manufacturing a product plus selling and administrative expenses
D) Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit
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Chapter 13: Budgeting and Standard Cost Systems
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168 Verified Questions
168 Flashcards
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Sample Questions
Q1) The direct labor time variance measures the efficiency of the direct labor force.
A)True
B)False
Q2) Standards that represent levels of operation that can be attained with reasonable effort are called:
A) theoretical standards.
B) ideal standards.
C) reasonable standards.
D) normal standards.
Q3) The formula to compute direct material quantity variance is:
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 difference between the standard cost of a product and its actual cost is called a variance.
A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The profit margin for Division E is 28% and the investment turnover is 3.0. What is the rate of return on investment for Division E?
A) 84%
B) 28%
C) 14%
D) 9%
Q2) Which of the following is true of the balanced scorecard?
A) It ignores the financial performance of the company.
B) It has the ability to reveal the underlying nonfinancial drivers of financial performance.
C) It aims to improve the nonfinancial performance of the business.
D) It focuses primarily on the short term performance of the business.
Q3) By using the rate of return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall rate of return for the company.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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103 Flashcards
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Sample Questions
Q1) All of the following qualitative considerations may impact upon capital investments analysis except:
A) manufacturing productivity.
B) manufacturing sunk cost.
C) manufacturing flexibility.
D) manufacturing control.
Q2) If a proposed expenditure of $400,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $160,000 and $60,000, respectively, the cash payback period is 2.5 years.
A)True
B)False
Q3) The excess of cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.
A)True
B)False
Q4) The average rate of return method of capital investment analysis gives consideration to the present value of future cash flows.
A)True
B)False
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