Introduction to Business Accounting Exam Preparation Guide
Course Introduction
Introduction to Business Accounting provides students with a foundational understanding of the principles and practices of accounting within a business environment. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, basic bookkeeping, and the interpretation of financial information for decision-making. Emphasis is placed on understanding how accounting information supports business operations, planning, and control, as well as the ethical considerations involved in financial reporting. This course equips students with the skills necessary to record, classify, and summarize financial transactions, laying the groundwork for more advanced accounting studies.
Recommended Textbook
Fundamentals of Financial Accounting 5th Canadian Edition by Fred Phillips
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13 Chapters
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Chapter 1: Business Decisions and Financial Accounting
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131 Verified Questions
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Sample Questions
Q1) Under IFRS it is possible for a payable to be recorded as an asset.
A)True
B)False
Answer: False
Q2) When is the financial information a \(\bold{\text{faithful representation}}\)?
A)If it fully depicts the economic substance of business activities
B)If it allows management to be faithful to its shareholders
C)Meets the requirements of the stock exchanges
D)If it makes a difference in decision making
Answer: A
Q3) During 2007,a company's assets rise $56,000 and its liabilities rise $38,000.If no dividend is paid and no further capital is contributed,shareholders' equity would:
A)rise $56,000.
B)rise $18,000.
C)fall $38,000.
D)fall $94,000.
Answer: B
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3
Chapter 2: The Balance Sheet
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Sample Questions
Q1) Which of the following would be listed as a current liability?
A)Cash in the bank.
B)Notes payable due in two years.
C)Bank loan due in 10 years.
D)Accounts payable.
Answer: D
Q2) Which of the following is true?
A)Assets have debit balances and liabilities have credit balances.
B)Assets and liabilities have credit balances.
C)Assets have credit balances and liabilities have debit balances.
D)Assets and liabilities have debit balances.
Answer: A
Q3) The normal balance of any account is the:
A)left side.
B)right side.
C)side which increases that account.
D)side which decreases that account.
Answer: C
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4
Chapter 3: The Income Statement
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Sample Questions
Q1) Which of the following is a true statement?
A)Revenue accounts are a subset of assets,and expense accounts are a subset of liabilities.
B)Both revenue accounts and expense accounts are subsets of contributed capital.
C)Both revenue accounts and expense accounts are subsets of retained earnings.
D)Revenue accounts are a subset of cash,and expense accounts are a subset of accounts payable.
Answer: C
Q2) The expense recognition principle requires that expenses be determined first and then revenues be "matched" to those expenses.
A)True
B)False
Answer: False
Q3) When cash is received,but no service is provided by the company,net income is zero under accrual accounting.
A)True
B)False
Answer: True
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5
Chapter 4: Adjustments, financial Statements, and
Financial Results
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Sample Questions
Q1) At the end of the month,the adjusting journal entry to record the use of supplies would include:
A)A debit to supplies and a credit to expenses.
B)A credit to supplies and a debit to expenses.
C)A debit to supplies and a credit to revenue.
D)A credit to supplies and a debit to cash.
Q2) Which of the following would appear in the debit column of an adjusted trial balance?
A)Service revenue.
B)Prepaid rent.
C)Accumulated depreciation.
D)Contributed capital.
Q3) After adjusting journal entries are prepared and posted,but before closing journal entries are prepared and posted,the balance in retained earnings is equal to A)zero.
B)the difference between total assets and total liabilities.
C)the amount that is to be reported in the current year's balance sheet.
D)the amount that was reported on the previous year's balance sheet.
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Chapter 5: Fraud, internal Control, and Cash
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Sample Questions
Q1) Segregation of duties means that a company assigns responsibilities so that:
A)sufficient workers are available to cover all necessary jobs.
B)responsibilities for related activities are assigned to two or more people.
C)employees are restricted to jobs for which they have adequate training.
D)workers are divided into those who make decisions and those who carry them out.
Q2) On October 31,2018,the bank's records say that your company has $12,956.73 in its chequing account.You are aware of three outstanding cheques for a total of $2,112.19.During October 2018,the bank rejected two deposited cheques from customers totalling $654.19 because of insufficient funds and charged you $12.00 in service fees.You had not yet received notice about the bad cheques,but you were aware of and have recorded the $12.00 of service fees.Prior to adjustment on October 31,2018,your Cash account would have a balance of:
A)$14,402.73.
B)$15,711.11.
C)$11,498.73.
D)$10,202.35.
Q3) Restricted cash is not reported separately on the balance sheet.
A)True
B)False
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Page 7
Chapter 6: Merchandising Operations and the Multi-Step
Income Statement
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Sample Questions
Q1) A buyer bought inventory for $3000 and pays $500 for shipping.The terms of the purchase is 2/10 n/30.If the buyer pays for the purchase within the discount period,the amount of the discount is $70.
A)True
B)False
Q2) In a perpetual inventory system,when a company purchases merchandise the journal entry includes a debit to Inventory.
A)True B)False
Q3) A company has gross profit of $58,300 and a gross profit percentage of 25%.What is the company's net sales?
A)$233,200.
B)$14,575.
C)$72,825.
D)none of the answers are acceptable.
Q4) "Shrinkage" is another term for inventory loss due to theft,error,or fraud.
A)True B)False
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Chapter 7: Inventory and Cost of Goods Sold
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Sample Questions
Q1) Last year bell-bottom jeans were fashionable and this year boot-cut jeans are.A retail company's inventory has 375 bell-bottom jeans that cost $17 each and could be replaced for $15.The inventory also includes 1,000 boot-cut jeans that cost $16 each and could be replaced for $19.Explain why this situation requires an adjustment to the accounting records,prepare the journal entry that would be used to make the adjustment,and show the effects of the adjustment on the accounting equation.
Q2) Which of the following inventory costing method is not permitted by ASPE and IFRS in Canada?
A)FIFO.
B)LIFO
C)Specific identification method
D)Weighted average cost method
Q3) A company should always keep extra inventory on hand; it could be needed if demand increases and it has to be bought sooner or later so it adds nothing to cost.
A)True
B)False
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Chapter 8: Receivables, bad Debt Expense, and Interest
Revenue
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Sample Questions
Q1) Analysts often interpret a sudden decline in the receivables turnover ratio as a signal of a developing problem.
A)True
B)False
Q2) In 2017,Lawrence Company had gross sales of $750,000 on account and granted sales discounts of $15,000.On January 1,2017,the Allowance for Doubtful Accounts account had a credit balance of $18,000.During 2017,$30,000 of uncollectible accounts receivable were written off.Past experiences indicate that 3% of net credit sales become uncollectible.Using the percentage of net credit sales method,what would be the adjusted balance in the Allowance for Doubtful Accounts at December 31,2017?
A)$10,050.
B)$10,500.
C)$22,050.
D)$34,500.
Q3) Direct write-off method violates the matching principle.
A)True
B)False
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Page 10
Chapter 9: Long-Lived Tangible and Intangible Assets
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Sample Questions
Q1) Your company has net sales revenue of $36 million during the year.At the beginning of the year,fixed assets are $8 million.At the end of the year,fixed assets are $10 million.What is the fixed asset turnover ratio?
A)4.5
B)4.0
C)2.0
D)3.6
Q2) Intangible assets are not adjusted for asset impairment losses. A)True
B)False
Q3) If a company buys a piece of used equipment and incurs repair costs before it can be used,these additional costs would be capitalized as a cost of the equipment. A)True B)False
Q4) Purchase cost minus residual value is equivalent to depreciable cost. A)True B)False
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11
Chapter 10: Liabilities
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Sample Questions
Q1) A company issues a 5-year bond with a $7,500 discount.Using straight-line amortization,the company should:
A)debit discount on bonds payable $1,500 per year.
B)credit discount on bonds payable $1,500 per year.
C)debit interest payable $1,500 per year.
D)credit interest payable $1,500 per year.
Q2) Travis County Bank agrees to lend Backyard Corporation $200,000 on January 1.Backyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30. A company pays $18,000 in interest on notes,consisting of $12,000 interest that accrued during the last accounting period and $6,000 of interest accumulated during this accounting period but not previously accrued on the books.The journal entry for the interest payment should:
A)debit Interest Expense for $18,000 and credit Cash for $18,000.
B)debit Cash for $18,000 and credit Interest Payable for $18,000.
C)debit Interest Expense for $6,000,debit Interest Payable $12,000 and credit Cash for $18,000.
D)debit Interest Payable for $12,000,debit Accrued Interest $6,000 and credit Cash for $18,000.
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Page 12
Chapter 11: Shareholders Equity
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Sample Questions
Q1) Earnings per share (EPS)is generally reported in the balance sheet under shareholders' equity.
A)True
B)False
Q2) A stock dividend:
A)is the same thing as a stock split.
B)will reduce shareholders' equity just like a cash dividend.
C)will not change any of the accounts within shareholders' equity.
D)will reduce retained earnings just like a cash dividend.
Q3) Company X has 12 million shares of common shares authorized with a par value of $3 and a market price of $116.Seven million shares are outstanding.The company declares a 12' dividend.Prepare the journal entry and show the effect on assets,liabilities,and shareholders' equity at the time of declaration and at the time of payment.
Q4) All else equal,when the current price for a company's stock falls and net income falls:
A)EPS decreases and ROE increases.
B)EPS and ROE both decrease.
C)EPS increases and ROE decreases.
D)EPS and ROE both increase.
Page 13
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Chapter 12: Statement of Cash Flows
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Sample Questions
Q1) Fraudulent financial reporting is more likely to result in overstatements of net cash flow from operating activities than as overstatement of net income.
A)True
B)False
Q2) Additional Cash flows from operations leftover after paying for replacement of existing plant,property and equipment and dividends to shareholders are:
A)Cash flows from investing.
B)Free cash flows.
C)Cash flows from financing activities.
D)Cash flows from investing activities.
Q3) As a general rule,operating cash flows affect
A)noncurrent assets and liabilities.
B)current assets and current liabilities.
C)noncurrent liabilities or shareholders equity.
D)noncurrent assets.
Q4) ASPE and IFRS currently allow companies to use only the indirect method.
A)True
B)False
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Chapter 13: Measuring and Evaluating Financial Performance
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Sample Questions
Q1) A company has $72,500 in inventory at the beginning of the accounting period and $65,500 at the end of the accounting period.Sales revenue is $986,400,cost of goods sold is $572,700,and net income is $124,200 for the accounting period.On average,this company has inventory on hand for approximately:
A)203 days.
B)44 days.
C)61 days.
D)26 days.
Q2) If net income is rising,but both sales and the gross profit percentage remain the same,then:
A)operating expenses are falling.
B)operating expenses are rising.
C)cost of goods sold is falling.
D)cost of goods sold is rising.
Q3) Horizontal analysis is identical to trend analysis.
A)True
B)False
Q4) Vertical analysis is one means of analyzing change over time.
A)True
B)False
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