Introduction to Financial Accounting Practice Exam
Course Introduction
Introduction to Financial Accounting provides students with a foundational understanding of accounting principles and practices used to record, summarize, and report business transactions. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, and the application of generally accepted accounting principles (GAAP). Students will develop the skills to interpret financial information, understand the impact of transactions on business operations, and make informed financial decisions, laying the groundwork for advanced studies in accounting and finance.
Recommended Textbook
Financial Accounting 3rd Edition by Robert Kemp
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12 Chapters
1837 Verified Questions
1837 Flashcards
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Chapter 1: Business, Accounting, and You
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Liabilities are obligations owed to third parties.
A)True
B)False Answer: True
Q2) Business owners are paid interest on the money they have invested in the business.
A)True
B)False Answer: False
Q3) Accountants who ignore the effect of inflation on prices may be violating which accounting principle?
A)Going concern
B)Business entity
C)Reliability
D)Something other than what is listed Answer: D
Q4) Accrual accounting recognizes business transactions when they occur.
A)True
B)False Answer: True
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Chapter 2: Analyzing and Recording Business Transactions
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Sample Questions
Q1) Dividends,revenues,and Expenses all:
A)start with the same chart of account number.
B)start with different chart of accounts numbers.
C)appear in the chart of accounts under assets.
D)appear in the chart of accounts under liabilities.
Answer: B
Q2) The second step in recording a transaction in the general journal is to record the:
A)explanation of the entry.
B)account(s)to be credited and the amount(s).
C)date of the entry.
D)account(s)to be debited and the amount(s).
Answer: D
Q3) Office Furniture,Wages Payable and Dividends have normal balances of:
A)credit,credit,and credit,respectively.
B)debit,credit,and debit,respectively.
C)debit,debit,and credit,respectively.
D)credit,debit,and debit,respectively.
Answer: B
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4
Chapter 3: Adjusting and Closing Entries
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149 Flashcards
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Sample Questions
Q1) Recording Interest Receivable would be an example of a(n):
A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.
Answer: D
Q2) Because inventories are high,Wal-Mart should end its fiscal year in either November or December.
A)True
B)False Answer: False
Q3) Wages that have been accrued need to be recorded so that the matching principle is reflected in Wages Expense.
A)True
B)False
Answer: True
Q4) Adjusting entries are made only for accrued revenues and accrued expenses.
A)True
B)False Answer: False
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Chapter 4: Accounting for a Merchandising Business
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Sample Questions
Q1) Caesar Company returned $750 of goods it had purchased from another company.The original invoice was for $4,200,3/10,n/30.What is the discount if Caesar pays the balance within the discount period?
A)$126.00
B)$103.50
C)$22.50
D)$0.00
Q2) When merchandise is purchased on account under the perpetual inventory system,the journal entry is:
A)debit Purchases and credit Accounts Payable.
B)debit Accounts Payable and credit Inventory.
C)debit Inventory and credit Accounts Payable.
D)debit Accounts Payable and credit Purchases.
Q3) A company's gross profit percentage increased from 37% to 41%.What does this mean?
A)This means that cost of goods sold as a percentage of net sales increased.
B)This means that cost of goods sold as a percentage of net sales decreased.
C)This means that operating expenses as a percentage of net sales decreased.
D)There is not enough information to explain the increase.
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Page 6
Chapter 5: Inventory
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152 Flashcards
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Sample Questions
Q1) Under the conservatism rule,assets and income would be understated,rather than overstated.
A)True
B)False
Q2) If the ending inventory is understated in Year 1,then the Gross Profit will be understated in Year 2.
A)True B)False
Q3) The Vintage Showroom,an antique shop,would most likely use the FIFO method of accounting for inventory.
A)True
B)False
Q4) Under the average cost method,the flow of costs through the accounting records will:
A)be nearly the opposite of the physical flow of goods through the business.
B)closely match the physical flow of goods through the business.
C)exactly match the physical flow of goods through the business.
D)have no relationship to the physical flow of goods through the business.
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Chapter 6: The Challenges of Accounting: Standards, internal Control,
audits, fraud, and Ethics
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Sample Questions
Q1) Certified public accountants are licensed by the: A)state.
B)SEC.
C)the college or university from which they earned their accounting degree.
D)AICPA.
Q2) Which of the following items is NOT a limit to the effectiveness of internal controls?
A)Poorly defined controls
B)Managers overriding controls
C)Not separating duties in departments
D)Making sure employees are less distracted on the job
Q3) The law specifies how we expect people to act.
A)True
B)False
Q4) Ethical conduct refers to how society requires people to act.
A)True
B)False
Q5) The Sarbanes-Oxley Act only applies to publicly traded companies.
A)True
B)False
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) A retailer has 4% credit/debit card service fees deducted from the proceeds from each sale.The retailer has $1,200 in credit/debit card sales for the day.The journal entry to record these sales would be to:
A)debit Cash for $1,200 and credit Sales for $1,200.
B)debit Sales for $1,200 and credit Cash for $1,200.
C)debit Cash for $1,152,debit Service Fee Expense for $48;and credit Sales for $1,200.
D)debit Cash for $1,152 and credit Sales for $1,152.
Q2) TLR Corporation lent $25,000 to Blitz,Inc.for 75 days at 7% interest on November 22,2013.How much interest will have accrued to TLR Corporation on December 31,2013,assuming a 360-day year?
A)$364.58
B)$189.58
C)$175.00
D)Some other number
Q3) The contra-account,Allowance for Doubtful Accounts,is credited when journal entries are made for estimates of bad debts.
A)True
B)False
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9
Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Assets that CANNOT be seen,touched,or held are called:
A)intangible assets.
B)natural resources.
C)plant assets.
D)tangible assets.
Q2) Which of the following would be included in the cost of a constructed building?
A)Purchase price of the building
B)Payments for material,labor,and overhead
C)Survey and legal fees
D)Realtor commissions
Q3) New equipment was purchased on January 1 for $142,000.It has a salvage value of $28,000 and a useful life of 8 years.To the nearest dollar,how much will the depreciation expense for the equipment be for the first year using the straight-line method?
A)$1,188
B)$17,750
C)$1,479
D)$14,250
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Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) Sydney earns $15 per hour and works 40 hours a week.Last week she worked 44 hours;given that her company pays time and a half for overtime-what is Sydney's gross pay for the week?
A)$600
B)$660
C)$690
D)$720
Q2) Bonds that mature all at the same time are:
A)serial bonds.
B)term bonds.
C)secured bonds.
D)callable bonds.
Q3) Bonds that are backed by collateral are:
A)unsecured bonds.
B)convertible bonds.
C)callable bonds.
D)secured bonds.
Q4) A company may use two payroll accounts as a control for efficiency.
A)True
B)False
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) A company issues 15,000 shares of its $25 par common stock for $29 per share.The amount to be debited to Cash is:
A)$60,000.
B)$435,000.
C)$375,000.
D)$405,000.
Q2) Preferred stock may have its dividend rate listed as a percentage of par value per share or as a flat stated amount.
A)True
B)False
Q3) Stockholders' stake in stock appears in:
A)Paid-In Capital.
B)Owner's Equity.
C)Retained Earnings.
D)Cash.
Q4) A corporation must incorporate in every state in which it does business.
A)True
B)False
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Acquisitions and sales of long-term assets belong in the financing section of a cash flow statement using the indirect method.
A)True
B)False
Q2) Under the direct method,the only section that differs from the indirect method is the financing activities section.
A)True
B)False
Q3) Current assets on the Balance Sheet would be affected by and be part of operating activities.
A)True
B)False
Q4) An example of a cash outflow from investing activities is:
A)issuance of a note payable.
B)making a loan to another company.
C)paying cash dividends.
D)the purchase of treasury stock.
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13
Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) On the Income Statement,extraordinary items are reported:
A)immediately after the continuing operations section.
B)immediately before the discontinued operations section.
C)net of income tax or net of income tax savings.
D)before the operating income section.
Q2) Why would a slow inventory turnover rate be a red flag in a financial statement analysis?
A)The company may have obsolete inventory.
B)The company may have bad salespeople.
C)The company may be overstating inventory.
D)Both A and C are reasons why it would be a red flag.
Q3) If Island Coffee's net sales decreased from $90,000 in year 1 to $45,000 in year 2 and its cost of goods sold decreased from $30,000 in year 1 to $20,000 in year 2,the vertical analysis based on sales would show the following for cost of goods sold for the two periods (rounded to nearest tenth of a percent):
A)33.3% and 44.4%.
B)44.4% and 33.3%.
C)300% and 225%.
D)225% and 300%.
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