Introduction to Financial Accounting Exam Review
Course Introduction
Introduction to Financial Accounting provides students with a comprehensive overview of the fundamental principles and concepts underlying the preparation and interpretation of financial statements. The course covers essential topics such as the accounting cycle, accrual accounting, asset and liability valuation, and the analysis of financial transactions. Students will learn how to record, summarize, and report financial information for business entities, enabling them to understand the financial health and performance of organizations. Emphasis is placed on developing analytical skills necessary for making informed business decisions based on financial data, as well as gaining familiarity with generally accepted accounting principles (GAAP).
Recommended Textbook
Cornerstones of Financial Accounting 1st Canadian Edition by Jay Rich
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12 Chapters
2327 Verified Questions
2327 Flashcards
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Chapter 1: Accounting and the Financial Statements
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249 Verified Questions
249 Flashcards
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Sample Questions
Q1) set of reports that communicate a company's financial position and results of operations
A)audit report
B)fiscal year
C)financial statements
D)management's discussion and analysis
E)notes to the financial statements
Answer: C
Q2) Cash
A)assets
B)liabilities
C)revenues
D)expenses
E)shareholders' equity
Answer: A
Q3) cash flows related to obtaining capital for the company
A)cash flows from financing activities
B)cash flows from investing activities
C)cash flows from operating activities
Answer: A
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Chapter 2: The Accounting Information System
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246 Flashcards
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Sample Questions
Q1) ____________________ documents provide the evidence needed in an accounting system to record a transaction.
Answer: Source
Q2) The conservatism principle is concerned with the possibility of understating assets or income.
A)True
B)False
Answer: False
Q3) Tax returns are prepared by the company's accountant.
A)external event to be recorded as a transaction
B)internal event to be recorded as a transaction
C)event that should not be recognized in the accounting system
Answer: C
Q4) Under the double-entry system of accounting,a debit is always a negative entry.
A)True
B)False
Answer: False
Q5) The ____________________ side,or left side,of a liability account is used to record decreases in the account balance.
Answer: debit
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Chapter 3: Accrual Accounting
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) A company forgot to record four adjustments during 2013.Which of the following omissions of adjustments will understate assets?
A) Unearned revenue is not reduced for the portion that has been earned.
B) Interest on monies loaned out has not yet been recorded.
C) Prepaid insurance is not reduced for the portion of the policy that has expired during the period.
D) Income taxes owed but not yet paid are ignored.
Answer: B
Q2) The five steps in the accounting cycle are listed as follows:
1)Close the accounts.
2)Post transactions to accounts in the ledger.
3)Journalize daily transactions.
4)Record and post adjustments.
5)Prepare financial statements.What is the correct order of these steps?
A) 2, 3, 4, 5, 1
B) 3, 2, 4, 5, 1
C) 3, 2, 4, 1, 5
D) 3, 2, 5, 4, 1
Answer: B
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Page 5
Chapter 2: Internal Control and Cash
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205 Flashcards
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Sample Questions
Q1) The following information is provided for a company that manufactures bicycles.The factory foreman determines when orders for materials are necessary.The orders are sent to the purchasing department that places orders with the vendors recommended by the factory foreman.When the materials are received,they are immediately delivered to a central storeroom.When invoices are received for the items purchased,they are sent to the accounting department for payment.The accounting department compares the invoices with purchase orders.If the two documents are in agreement,the invoice is approved for payment.The accounting department prepares cheques that are signed by the company treasurer.
Recommend three or four improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control.
Q2) Items that are included on a bank statement and decrease the bank account balance are called ____________________.
Q3) Under the ____________________ Act,management of publicly-traded corporations has increased responsibility for a system of internal controls that ensures reliability of financial statements.
Q4) Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.
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Page 6
Chapter 5: Revenue and Receivables
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162 Flashcards
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Sample Questions
Q1) indicates that noncash resources have been exchanged for cash
A)accounts receivable
B)aging method
C)allowance for doubtful accounts
D)earned
E)notes receivable
F)realized
G)securitization
Q2) Refer to Atlantis Tropicals.If the aging approach is used to estimate bad debts,how much bad debts expense will the company report for 2012?
Q3) The amount of money borrowed when a promissory note is issued is called the ____________________.
Q4) ____________________ are receivables that generally specify an interest rate and a maturity date at which any interest and principal must be repaid.
Q5) Special forms of factoring are called ____________________.
Q6) What are the criteria the IFRS uses to determine if revenue is realized or realizable and earned?
Q7) Refer to Accutemp Heating & Air.Identify the maturity date of the note.
Page 7
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Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) At the year-end inventory count,if goods in transit are shipped F.O.B.destination,whose inventory count should they be included in?
A) the seller's
B) the buyer's
C) the shipping company's
D) the customer's
Q2) If a company understates its inventory,what will be the effects on cost of goods sold and net income for the current year?
A) Cost of goods sold will be understated; net income will be overstated.
B) Cost of goods sold will be overstated; net income will be understated.
C) Cost of goods sold and net income will both be understated.
D) Cost of goods sold and net income will both be overstated.
Q3) Which of the following accounts would most likely appear on the income statement of a merchandise company but NOT on the income statement of a service company?
A) cost of goods sold
B) selling expenses
C) administrative expenses
D) income tax expense
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Chapter 7: Property plant and Equipment Intangibles and Natural Resources
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Refer to the figure Fantasy Cruise Lines.What will the book value of the ship be at the end of its useful life?
A) $0
B) $100,000
C) $200,000
D) cannot be determined from the information given
Q2) exclusive right to conduct a certain type of business in some particular geographic area
A)franchise
B)intangible operating assets
C)natural resources
D)operating assets
E)organizational costs
F)property, plant, and equipment
G)trademark
H)voluntary disposal
Q3) Explain the meaning or significance of the following ratios:
A) fixed asset turnover ratio
B) average age of property, plant, and equipment
Q4) Distinguish between tangible and intangible operating assets.
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Chapter 8: Current Liabilities
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Sample Questions
Q1) Refer to the partial balance sheet presented above for Glass Doctor.Compute the total current liabilities for December 31,Year 2,and December 31,Year 1.
Q2) Refer to the figure General Lighting.HST must be paid to the Canada Revenue Agency at the end of the quarter.What is the amount of the current liability related to this transaction?
A) $36,000
B) $150,000
C) $600,000
D) $636,000
Q3) During the current year,Going,Going,Gone sold 100 hot air balloons for $4,000 each.The balloons carry a five-year warranty for defects.It is estimated that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $42,000.Only $11,000 in claims was actually incurred during the year to honour the warranty.What was the balance in the estimated warranty liability at the end of the year?
A) $5,000
B) $37,000
C) $42,000
D) $47,000
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Page 10
Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) When will bonds sell at a discount?
A) when the issuing company's credit standing is worse than that of other companies in a similar line of business
B) when the stated rate of interest is less than the yield rate of interest at the time of issue
C) when the stated rate of interest is more than the yield rate of interest at the time of issue
D) when the issuing company will be able to retire the bonds at less than face at maturity
Q2) Refer to King Cotton Company.What percent of the total liabilities for Year 2 and Year 1 are long-term liabilities? What implication does this have?
Q3) Callable bonds may be retired by the issuer before their specified due date. A)True B)False
Q4) ____________________ bonds may be retired by the issuing company before their specified due date.
Q5) Refer to Kids R Kids Company.The interest coverage (cash basis)ratio at December 31,Year 2,is:
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Under the indirect method,the first line in the operating activities section of the statement of cash flows is the net income or loss for the period.
A)True
B)False
Q2) sold common shares for cash
A)inflow from operating activity
B)outflow from operating activity
C)inflow from investing activity
D)outflow from investing activity
E)inflow from financing activity
F)outflow from financing activity
G)noncash investing and financing activity
H)not reported on statement of cash flows
Q3) If the December 31,Year 1,balance of accounts payable is lower than the January 1,Year 2,balance,then the amount of cash payments will exceed the purchases on account for the year.
A)True
B)False
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12
Chapter 12: Investments
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Sample Questions
Q1) An advantage of the equity method over the fair value method is that it prevents an investor from manipulating its own income by exerting influence over the amount and timing of investee dividends.
A)True
B)False
Q2) On January 1,Year 1,P Company purchased all of the outstanding common shares of S Company.What kind of adjustment is required for the consolidation of the two balance sheets?
A) credit adjustment to eliminate P Company's "Investment in S Company" account
B) debit adjustment to eliminate S Company's "Investment in P Company" account
C) debit adjustment to eliminate P Company's "Investment in S Company" account
D) credit adjustment to eliminate S Company's "Investment in P Company" account
Q3) If the acquisition cost exceeds the current value of the net assets (assets minus liabilities)acquired,the investor must also be purchasing an intangible asset arising from attributes that are not separable from the business-such as customer satisfaction,product quality,skilled employees,and business location.
A)True
B)False
Q4) ____________________ investments only consist of investments in common shares.
Page 13
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Various financial ratios,including return ratios,are categorized as ____________________ ratios.
Q2) Which of the following is indicative of the relationship between the current ratio and the quick (acid test)ratio?
A) The current ratio is based on a more conservative measure of liquidity.
B) Both ratios focus on the relationship between all or part of a company's current assets and all of its current liabilities.
C) Both ratios focus on the relationship between all of a company's current assets and all or part of its current liabilities.
D) For a company that carries no inventories, the current ratio and acid test ratio will be significantly different.
Q3) Which of the following is most characteristic of the quick ratio?
A) It is generally larger than the current ratio.
B) It decreases when a company's assets become more liquid.
C) It increases when a company has more cash sales than credit sales.
D) It is larger when a company's assets are more liquid.
Q4) For what purpose is horizontal analysis used by financial analysts?
Q5) What do profitability ratios measure?
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