Course Introduction
Principles of Accounting Exam Practice Tests
Principles of Accounting introduces students to the foundational concepts and practices of financial accounting. The course covers the accounting cycle, including recording transactions, preparing financial statements, and understanding accounting principles such as double-entry bookkeeping, accruals, and matching. Students will learn to analyze and interpret financial information, assess the financial health of organizations, and apply ethical considerations in accounting. Emphasis is placed on developing skills in using accounting software and understanding the role of accounting in business decision-making and compliance with regulatory standards.
Recommended Textbook
Financial Accounting 11th Edition by Belverd E. Needles
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15 Chapters
2808 Verified Questions
2808 Flashcards
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Page 2
Chapter 1: Uses of Accounting Information and the Financial Statements
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181 Verified Questions
181 Flashcards
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Sample Questions
Q1) All of the following statements are false about the Sarbanes-Oxley Act except A) it does not apply to publicly traded companies.
B) it shields chief executives from criminal penalties.
C) it prevents the SEC from drawing up certain rules.
D) its primary goal is to regulate financial reporting and the accounting profession.
Answer: D
Q2) The purchase of equipment is an example of a financing activity.
A)True
B)False
Answer: False
Q3) The Internal Revenue Service is an agency of the federal government that has the legal power to set and enforce accounting practices for companies.
A)True
B)False
Answer: False
Q4) Net income is another term for revenues.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Analyzing Business Transactions
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204 Flashcards
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Sample Questions
Q1) A decrease in a dividend account is recorded with a credit.
A)True
B)False
Answer: True
Q2) The most generally accepted value used in accounting is market value.
A)True
B)False Answer: False
Q3) Expenses should be recorded when they have been incurred,not when they are paid.
A)True
B)False
Answer: True
Q4) All of the following are examples of source documents except A) checks.
B) contracts.
C) ledgers.
D) receipts.
Answer: C
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Page 4
Chapter 3: Measuring Business Income
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235 Flashcards
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Sample Questions
Q1) Probably the last account to be listed on a post-closing trial balance would be
A) Income Summary.
B) Retained Earnings.
C) Wages Expense.
D) Wages Payable.
Answer: B
Q2) Which of the following pairs of accounts could not be included in the same adjusting entry?
A) Unearned Revenue and Revenue from Services
B) Wages Expense and Wages Payable
C) Interest Expense and Interest Receivable
D) Rent Expense and Rent Payable
Answer: C
Q3) Which of the following is a nominal account?
A) Retained Earnings
B) Income Taxes Expense
C) Accumulated Depreciation-Furniture
D) Retained Earnings.
Answer: B
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Page 5
Chapter 4: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) The balances of the Accumulated Depreciation accounts will appear on the credit side of the work sheet's Balance Sheet columns.
A)True
B)False
Q2) The total assets and the total liabilities and stockholders' equity on the balance sheet are the same as the totals of the Balance Sheet columns on the work sheet.
A)True
B)False
Q3) When adjusting entries are entered onto a work sheet,it is not necessary to record them in the general journal.
A)True
B)False
Q4) Omitting key letters in the work sheet would make which of the following difficult?
A) The preparation of the trial balance columns
B) The preparation of the closing entries
C) The preparation of the adjusting entries
D) Crossfooting to the adjusted trial balance columns
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Chapter 5: Financial Reporting and Analysis
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Sample Questions
Q1) To obtain a slightly more accurate measure of net income,Gabrielli,Inc.,has determined that it must hire two full-time accountants.If it decides against the hiring,it has followed the convention of A) full disclosure.
B) verifiability.
C) consistency.
D) cost-benefit.
Q2) A company with a profit margin of 6 percent earns six cents profit for every dollar of net sales.
A)True
B)False
Q3) The term owner's equity is a more accurate term than net worth because many assets are recorded at original cost rather than at current value.
A)True
B)False
Q4) Natural resources,such as coal mines and oil wells,are classified as property,plant,and equipment.
A)True
B)False
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Chapter 6: The Operating Cycle and Merchandising Operations
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Sample Questions
Q1) Sales returns and allowances account
A)An inventory system in which the inventory not yet sold or on hand is counted periodically.
B)Management's regular assessment of the quality of internal control.
C)An account that accumulates the total cost of merchandise purchased for resale during an accounting period.
D)The policies and procedures that management puts into place to see that its directives are carried out.
E)The seller bears the transportation costs to the place where merchandise is delivered and title passes at the time it is delivered.
F)An inventory system in which continuous records are kept of the quantity and cost of individual items as they are bought and sold.
G)The total cost of merchandise that could be sold in an accounting period.
H)The buyer bears the shipping costs of merchandise and title passes at the time it is shipped.
I)An account that gives management a readily available measure of unsatisfactory products and dissatisfied customers.
J)Controls that limit access to assets.
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Chapter 7: Inventories
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Sample Questions
Q1) In accounting for inventory,the assumed cost flow must match the physical goods flow.
A)True
B)False
Q2) Inventory turnover is expressed in terms of A) days.
B) a percentage. C) dollars.
D) times.
Q3) How is the matching rule applied when accounting for merchandise inventory?
Q4) Average inventory equals $200,000,and cost of goods sold equals $432,000.Inventory turnover equals
A) 0.46 times.
B) 1.23 times.
C) 2.16 times.
D) 168.98 times.
Q5) The matching of revenue with inventory costs is best achieved with the FIFO method. A)True B)False
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Chapter 8: Cash and Receivables
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Sample Questions
Q1) A discounted note represents a contingent liability because a potential liability exists.
A)True
B)False
Q2) A note receivable dated May 23 and due in 90 days would be due on
A) August 20.
B) August 21.
C) August 23.
D) August 22.
Q3) Which of the following bank reconciliation items would result in a journal entry on the company's books?
A) Bank error
B) Interest income
C) Deposit in transit
D) Outstanding checks
Q4) A check that is outstanding for two consecutive months will appear only on the first month's bank reconciliation.
A)True
B)False
Q5) Why do businesses need to keep some currency on hand?
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Chapter 9: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) Under what circumstances is a contingent liability reflected in the accounting records as though an actual liability exists?
Q2) Explain why the cost of employing someone is more than just the wage or salary paid to the employee.
Q3) For notes payable whose interest is stated separately,the adjusting entry would consist of a debit to Interest Payable and a credit to Interest Expense.
A)True
B)False
Q4) The costs associated with coupons and rebates are usually reflected in liability accounts.
A)True
B)False
Q5) The days' payable shows how long,on average,a company takes to pay its accounts payable.
A)True
B)False
Q6) There is a limit to the amount of income subject to the FUTA tax.
A)True
B)False
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Chapter 10: Long Term Assets
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Sample Questions
Q1) Which of the following is not considered an intangible asset?
A) Software
B) Mines
C) A franchise
D) Goodwill
Q2) A specialized piece of equipment closely associated with a mine is most likely to be depreciated over a shorter than normal useful life because the A) equipment will be fully utilized.
B) income tax laws require that a shorter life be used.
C) equipment contains certain defects.
D) mine is expected to be fully depleted in the shorter length of time.
Q3) The exclusive right to sell a product within a certain geographic area is called a A) noncompete covenant.
B) franchise.
C) trademark.
D) copyright.
Q4) Gain on Sale of Machinery is recorded as a credit.
A)True
B)False
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Chapter 11: Long-Term Liabilities
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Sample Questions
Q1) Interest on bonds usually is paid annually.
A)True
B)False
Q2) When a bond sells at a premium,what is probably true about the market interest rate versus the face interest rate? Discuss.
Q3) Straight-line method
Q4) The debt to equity ratio is expressed as a percent.
A)True
B)False
Q5) Bondholders are debtors of the issuing corporation.
A)True
B)False
Q6) Discounts or premiums are contra-accounts that are subtracted from or added to bonds payable on the balance sheet.
A)True
B)False
Q7) Discount
Q8) An $160,000 bond issue priced at 97-3/4 is sold for $156,400.
A)True
B)False
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Chapter 12: Stockholders Equity
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Sample Questions
Q1) A good measure of confidence in a corporation's future is A) par value.
B) price/earnings ratio.
C) dividends yield.
D) return on equity.
Q2) Use the following information to answer the question below.
The following accounts appear in the ledger of Bullock Corporation on December 31,2013: \(\begin{array}{lc}
\text { Preferred Stock } & \$ 60,000 \\
\text { Common Stock } & 94,000 \\
\text { Additional Paid-in Capital, Preferred } & 14,000 \\
\text { Additional Paid-in Capital, Common } & 36,000 \\
\text { Retained Earnings } & 80,000
\end{array}\) A balance sheet prepared on December 31,2013,would report total stockholders' equity of
A) $154,000.
B) $168,000.
C) $204,000.
D) $284,000.
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Page 14
Chapter 13: The Statement of Cash Flows
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Sample Questions
Q1) Bamberg Corporation purchased a 60-day commercial paper.Indicate which section,if any,this transaction would appear in,or relate to,on a statement of cash flows.
A) Does not appear on cash flow statement
B) Operating activities section
C) Financing activities section
D) Investing activities section
Q2) Aiken Corporation acquired a land site with a building by issuing a 30-year mortgage payable.In Aiken's statement of cash flows,this transaction should be shown A) only as a cash flow from operating activity for the purchase of the land and building. B) only as a cash flow from financing activity for the issuance of the mortgage payable. C) in the schedule of noncash investing and financing transactions. D) as both a cash flow from investing activity and a cash flow from financing activity.
Q3) Cash flows to assets is measured in "times."
A)True
B)False
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Chapter 14: Financial Performance Measurement
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Sample Questions
Q1) Days' payable is a measure of A) volatility.
B) long-term solvency.
C) profitability.
D) operating asset management.
Q2) The comparison of financial measures or ratios of the same company over a period of times is superior to the use of rule-of-thumb measures.
A)True
B)False
Q3) Market strength refers most closely to the ability to
A) increase the wealth of stockholders.
B) pay bills when they fall due.
C) survive for many years.
D) earn a satisfactory net income.
Q4) Accounting estimates rarely affect the reported income of a company. A)True B)False
Q5) Accounting methods may be a source of incomparability among companies. A)True
B)False
Page 16
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Chapter 15: Investments
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Sample Questions
Q1) When a parent company owns 100 percent of the outstanding stock of a subsidiary,Goodwill from Consolidation will appear on the consolidated balance sheet when the
A) cost of the parent's investment exceeds the book value and the fair value of the investee's net identifiable assets.
B) cost of the parent's investment exceeds the book value of the parent's net assets.
C) book value of the parent's net assets exceeds the fair value of the parent's net assets.
D) fair value of the investee's net identifiable assets exceeds the cost of the parent's investment.
Q2) If a parent company pays more than book value for a 100 percent owned subsidiary,goodwill could arise on the consolidated financial statements.
A)True
B)False
Q3) Discuss the financial statement presentation of the account Allowance to Adjust Short-Term Investments to Market,distinguishing between the effect of a debit balance and the effect of a credit balance in the account.
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