Principles of Accounting Review Questions
Course Introduction
Principles of Accounting introduces students to the fundamental concepts and practices of financial and managerial accounting. The course covers the accounting cycle, including recording transactions, preparing financial statements, and understanding the underlying principles that guide the preparation and interpretation of accounting information. Students learn about topics such as assets, liabilities, equity, revenue, expenses, and the use of accounting information for decision-making. Emphasis is placed on understanding Generally Accepted Accounting Principles (GAAP), the role of ethics in accounting, and the importance of accurate financial reporting for businesses and stakeholders.
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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Sample Questions
Q1) The Federal Reserve Board is an example of a labor union.
A)True
B)False Answer: False
Q2) Accountants consider the euro to be the common unit of measure for all business transactions.
A)True
B)False Answer: False
Q3) Paying taxes to the government is an example of an operating activity.
A)True
B)False
Answer: True
Q4) Which of the following accounts is not considered an asset?
A) Cash
B) Inventory
C) Common stock
D) Trademark
Answer: C
Page 3
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Chapter 2: Analyzing Business Transactions
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204 Flashcards
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Sample Questions
Q1) Cost Value is the exchange price associated with a business transaction at the time the transaction is recognized.
A)True
B)False
Answer: False
Q2) It is sometimes correct for a compound entry's debit totals and credit totals to be unequal.
A)True
B)False
Answer: False
Q3) Which of the following accounts is increased with a credit?
A) Cash
B) Revenues Earned
C) Rent Expense
D) Dividends
Answer: A
Q4) Liabilities are established with debits and eliminated with credits.
A)True
B)False
Answer: False
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Chapter 3: Measuring Business Income
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Sample Questions
Q1) Which of the following assets is not subject to depreciation?
A) Vehicles
B) Art equipment
C) Land
D) Machinery Answer: C
Q2) In applying the matching rule,expenses should be recognized in the same accounting period as the revenues to which they are related..
A)True
B)False Answer: True
Q3) Expenses are often called the cost of doing business or expired costs.
A)True
B)False Answer: True
Q4) Real account balances are reduced to zero by closing entries.
A)True
B)False Answer: False
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Chapter 4: Supplement - Closing Entries and the Work Sheet
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Sample Questions
Q1) Which of the following accounts probably would have a smaller balance in the Adjusted Trial Balance columns of a work sheet than in the Trial Balance columns?
A) Office Supplies
B) Utilities Payable
C) Accumulated Depreciation-Equipment
D) Rent Expense
Q2) An important use of the work sheet is as an aid in the preparation of the closing journal entries.
A)True
B)False
Q3) The process of crossfooting requires horizontal addition and subtraction.
A)True
B)False
Q4) In preparing closing entries,which of the following columns of the work sheet are the most helpful?
A) Adjustments columns
B) Income Statement columns
C) Adjusted Trial Balance columns
D) Balance Sheet columns
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Chapter 5: Financial Reporting and Analysis
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Sample Questions
Q1) The owner's capital for a sole proprietorship is similar in nature to which of the following for corporations?
A) Stockholders' equity
B) Retained earnings
C) Common stock
D) Dividends
Q2) A company should classify land held for a planned manufacturing facility as
A) an intangible asset.
B) an investment.
C) a current asset.
D) property,plant,and equipment.
Q3) Financial statements are not important to the efficient allocation of resources in our economy.
A)True
B)False
Q4) Illegal acts of a small dollar amount can be ignored because they are immaterial.
A)True
B)False
Q5) List at least five qualitative characteristics of financial accounting.
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Chapter 6: The Operating Cycle and Merchandising Operations
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) It is likely that a company would want to bond its employees who handle cash or inventory.
A)True B)False
Q2) The perpetual inventory system relies on a physical count of merchandise for its balance sheet amount.
A)True
B)False
Q3) Why is the separation of duties an important control activity in a good system of internal control?
Q4) The fee paid by a retailer to a credit card company is considered an expense account by the retailer.
A)True B)False
Q5) The calculation of goods available for sale during the year is affected by the previous year's ending merchandise inventory.
A)True B)False
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Chapter 7: Inventories
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Sample Questions
Q1) In a period of rising prices,the liquidation of base-layer inventory will result in an unusually high income tax liability under which of the following methods?
A) Specific identification
B) Average-cost
C) LIFO
D) FIFO
Q2) Supply-chain management works well in a just-in-time operating environment.
A)True
B)False
Q3) Freight charges associated with the purchase of inventory normally are included in inventory cost.
A)True
B)False
Q4) The computer has made the perpetual inventory system more popular and easier to apply.
A)True
B)False
Q5) Why are cost flow assumptions made when accounting for merchandise inventory?
Q6) How is the matching rule applied when accounting for merchandise inventory?
Page 9
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Chapter 8: Cash and Receivables
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Sample Questions
Q1) When a bank reconciliation balances,no errors could have been made by the bank or the company.
A)True
B)False
Q2) A compensating balance restricts cash; in effect,it increases the interest on the loan and reduces a company's liquidity.
A)True
B)False
Q3) Because bad debt losses are incurred to generate sales,they should be charged against the sales that they helped generate.
A)True
B)False
Q4) The maker of a note records Notes Receivable.
A)True
B)False
Q5) The existence of uncollectible accounts is not evidence of poor credit policies.
A)True
B)False
Q6) On a balance sheet,what items normally are included in Cash?
Page 10
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Chapter 9: Current Liabilities and Fair Value Accounting
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Sample Questions
Q1) A company wishes to make deposits at the end of each of the next four years to accumulate a fund of $60,000.The annual contributions equal $60,000 multiplied by the appropriate present value of an ordinary annuity factor.
A)True
B)False
Q2) A business accepts a 9 percent,$25,000 note due in 120 days.Assuming simple interest,how much (amount rounded)will the business receive when the note falls due?
A) $25,000
B) $25,075
C) $25,740
D) $27,260
Q3) A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would
A) credit Cash for less than $10,000.
B) debit Interest Expense for the imputed amount.
C) debit the asset account for $10,000.
D) debit Accounts Payable for $10,000.
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11
Chapter 10: Long Term Assets
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Sample Questions
Q1) Which of the following is not classified properly as property,plant,and equipment?
A) Land improvements,such as parking lots and fences
B) Natural resources
C) Land used in ordinary business operations
D) A truck held for resale by an automobile dealership
Q2) The exclusive right to use an identifying symbol is called a trademark.
A)True
B)False
Q3) Which of the following is not considered an intangible asset?
A) Software
B) Mines
C) A franchise
D) Goodwill
Q4) Fair value is the amount for which an asset could be bought or sold in a current transaction.
A)True
B)False
Q5) Under what circumstances will a loss be recorded on the sale of equipment,and what effect will the loss have on stockholders' equity?
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Chapter 11: Long-Term Liabilities
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Sample Questions
Q1) Bond issue costs have the effect of
A) decreasing the face value of the bond.
B) increasing a bond premium.
C) decreasing the effective interest rate.
D) increasing a bond discount.
Q2) The callable feature of a bond can be exercised by the issuer.
A)True
B)False
Q3) Interest on debt is tax-deductible to the issuing corporation,whereas dividends on stock are not.
A)True
B)False
Q4) When bonds are called for retirement,any excess of the bonds' call price over the bonds' carrying value is reported as a loss on the income statement.
A)True
B)False
Q5) When a bond sells at a discount,what is probably true about the market interest rate versus the face interest rate? Discuss.
Q6) Registered bonds
Page 13
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Chapter 12: Stockholders Equity
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Sample Questions
Q1) The company issued 7,000 shares of stock in exchange for equipment that had a fair market value of $320,000. The entry to record transaction 2 would be:
A) Cash 400,000
Common Stock 400,000
B) Cash 400,000
Common Stock 320,000
Additional Paid-in Capital 80,000
C) Cash 320,000
Additional Paid-in Capital 80,000
Common Stock 400,000
D) Cash 320,000
Common Stock 320,000
Q2) Dividends in arrears are dividends on
A) noncumulative preferred stock that have not been declared for some specified period of time.
B) common stock that may never be declared.
C) cumulative preferred stock that have been declared but not yet paid.
D) cumulative preferred stock that have not been declared for some specified period of time.
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Page 14
Chapter 13: The Statement of Cash Flows
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Sample Questions
Q1) 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.
Q2) 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
Q3) Provide the components for the calculation of free cash flow.
Q4) How is it possible for a company to show a net loss for a given year,yet produce positive net cash flows from operating activities?
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Chapter 14: Financial Performance Measurement
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Sample Questions
Q1) In a common-size balance sheet,which of the following is given a designation of 100 percent?
A) Total assets
B) Net income
C) Current assets
D) Cost of goods sold
Q2) During the year,Dempsey Corporation's current ratio increased while its quick ratio decreased.Which of the following could help explain this situation?
A) The sale of short-term investments during the year
B) A decrease in accounts receivable during the year
C) An increase in accounts payable during the year
D) An increase in inventory levels during the year
Q3) It is possible for horizontal analysis to indicate a decrease in revenues from one year to another and an increase in net income.
A)True
B)False
Q4) Form 10-Q refers to the annual report filed with the SEC.
A)True
B)False
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Chapter 15: Investments
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Sample Questions
Q1) When the cost-adjusted-to-market method is used to account for a long-term investment in stock of another company,the carrying value of the investment is directly affected by
A) the dividend distributions of the investee.
B) the earnings and dividend distributions of the investee.
C) the earnings of the investee.
D) neither the earnings nor the dividends of the investee.
Q2) When a parent has borrowed cash from the subsidiary company,the related receivable and payable are eliminated in preparing a consolidated balance sheet so that
A) stockholders' equity will not be understated.
B) stockholders' equity will not be overstated.
C) assets and liabilities will not be understated.
D) assets and liabilities will not be overstated.
Q3) Trading securities are valued on the balance sheet at market value. A)True B)False
Q4) Unrealized gains and losses on trading securities appear on the balance sheet. A)True B)False
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