Course Introduction
Principles of Accounting Study Guide
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Principles of Accounting introduces students to the foundational concepts and practices of financial and managerial accounting. The course covers the accounting cycle, including recording transactions, preparing financial statements, and understanding the principles of accrual accounting. Students learn to analyze and interpret financial information, explore the regulatory environment, and understand the ethical considerations in accounting. This course provides a crucial base for advanced study in accounting and equips students with the skills necessary to make informed financial decisions in business settings.
Recommended Textbook
Financial Accounting Information for Decisions 6th Edition by John Wild
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16 Chapters
3236 Verified Questions
3236 Flashcards
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Chapter 1: Introducing Accounting in Business
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261 Flashcards
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Sample Questions
Q1) The statement of cash flows reports information on:
A)Revenue activities
B)Expense activities
C)Financing activities
D)Equity activities
E)Asset activities
Answer: C
Q2) Increases in retained earnings from a company's earnings activities are:
A)Assets
B)Revenues
C)Liabilities
D)Stockholder's Equity
E)Expenses
Answer: B
Q3) Accounting is one way important information about businesses are reported to decision makers.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Analyzing and Recording Transactions
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221 Flashcards
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Sample Questions
Q1) Crediting an expense account decreases it.
A)True
B)False
Answer: True
Q2) An account balance is:
A)The total of the credit side of the account
B)The total of the debit side of the account
C)The difference between the total debits and total credits for an account including the beginning balance
D)Assets = liabilities + equity
E)Always a credit
Answer: C
Q3) Prepaid expenses are:
A)Payments made for products and services that do not ever expire
B)Classified as liabilities on the balance sheet
C)Decreases in retained earnings
D)Assets that represent prepayments of future expenses
E)Promises of payments by customers
Answer: D
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Page 4
Chapter 3: Adjusting Accounts and Preparing Financial Statements
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268 Flashcards
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Sample Questions
Q1) What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet?
A)Under IFRS it is mandatory to present current assets first while under GAAP it is customary (but not required)to present noncurrent assets first.
B)Both IFRS and GAAP require that current assets are listed first
C)Under GAAP it is mandatory to present current assets first while under IFRS it is customary (but not required)to present noncurrent assets first.
D)It is customary (but not required)under both IFRS and GAAP to present noncurrent assets first
E)GAAP requires that current assets be presented first while IFRS requires that current assets be presented last
Answer: C
Q2) Depreciation expense is an example of an accrued expense.
A)True
B)False
Answer: False
Q3) Profit margin = ___________________ divided by net sales.
Answer: Net income
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Chapter 4: Reporting and Analyzing Merchandising Operations
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196 Flashcards
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Sample Questions
Q1) A company's current assets were $17,980,its quick assets were $11,420 and its current liabilities were $12,190.Its quick ratio equals:
A)0.94
B)1.07
C)1.48
D)1.57
E)2.40
Q2) ______________________ are non-operating activities that include interest expense,losses from asset disposals and casualty losses.
Q3) J.C.Penney had net sales of $24,750 million,cost of goods sold of $16,150 million and net income of $837 million.Its gross margin ratio equals 3.4%.
A)True
B)False
Q4) In a periodic inventory system,cost of goods sold is recorded as each sale occurs. A)True
B)False
Q5) The acid-test ratio reflects the ___________ of a company.
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Chapter 5: Reporting and Analyzing Inventories
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Sample Questions
Q1) If the _______________ is responsible for paying the freight,ownership of merchandise inventory passes when goods are loaded on the transport vehicle.
Q2) It can be expected that companies that sell perishable goods have higher inventory turnover than companies that sell nonperishable goods.
A)True
B)False
Q3) A company reported the following data: \(\begin{array}{|l|r|r|r|}
\hline &\text { Year } 1 & \text { Year } 2 & \text { Year } 3 \\
\hline \text { Cost of goods sold } & \$ 347,600 & \$ 379,650 & \$ 443,900 \\
\hline \text { Average inventory } & 85,000 & 91,050 & 98,350 \\ \hline
\end{array}\)
Required:
1.Calculate the company's merchandise inventory turnover for each year.
2.Comment on the company's efficiency in managing its inventory.
Q4) Identify the items that are included in merchandise inventory.(In your answer address the special situations of goods in transit,consigned goods and damaged goods.)
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Chapter 6: Reporting and Analyzing Cash and Internal Controls
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Sample Questions
Q1) Given the following information:
Petty cash balance: $530.00 Courier receipt: $74.22
Postage receipt: $ 25.00 Office Supplies receipt: $95.64
Business Meal receipt: $ 54.21 Cash on hand at the end of the month: $299.71 What is the amount that needs to be reimbursed?
A)$365.27
B)$289.06
C)$280.73
D)$181.22
E)$230.29
Q2) The _________________________ is also called the check authorization.
Q3) When merchandise is needed,a department manager must inform the purchasing department of this need by preparing and signing a purchase requisition,which lists the merchandise needed and requests that it be purchased.
A)True
B)False
Q4) The Petty Cash account is a separate checking account used for small amounts. A)True
B)False
Q5) Define an internal control system and describe the purpose that it serves.
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Chapter 7: Reporting and Analyzing Receivables
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169 Flashcards
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Sample Questions
Q1) Assume that this company's bad debts are estimated and recorded as 1.5% of credit sales.
On December 31,of the current year,a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit)and Allowance for Doubtful Accounts of $1,600 (credit balance).
1.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment.
2.Prepare the entry to write off a $1,500 account receivable on January 1 of the next year. 3.Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 2.
Q2) When using the allowance method of accounting for uncollectible accounts,the recovery of a bad debt would be recorded as a debit to Cash and a credit to Bad Debts Expense.
A)True
B)False
Q3) What is the amount of interest that is due on a $36,000 3-month 4% note receivable?
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Chapter 8: Reporting and Analyzing Long-Term Assets
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Sample Questions
Q1) _____________ are the federal income tax rules for depreciating assets.
Q2) The process of allocating the cost of a natural resource to the period when it is consumed is called _____________________.
Q3) Mason Company sold a piece of equipment for $25,000 cash on December 31 after recording the annual depreciation on the asset.The equipment had an original cost of $92,500 and accumulated depreciation of $60,000.Prepare the general journal entry to record the sale of this asset.
Q4) A company exchanged its used machine for a new machine.The old machine cost $70,000 and the new one had a cash price of $95,000.The company had taken $60,000 depreciation on the old machine and was allowed a $2,500 trade-in allowance and the balance of $92,500 was paid in cash.What gain or loss should be recorded on the exchange?
Q5) _____________________ are additional costs of plant assets that provide benefits extending beyond the current period; they increase or improve the type or amount of service an asset provides.
Q6) If an asset is sold above its book value,the selling company records a loss. A)True B)False
Q7) Why is the useful life of a plant asset so difficult to predict?
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Chapter 9: Reporting and Analyzing Current Liabilities
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Sample Questions
Q1) Miller Company has a times interest earned ratio of 5.Sales and variable expenses were $57,290 and $40,105 respectively.Compute the company's fixed interest expense.
A)$17,185
B)$3,437
C)$11,458
D)$8,021
E)$85,925
Q2) The state unemployment tax rates applied to an employer are adjusted according to an employer's merit rating.
A)True
B)False
Q3) A corporation has a $42,000 credit balance in the Income Tax Payable account.Period end information shows that the actual liability is $50,000.The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.
A)True B)False
Q4) Unearned revenues are amounts received _______________ for future products or services.
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Chapter 10: Reporting and Analyzing Long-Term Liabilities
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188 Verified Questions
188 Flashcards
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Sample Questions
Q1) The Premium on Bonds Payable account is a(n):
A)Revenue account
B)Adjunct or accretion liability account
C)Contra revenue account
D)Asset account
E)Contra expense account
Q2) Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:
A)Convertible bonds
B)Sinking fund bonds
C)Callable bonds
D)Serial bonds
E)Junk bonds
Q3) An annuity is a series of equal payments at equal time intervals.
A)True
B)False
Q4) Explain the accounting procedures when a bond's interest period does not coincide with the issuer's accounting period.
Q5) Explain the present value concept and how it applies to long-term liabilities.
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Chapter 11: Reporting and Analyzing Equity
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Sample Questions
Q1) Stockholders who are not officers or managers of a corporation do not have the power to bind the corporation to contracts.This is called ______________________.
Q2) Shamrock Company had net income of $30,000.On January 1,there were 8,000 shares of common stock outstanding.On April 1,the company issued an additional 2,000 shares of common stock.The company declared a $2,700 dividend on its noncumulative,nonparticipating preferred stock.There were no other stock transactions.The company has an earnings per share of:
A)$2.87
B)$2.73
C)$3.41
D)$3.16
E)$3.75
Q3) The annual amount of cash dividends distributed to common shareholders relative to the common stock's market value is the:
A)Dividend payout ratio
B)Dividend yield
C)Price-earnings ratio
D)Current yield
E)Earnings per share
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Page 13
Chapter 12: Reporting and Analyzing Cash Flows
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179 Flashcards
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Sample Questions
Q1) The direct method of reporting operating cash flows:
A)Is recommended but not required by the FASB
B)Must be used by all companies
C)Is used by most companies
D)Is considered supplementary disclosure
E)Is not recommended by the FASB,but is commonly used
Q2) When using a spreadsheet to prepare the statement of cash flows,a decrease in accounts payable is entered in the Analysis of Changes column with a debit in the statement of cash flows section and a credit in the balance sheet section.
A)True
B)False
Q3) The cash flow on total assets ratio is calculated by:
A)Dividing cash flows from operations by average total assets
B)Dividing total cash flows by average total assets
C)Dividing average total assets by cash flows from investing activities
D)Dividing average total assets by total cash flows
E)Total cash flows divided by average total assets times 365
Q4) Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.
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Chapter 13: Analyzing and Interpreting Financial Statements
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Sample Questions
Q1) A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year.At year-end,the price per share of the company's stock was $49.40.What is the company's year-end price-earnings ratio?
Q2) Industry standards for financial statement analysis:
A)Are based on a company's prior performance
B)Are set by the government
C)Are set by the financial performance and condition of the company's industry
D)Are based on rules of thumb
E)Compare a company's income with the prior year's income
Q3) If a company's activities include operations that are being discontinued,the income or loss effects of the discontinued operations are included on the income statement as part of income from continuing operations.
A)True
B)False
Q4) The comparison of a company's financial condition and performance across time is known as ________________________________.
Q5) The comparison of a company's financial condition and performance to a base amount is known as _____________________________.
Page 15
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Chapter 14: Investments and International Operations
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Sample Questions
Q1) A company's return on total assets equals 28%.If total assets and net sales are
$4,500,000 and $10,000,000 respectively,how much is net income?
A)$2,800,000
B)$4,060,000
C)$1,260,000
D)$14,500,000
E)$2,030,000
Q2) Available-for-sale debt securities are:
A)Recorded at cost and remain at cost over the life of the investment
B)Reported at historical cost,adjusted for the amortized amount of any difference between cost and maturity value
C)Reported at market value on the balance sheet
D)Intended to be held to maturity
E)Always classified with Long-Term Liabilities
Q3) ___________________________ are investments in securities that management intends to convert to cash within the longer of one year or the operating cycle and are readily convertible to cash.
Q4) Foreign exchange rates fluctuate due to changing _______________ and ___________ conditions.
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Chapter 15: Reporting and Analyzing Partnerships
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Sample Questions
Q1) Baldwin and Tanner formed a partnership.Baldwin's initial capital account balance was $125,000 and Tanner's was $105,000.They agreed to share income and loss as follows: Baldwin 40%,Tanner 60%.Income was $102,000 in year 1 and $150,000 in year 2.Assume they each withdrew $10,000 per year.Calculate the capital balances for Baldwin and Tanner at the end of year 2.
Q2) A _____________________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.
Q3) A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ____________________________ partnership.
Q4) A capital deficiency means that:
A)The partnership has a loss
B)The partnership has more liabilities than assets
C)At least one partner has a debit balance in his/her capital account
D)At least one partner has a credit balance in his/her capital account
E)The partnership has been sold at a loss
Q5) A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.
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Chapter 16: Reporting and Preparing Special Journals
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Sample Questions
Q1) __________________ processing accumulates source documents for a period of time and then processes them all at once such as daily,weekly or monthly.
Q2) The basic components of an accounting information system include all but which of the following?
A)Source documents
B)Input devices
C)cell phones
D)Information processors
E)Information storage.
Q3) Equipment,inventory and investments can each include its own subsidiary ledger.
A)True
B)False
Q4) When a company uses special journals,the general journal is used for selected transactions and events including:
A)Recording adjusting transactions
B)Posting transactions to special journals
C)Accumulating debits and credits
D)Collecting detailed listings of amounts
E)Recording cash receipts
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