Question 1

When a company borrows cash from a bank, which of the following will occur?

An increase to cash

A decrease to accounts receivable

A decrease to notes payable

An increase to owners' capital

Question 2

Which of the following assets is assumed to have an unlimited useful life?

Furniture

Land

Machinery

Building

Question 3

The primary responsibility for setting the rules of accounting rests with the:

Financial Accounting Standards Board (FASB).

American Institute of CPAs (AICPA)

Generally Accepted Accounting Principles (GAAP)

Security and Exchange Commission (SEC)

Question 4

Which financial statement includes only those activities that result in cash changing hands during the period?

Statement of cash flows

Income statement

Balance sheet

Statement of owner's equity

Question 5

The income statement reports:

Only sales amounts paid in cash

The financial position on a particular date

Net income or loss for the period

Revenues, assets and expenses

Question 6

Expenses are:

Incurred only when cash is paid

Costs incurred to generate revenues

Increases to owner's equity

Recorded as credits in journal entries.

Question 7

Which of the four basic financial statements provides a snapshot of the business on a particular day?

Balance sheet

Statement of owner's equity

Income statement

Statement of cash Flows

Question 8

For external financial reporting GAAP requires use of:

Either cash basis or accrual basis accounting

Accrual basis accounting

Cash basis accounting

Credit basis accounting

Question 9

The statements of financial accounting standards and other authoritative pronouncements that define what constitutes acceptable accounting practice for financial reporting are collectively referred to as:

SEC

GAAP

FASB

SFAS

Question 10

Which depreciation method produces an equal amount of depreciation each period?

Declining-balance

Straight-line

Units-of-production

Weighted Average

Question 11

Financial information that is __________ ensures that it is unbiased and verifiable.

relevant

comparable

consistent

reliable

Question 12

Amortization:

Is another term for depreciation of fixed assets

Can be used to expense the cost of intangible assets with unlimited lives.

Is an accelerated depreciation method

Is a method used to allocate the cost of an intangible asset over its limited useful life

Question 13

Terms for the left and right side of an account are known as:

Positive/Negative

Up/Down

Debit/Credit

Increase/Decrease

Question 14

Activities involving the purchase and sale of long-term assets as well as other major items used in a business's operation are referred to as:

Financing activities

Planning activities

Operating activities

Investing activities

Question 15

A debit is:

A decrease in an account.

The left side of a T-account

An increase in an account

The right side of a T-account

Question 16

Which inventory costing method assigns the earliest units received to cost of goods sold?

Weighted average

Specific identification

LIFO

FIFO

Question 17

Which of the following statements is true?

Double-entry accounting systems have existed for at least 2,000 years

Before the advent of a money economy, the double-entry accounting system was not feasible

The double-entry accounting system came about as a result of the Great Depression

Accounting systems developed in the 18thcentury because, by then, most people were literate

Question 18

The organization responsible for setting U.S. external financial reporting practice is the:

Financial Accounting Standards Board

American Institute of Certified Public Accountants

Federal Government

Securities and Exchange Commission

Question 19

When sales are made on account, which of the following will occur?

Accounts receivable will increase

Cash will increase

Accounts payable will decrease

Revenues will decrease

Question 20

Which of the following is not one of the four basic financial statements?

Balance sheet

Accounting equation

Statement of cash flows

Income statement

Question 21

When expenses are incurred, what is the effect on the accounting equation?

Assets will increase

Owner's equity will increase

Liabilities will decrease

Owner's equity will decrease

Question 22

When faced with uncertainty about the amount at which assets and liabilities should be recorded, accountants should follow which principle, in order to avoid misleading users of financial statements?

Consistency

Conservatism

Comparability

Continuity

Question 23

Resources a business owns are called:

Liabilities

Assets

Revenues

Owner's equity

Question 24

An account with the word "prepaid" in the title is a(n):

Expense

Liability

Liability

Asset

Question 25

Which of the following is an example of a liability account?

Prepaid Rent

Unearned Revenue

Equipment

Inventory