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