Accounting Principles
Practice Questions
Course Introduction
Accounting Principles introduces students to the fundamental concepts and practices of financial accounting. The course covers the accounting cycle, including recording, classifying, and summarizing financial transactions, the preparation of financial statements, and the analysis and interpretation of accounting information. Emphasis is placed on understanding generally accepted accounting principles (GAAP), the role of ethics in accounting, and the use of accounting information for effective decision-making. Students will gain practical skills in handling accounts, adjusting entries, and preparing basic financial reports essential for any business environment.
Recommended Textbook
Financial Accounting 4th Edition by Robert Kemp
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12 Chapters
1893 Verified Questions
1893 Flashcards
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Page 2
Chapter 1: Business, Accounting, and You
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) All of the following would be considered a stakeholder in a business except A)Customers
B)Lenders
C)Competitors
D)Society
Answer: C
Q2) A business purchases a computer for cash. What effect does this have on the accounting equation?
A)Stockholders' Equity and Assets increase.
B)There is no change in Total Assets.
C)Assets increase and Liabilities decrease
D)Stockholders' Equity and Liabilities increase.
Answer: B
Q3) A company has $129,000 in Assets and $65,000 in Liabilities. How much does the company have in Stockholders' Equity?
A)$194,000
B)$129,000
C)$65,000
D)$64,000
Answer: D
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Chapter 2: Analyzing and Recording Business Transactions
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152 Flashcards
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Sample Questions
Q1) A company accidentally records the rent payment twice in October. The effect on the trial balance will be:
A)debits will be more than credits.
B)credits will be more than debits.
C)debits will still be equal to credits.
D)not enough information provided.
Answer: C
Q2) Which of the following is NOT a liability?
A)Accounts Payable
B)Interest Payable
C)Rent Expense
D)All of the above are liabilities.
Answer: C
Q3) The third step in recording a transaction in the general journal is to record the:
A)explanation of the entry.
B)account(s)to be credited and the amount(s).
C)date of the entry.
D)account(s)to be debited and the amount(s).
Answer: B
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Page 4
Chapter 3: Adjusting and Closing Entries
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155 Flashcards
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Sample Questions
Q1) Of the following, which are reported on the Balance Sheet?
A)Assets
B)Revenues
C)Expenses
D)Net income or net loss
Answer: A
Q2) Which of the following accounts would NOT appear on a post-closing trial balance?
A)Common Stock
B)Dividends
C)Dividends Payable
D)Accounts Receivable
Answer: B
Q3) Which of the following accounts would NOT be adjusted?
A)Accumulated Depreciation
B)Cash
C)Depreciation Expense
D)Wages
Answer: B
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5
Chapter 4: Accounting for a Merchandising Business
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158 Flashcards
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Sample Questions
Q1) A company's gross profit percentage decreases from 58% to 51%. What does this mean?
A)This means that net income will be higher.
B)This means that net income will be lower.
C)This means that there will be a net loss.
D)We cannot determine anything definite from the information given.
Q2) The Cost of Goods Sold account appears on the:
A)Balance Sheet.
B)Statement of Retained Earnings.
C)Income Statement.
D)post-closing trial balance.
Q3) If an invoice shows a total of $3,000 with terms 5/15, n/60, which of the following is NOT a true statement?
A)The customer must pay $3,000 within 60 days after the date of the invoice.
B)The customer may pay $2,850 within 15 days to satisfy the bill.
C)The customer will receive a 10% discount if they pay within 60 days.
D)The customer has a discount period of 15 days.
Q4) Most merchandising businesses prepare a single-step Income Statement. A)True B)False
Page 6
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Chapter 5: Inventory
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Sample Questions
Q1) In order to attract investors and borrow on favorable terms, a company would use ________ in times when inventory costs are rising.
A)LIFO
B)FIFO
C)average costing
D)specific-identification costing
Q2) If gross profit is overstated in Period 1, then the ending inventory and net income in Period 1 were respectively:
A)overstated, and understated.
B)overstated, and overstated.
C)understated, and overstated.
D)understated, and understated.
Q3) Net sales minus estimated gross profit yields the estimated:
A)ending inventory.
B)beginning inventory.
C)gross profit.
D)cost of goods sold.
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Chapter 6: The Challenges of Accounting: Standards, Internal
Control, Audits, Fraud, and Ethics
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Sample Questions
Q1) Generally Accepted Auditing Standards are developed by the Securities and Exchange Commission.
A)True
B)False
Q2) Marla has a gambling addiction. She may have a perceived pressure to commit fraud.
A)True
B)False
Q3) Sydney just found out that her dog needs an expensive operation. Sydney is a trusted employee in a small firm, and she knows that nobody double checks her deposits. However, her moral beliefs do not allow her to take advantage of the lack of controls. Because there is no _________, Sydney is less likely to commit fraud.
A)perceived pressure
B)rationalization
C)perceived opportunity
D)financial motivation
Q4) In large companies, it may not be cost effective to properly segregate duties.
A)True
B)False
8
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Chapter 7: Cash and Receivables
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Sample Questions
Q1) Which of the following would indicate poor internal control over Accounts Receivable?
A)The person handling cash receipts passes the receipts to someone who enters them into Accounts Receivable.
B)The same person handling cash receipts also records the Accounts Receivable transactions.
C)The mailroom employees open the mail and give the cash receipts to another employee.
D)The person who handles Accounts Receivable would not write off accounts as uncollectible.
Q2) A bank statement shows the:
A)ending book balance as of a specific date.
B)ending bank balance as of a specific date.
C)reconciled balance as of a specific date.
D)book errors as of a specific date.
Q3) The _____ is a more stringent measure of a business's liquidity.
A)current ratio
B)turnover ratio
C)quick ratio
D)receivables collection ratio
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Chapter 8: Long-Term and Other Assets
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Sample Questions
Q1) Available-for-sale securities are reported at their current market value, and any increases or decreases in market value are reported as part of net income.
A)True
B)False
Q2) Which of the following marketable securities are reported at market value on the Balance Sheet date?
A)Held-to-maturities securities
B)Available-for-sale securities
C)Trading securities
D)Available-for-sale and trading securities
Q3) The return on assets and the fixed asset turnover are usually computed monthly.
A)True
B)False
Q4) Which of the following would be considered part of the cost of a printing press?
A)The medical fees for a worker who was injured while installing the press
B)The cost of a test run to make sure the press worked properly
C)Both A and B are part of the cost of the printing press.
D)Neither A nor B are part of the cost of the printing press.
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Page 10
Chapter 9: Current Liabilities and Long-Term Debt
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Sample Questions
Q1) The interest coverage ratio equals interest expense divided by EBIT.
A)True
B)False
Q2) A $5,000 bond quoted at 104.4 will cost $5,220.
A)True
B)False
Q3) When sales tax is remitted to the state, the journal entry includes a debit to Cash and a credit to Sales Tax Payable.
A)True
B)False
Q4) A $30,000 bond issue with a stated rate of interest of 6%, when the market rate of interest is 7%, means that the bond will be sold for:
A)$30,000
B)more than $30,000.
C)less than $30,000.
D)the maturity value.
Q5) The debt ratio equals total assets divided by total liabilities.
A)True
B)False
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Chapter 10: Corporations: Paid-In Capital and Retained Earnings
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Sample Questions
Q1) For most companies, preemptive rights are the exception, rather than the rule.
A)True
B)False
Q2) Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20-par common stock. The preferred stock is cumulative. How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $12,000 in arrears?
A)$43,000 preferred, $0 common
B)$4,500 preferred, $38,500 common
C)$16,500 preferred, $26,500 common
D)$21,500 preferred, $21,500 common
Q3) If a company has 2,500 shares authorized and 1,500 have been issued, the annual dividends on $20 par 5% preferred stock is $1,500.
A)True
B)False
Q4) Treasury stock transactions are uncommon among larger corporations.
A)True
B)False
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Robbins Company distributed a 5% common stock dividend, this will be reported in the financing activity section of the cash flow statement.
A)True
B)False
Q2) An example of a cash inflow from financing activities is:
A)cash receipts from sale of investments.
B)cash receipts from issuance of bonds.
C)selling a building.
D)gain on sale of land.
Q3) Which of the following is NOT a part of investing activities?
A)Buying a building
B)Collecting on a loan receivable
C)Borrowing money
D)Selling off equipment
Q4) Payments to suppliers include payments for which of the following?
A)Inventory
B)Employee compensation
C)Income taxes
D)All of the above.
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) The net working capital for a company with current assets of $77,000, quick assets of $46,000, total assets of $187,000 current liabilities of $65,000 and net sales of $91,000 would be:
A)$58,000.
B)$26,000.
C)$12,000.
D)$122,000.
Q2) For vertical analysis purposes, the base item on the Income Statement is:
A)net income.
B)net sales.
C)total expenses.
D)gross profit.
Q3) How a business uses its money to acquire assets is called the financing decision. A)True
B)False
Q4) Financial analysis is used to predict the future of a business. A)True
B)False
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