Basic Accounting Study Guide
Questions
Course Introduction
Basic Accounting provides an introduction to the fundamental principles and practices of accounting, emphasizing the recording, processing, and interpretation of financial transactions. Students will learn how to prepare and analyze financial statements, understand the accounting cycle, and apply key concepts such as double-entry bookkeeping, accruals, and cash flows. The course equips learners with the essential skills needed to track financial performance, make informed decisions, and ensure compliance with accounting standards in both personal and organizational contexts.
Recommended Textbook
Cornerstones of Financial Accounting 2nd Edition by Jay Rich
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12 Chapters
1918 Verified Questions
1918 Flashcards
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Chapter 1: Accounting and the Financial Statements
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Refer to Bellweather Times.What is the company's income from operations?
A)$280,000
B)$220,000
C)$100,000
D)$40,000
Answer: C
Q2) When an entity's stock issuances exceed its expenses for a period of time,the entity will report net income.
A)True
B)False
Answer: False
Q3) Which of the following items will be found in a corporate annual report?
A)Industry standards
B)Notes to the financial statements
C)Selected financial data from non-competitor companies
D)Management's statement that the auditors are responsible for the financial statements.
Answer: B
Q4) The current ratio is found by dividing current assets by ____________________.
Answer: current liabilities
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Chapter 2: The Accounting Information System
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177 Flashcards
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Sample Questions
Q1) A company's current ratio is 1.5,what is the effect of obtaining land by issuing shares of stock?
A)Increase
B)Decrease
C)No change
D)Unable to determine
Answer: C
Q2) Hypnosis Institute received payments from customers who had been billed earlier for services provided.What effect does this transaction have on the accounting equation?
A)Assets and liabilities increase.
B)Assets and stockholders' equity increase.
C)Assets and liabilities decrease.
D)There is no effect on the accounting equation,as one asset account increases while another asset account decreases.
Answer: D
Q3) The ____________________ is a list of all the accounts used by an entity.
Answer: chart of accounts
Q4) A revenue account has a normal ___________ balance.
Answer: credit
Page 4
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Chapter 3: Accrual Accounting
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Sample Questions
Q1) When an expense is incurred prior to the payment of cash for that expense,an adjustment that increases an expense account and increases a liability is prepared.
A)True
B)False
Answer: True
Q2) Refer to California Condos.The company reported interest receivable of $2,500 at December 31,2013,and $0 at the beginning of 2013.How much cash did the company collect for interest during the year?
Answer: $7,500
$10,000 (Interest Revenue)- $2,500 (Interest Receivable at December 31)= $7,500
Q3) An informal schedule called a ________________ is helpful for organizing and preparing the information necessary to perform the end-of-period steps in the accounting cycle.
Answer: worksheet
Q4) A cost can be an asset or expense depending on whether or not the future economic benefits have expired.
A)True
B)False
Answer: True
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Chapter 4: Internal Control and Cash
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162 Flashcards
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Sample Questions
Q1) When reconciling a bank account,the company must prepare an adjusting entry for deposits in transit.
A)True
B)False
Q2) The sole purpose for creating an internal control system is to deter embezzlement.
A)True
B)False
Q3) The practices of delaying payments to suppliers,speeding up collection from customers,and earning the greatest possible return on any excess cash are known as ____________________ principles.
Q4) Refer to Dance Town Academy.How will the bank services charges be handled on a bank reconciliation?
A)add to the balance from the company records
B)subtract from the balance from the company records
C)add to the bank statement balance
D)subtract from the bank statement balance
Q5) Items that are included on a bank statement and decrease the bank account balance are called ____________________.
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Chapter 5: Sales and Receivables
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Sample Questions
Q1) Refer to AT&U Company.If the company uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?
A)$640,000
B)$595,000
C)$620,000
D)$615,000
Q2) Under the allowance method of accounting for bad debts,the company estimates the amount of bad debts before those debts actually occur.
A)True
B)False
Q3) All of the following are true for a company that uses the allowance method of accounting for bad debts,EXCEPT:
A)It uses a contra-asset account called the allowance for doubtful accounts.
B)It records bad debt expense each time an account is determined to be uncollectible.
C)It reduces its accounts receivable balance when the account is written off.
D)It reports accounts receivable in the balance sheet at their net realizable value.
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Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) For a merchandising company,the cost of goods sold is subtracted from net sales to arrive at gross profit.
A)True
B)False
Q2) Refer to the information provided for Robey Company.If the Moving Average Cost method is used,determine the following amounts:
A)Cost of Goods sold for the month of February?
B)Ending inventory on February 28th?
Q3) The journal entries required for purchase and sales transactions using the perpetual system are more complex than under the periodic system but offer the advantage of:
A)requiring the additional control of a physical inventory count whenever accurate inventory amounts are needed.
B)delaying the majority of the accounting effort until year-end.
C)requiring the use of the average cost method.
D)providing management with more complete information from which to control inventories.
Q4) The ratio of a company's cost of goods sold to its average inventory is called its
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Chapter 7: Operating Assets
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Sample Questions
Q1) The following costs were incurred to acquire and prepare land for a new parking lot: purchase price for land,cost to clear the land,cost of paving,cost of lighting for the parking lot,and cost of landscaping for the parking lot.How should the company determine which costs should be recorded as Land Improvements and which costs should be recorded as Land?
A)The costs with an unlimited life are debited to Land,and the costs with a limited useful life are debited to Land Improvements.
B)The costs with a limited life are debited to Land,and the costs with an unlimited useful life are debited to Land Improvements.
C)The costs to be depreciated are debited to Land,and the costs that will not be depreciated are debited to Land Improvements
D)Costs that are depreciable are debited to Land Improvements,while other costs are expensed immediately because of a lack of definite life.
Q2) The more efficiently a company uses its fixed assets the lower will be the fixed asset turnover ratio.
A)True B)False
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Page 9
Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) Which of the following statements regarding liabilities is true?
A)Liabilities must be legally enforceable to a known recipient.
B)Liabilities arise from past activities that require some future sacrifice of economic benefits.
C)The accounting principles followed in the U.S.require that current liabilities be listed in order of decreasing amounts on the balance sheet.
D)The accounting principles followed in the U.S.differ substantially from those of other countries,especially with respect to current liabilities.
Q2) Interest on a note payable can be calculated by multiplying the amount owed by the interest rate by the fraction of year that represents the time elapsed since borrowing.
A)True
B)False
Q3) A(n)____________________ arises when a business purchases goods or services on credit.
Q4) A company has a note payable that is due on December 31,2013.In its December 31,2012,balance sheet,this note payable should be classified as a(n)____________________.
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) A lease is accounted for as an operating lease if the present value of the lease payments is at least 90 percent of the fair value of the leased property.
A)True
B)False
Q2) The effective interest rate method will record amortization of a bond discount or premium in a manner that produces a constant rate of interest expense from period to period.
A)True
B)False
Q3) A capital lease liability would appear on the balance sheet as:
A)Stockholder's equity
B)Long-term liability
C)Current asset
D)Long-term asset
Q4) The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.
A)True
B)False
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Chapter 10: Stockholders Equity
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Sample Questions
Q1) Refer to Ladder Distributors.Suppose the company reissued 1,000 shares of its treasury stock on June 1,2015,for $44 each.Which of the following is true regarding the entry required to record this transaction?
A)A debit to treasury stock is required for $44,000.
B)A credit to treasury stock is required for $50,000.
C)A credit to retained earnings is required for $6,000.
D)A debit to paid-in capital from treasury stock transactions is required for $6,000.
Q2) Par value represents the A)arbitrary amount that establishes a minimum price for the stock when it is first issued. B)current market price of the stock.
C)amount for which any treasury shares have been acquired by the corporation. D)amount for which treasury shares may be reissued.
Q3) When a corporation is in the process of being dissolved,any additional dividends are referred to as ____________________ dividends.
Q4) A corporation may become chartered by applying to the federal government. A)True B)False
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Page 12
Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) Refer to Medstar Ambulance Service.How much was paid to retire the $1,000,000 note issue during 2014?
A)$ 800,000
B)$1,200,000
C)$1,045,000
D)$1,075,000
Q2) A company reported the following information: \(\begin{array}{ll}
\text {Prepaid insurance, December 31, 2014 } &\$ 14,000 \\ \text { Prepaid insurance, December 31, 2013 } &11,500 \\ \text { Insurance expense for 2014 } &25,200 \end{array}\) How much cash was paid for insurance during 2014?
A)$22,700
B)$27,700
C)$39,200
D)$36,700
Q3) If the beginning balance in Accounts Receivable is $11,000 and the ending balance is $9,000,then credit sales must have exceeded collections on account.
A)True
B)False
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Chapter 12: Financial Statement Analysis
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Which of the following combinations of ratios will best analyze a company's income statement performance?
A)Gross profit percentage,return on common equity,and debt-to-equity
B)Gross profit percentage,earnings per share,and net profit margin percentage
C)Gross profit percentage,current ratio,and return on common equity
D)Gross profit percentage,net profit margin percentage,and debt-to-equity
Q2) Refer to Rio Imports.Which of the following statements is true concerning the company's debt management activities?
A)The company has a smaller percentage of capital from stockholders at the end of 2015 than at the end of 2014.
B)The company relied more on creditors for financing during 2015 than in 2014.
C)The company improved its debt-to-equity ratio.
D)Relative to 2014,the company is in a weaker position at the end of 2015 to finance capital expenditures from cash flow generated by operating activities.
Q3) Agrefeld,Inc.has a return on assets of 12% and a return on common equity of 15%.What causes the difference in these two returns?
Q4) Various financial ratios,including return ratios,are categorized as ____________________ ratios.
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