Basic Accounting Test Questions
Course Introduction
Basic Accounting introduces students to the fundamental principles and concepts of accounting, including the accounting cycle, preparation and analysis of financial statements, and the recording of business transactions. The course covers essential topics such as double-entry bookkeeping, journals, ledgers, trial balances, and the use of accounting information in decision-making. Students will gain a foundational understanding of how businesses track, report, and interpret financial data, equipping them with skills critical for further study or entry-level positions in business and finance.
Recommended Textbook Survey of Accounting 6th Edition by Carl S. Warren
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15 Chapters
1713 Verified Questions
1713 Flashcards
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Page 2
Chapter 1: The Role of Accounting in Business
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Manufacturing businesses change basic inputs into products that are sold to individual customers.
A)True
B)False
Answer: True
Q2) Which of the following would not be an example of a merchandising business?
A) The Walt Disney Company
B) JCPenney
C) Amazon.com
D) Wal-Mart
Answer: A
Q3) The basic type of stock issued to owners is called common stock.
A)True
B)False
Answer: True
Q4) What is the basic accounting equation, and which financial statement is prepared from this equation?
Answer: Assets = Liabilities + Stockholders' Equity; the balance sheet is prepared from this equation.
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Chapter 2: Basic Accounting Concepts
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89 Flashcards
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Sample Questions
Q1) The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $3,425. The net cash from financing activities must be:
A) $1,770.
B) $5,080.
C) $5,750.
D) $12,600.
Answer: B
Q2) Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities. How much is in Common Stock?
A) $22,000
B) $16,000
C) $11,000
D) $6,000
Answer: D
Q3) How can a company earn a large net income and have a small balance in retained earnings?
Answer: The company may pay out most of its earnings in dividends.
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Chapter 3: Accrual Accounting Concepts
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111 Flashcards
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Sample Questions
Q1) Donald Duck Co. Donald Duck Co. has a five-day workweek (Monday through Friday). Employees earn $500 per day.
Refer to Donald Duck Co. How much cash will be paid on Friday?
A) $500
B) $1,500
C) $2,500
D) $1,000
Answer: C
Q2) Describe deferrals and accruals.
Answer: Deferrals are created by recording a transaction that delays the recognition of an expense or revenue. An example of a deferral is prepaid insurance. The expense recognition is "deferred" until time has passed.
Accruals are created when a revenue/expense has not been recorded at the end of the accounting period. An example of an accrual is interest income earned but not yet recorded.
Q3) Land is an example of a current asset.
A)True
B)False
Answer: False
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Chapter 4: Accounting for Merchandising Businesses
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138 Flashcards
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Sample Questions
Q1) Which of the following accounts will not be found in the Cost of Merchandise Sold section on the income statement?
A) Purchases
B) Transportation In
C) Sales Returns and Allowances
D) Merchandise Inventory
Q2) Using a perpetual inventory system, the return of merchandise purchased on account includes a(n):
A) increase in Sales.
B) increase in Merchandise Inventory.
C) decrease in Merchandise Inventory.
D) decrease in Sales.
Q3) Purchases of merchandise increase the merchandise inventory account under the perpetual inventory system.
A)True
B)False
Q4) Net sales is equal to sales plus cost of merchandise sold.
A)True
B)False
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Chapter 5: Sarbanes-Oxley, Internal Control, and Cash
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The amount of deposits in transit is included on the bank statement as a(n):
A) deduction from the cash balance per books.
B) deduction from the cash balance per bank.
C) addition to the cash balance per bank.
D) addition to the cash balance per books.
Q2) The depositor reconciles the bank's statement to the depositor's records.
A)True
B)False
Q3) List the advantages of Electronic Funds Transfers.
Q4) Accompanying the bank statement was a debit memorandum for bank service charges. What adjustment is required in the depositor's accounts?
A) Increase Miscellaneous Expense; decrease Cash
B) Increase Cash; increase Other Income
C) Increase Cash; increase Accounts Payable
D) Decrease Accounts Payable; decrease Cash
Q5) The bank reconciles its statement to the depositor's records.
A)True B)False
Q6) What is a special-purpose cash fund? What is its purpose? Give two examples.
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Q7) What is the purpose of the Sarbanes-Oxley Act of 2002, and why was it enacted?
Chapter 6: Receivables and Inventories
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102 Flashcards
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Sample Questions
Q1) The two methods of accounting for uncollectible receivables are the allowance method and the:
A) equity method.
B) direct write-off method.
C) interest method.
D) cost method.
Q2) During inflationary periods, the use of the LIFO method of costing inventory will result in a lesser amount of net income than would result from the use of the average method of inventory costing.
A)True
B)False
Q3) The difference between the total receivables and the balance in Allowance for Doubtful Accounts at the end of a period is referred to as the net realizable value of the receivables.
A)True
B)False
Q4) Lower-of-cost-or-market is a method of inventory valuation.
A)True B)False
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Chapter 7: Fixed Assets and Intangible Assets
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86 Flashcards
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Sample Questions
Q1) NBC Company purchased a patent from ABC for $144,000. At the time of purchase the patent had a remaining useful life of 10 years. Determine the patent amortization expense for the first year.
A) $7,200
B) $18,000
C) $12,000
D) $14,400
Q2) The estimated amount that an asset can be sold for at the end of its useful life is called its book value.
A)True
B)False
Q3) A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building. Materials salvaged from the demolition of the building were sold for $1,950. Determine the cost of the land to be reported on the balance sheet.
A) $93,500
B) $91,550
C) $85,700
D) $89,600
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Page 9
Chapter 8: Liabilities and Stockholders Equity
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Obligations that depend on past events and that are based on future transactions are contingent liabilities.
A)True
B)False
Q2) When the contract rate of interest on bonds is higher than the market rate of interest, the bonds sell at:
A) a premium.
B) their face value.
C) their maturity value.
D) a discount.
Q3) A bond is simply a form of an interest-bearing note.
A)True
B)False
Q4) Current liabilities are:
A) due but not receivable for more than one year.
B) due but not payable for more than one year.
C) due and receivable within one year.
D) due and payable within one year.
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Chapter 9: Financial Statement Analysis
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Sample Questions
Q1) Based on the following data, what is the amount of quick assets? \(\begin{array}{ll}
\$ 32,000 & \text { Accounts payable } \\
56,000 & \text { Accounts receivable } \\
7,000 & \text { Accrued liabilities } \\
20,000 & \text { Cash } \\
40,000 & \text { Intangible assets } \\
72,000 & \text { Inventory } \\
100,000 & \text { Long-term investments } \\
75,000 & \text { Long-term liabilities } \\
40,000 & \text { Marketable securities } \\
20,000 & \text { Notes payable (short-term) } \\
625,000 & \text { Property, plant, and equipment } \\
2,000 & \text { Supplies } \end{array}\)
A) $228,000
B) $188,000
C) $116,000
D) $114,000
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Chapter 10: Accounting Systems for Manufacturing Businesses
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.
A)True
B)False
Q2) Factory overhead is applied to production using a predetermined overhead rate.
A)True
B)False
Q3) The recording of the jobs completed would decrease:
A) Factory Overhead.
B) Finished Goods.
C) Work-in-Process.
D) Cost of Goods Sold.
Q4) A difference in quantity of materials used on two comparable jobs may be caused by:
A) inadequately trained employees.
B) poor quality materials.
C) employee carelessness.
D) all of these.
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Chapter 11: Cost Behavior and Cost-Volume-Profit Analysis
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) In cost-volume-profit analysis, all costs are classified into the following two categories:
A) mixed costs and variable costs.
B) sunk costs and fixed costs.
C) discretionary costs and sunk costs.
D) variable costs and fixed costs.
Q2) The contribution margin ratio is the same as the variable cost ratio.
A)True
B)False
Q3) Which of the following is an example of a cost that varies in total as the number of units produced changes?
A) Electricity cost per KWH to operate factory equipment
B) Monthly rent on a factory building
C) Straight-line depreciation on factory equipment
D) Salary of a production supervisor
Q4) A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
A)True
B)False
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Chapter 12: Differential Analysis and Product Pricing
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Sample Questions
Q1) When a product or segment of a business is determined to be generating a loss, the total income from operations for the company will always increase if management eliminates the product or segment.
A)True
B)False
Q2) In deciding whether to accept business at a special price when the company is operating below full capacity, the special price should be set high enough to cover both the fixed and variable costs.
A)True
B)False
Q3) Hill Co. can further process Product O to produce Product P. Product O is currently selling for $65 per pound and costs $42 per pound to produce. Product P would sell for $82 per pound and would require an additional cost of $13 per pound to produce. The differential revenue of producing Product P is $17 per pound.
A)True
B)False
Q4) A cost that will not be affected by later decisions is termed as sunk cost.
A)True
B)False
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Chapter 13: Budgeting and Standard Cost Systems
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Sample Questions
Q1) As of January 1 of the current year, the Butner Company had accounts receivables of $50,000. Sales for January, February, and March were as follows: $120,000, $140,000, and $150,000. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?
A) $132,000
B) $105,600
C) $133,600
D) $95,200
Q2) The budget that summarizes future plans for the acquisition of fixed assets is the: A) direct materials purchases budget.
B) production budget.
C) sales budget.
D) capital expenditures budget.
Q3) The direct labor time variance measures the efficiency of the direct labor force. A)True
B)False
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Chapter 14: Performance Evaluation for Decentralized Operations
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137 Flashcards
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Sample Questions
Q1) In large businesses, decentralization is often advantageous because:
A) it allows top management to make all decisions, thus ensuring that overall operational goals are met.
B) it prevents decisions from one unit to negatively affect the profitability of the entire company.
C) it allows departmental managers to focus on acquiring expertise in their areas of responsibility.
D) it prevents duplication of assets and expense.
Q2) Separation of businesses into more manageable operating units is termed centralization.
A)True
B)False
Q3) A decentralized business organization is one in which all major planning and operating decisions are made by top management.
A)True
B)False
Q4) The ratio of sales to invested assets is termed investment turnover.
A)True
B)False
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Chapter 15: Capital Investment Analysis
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Sample Questions
Q1) When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n):
A) average rate of return.
B) cash payback period.
C) present value index.
D) price-level index.
Q2) A present value index can be used to rank competing capital investment proposals when the net present value method is used.
A)True
B)False
Q3) Average rate of return equals estimated average annual income divided by average investment.
A)True
B)False
Q4) A series of unequal cash flows at fixed intervals is termed an annuity.
A)True
B)False
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