Basic Accounting
Textbook Exam Questions
Course Introduction
Basic Accounting introduces students to the fundamental principles and concepts of accounting, providing a solid foundation for understanding how businesses record, summarize, and report financial information. The course covers essential topics such as the accounting equation, double-entry bookkeeping, preparation and interpretation of financial statements, and the role of accounting in decision-making. Students will develop practical skills in recording transactions, preparing ledgers, managing accounts, and understanding the regulatory environment governing accounting practices. By the end of the course, students will be able to apply basic accounting techniques and concepts to real-world financial situations, enabling them to interpret and analyze financial information effectively.
Recommended Textbook
Financial Accounting 6th Edition by Walter T. Harrison
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11 Chapters
1425 Verified Questions
1425 Flashcards
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) Relevance and comparability are the two fundamental qualitative characteristics of accounting.
A)True
B)False
Answer: False
Q2) To determine a company's gross margin for the period,an investor would look on the:
A) balance sheet
B) cash flow statement
C) income statement
D) statement of retained earnings
Answer: C
Q3) The relevant measure of value of the assets of a company that is going out of business is its:
A) historical cost
B) recorded value
C) book value
D) liquidation value
Answer: D
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) Posting,a part of the accounting process,refers to:
A) copying amounts from the accounts in the general ledger to the journal
B) copying amounts from the financial statements to the general ledger
C) copying amounts from the journal to the appropriate accounts in the general ledger
D) copying amounts from the general ledger to the financial statements
Answer: C
Q2) Prepare a trial balance for Salty Inc.dated June 30,2017,based on the following transactions that occurred during the month of June.
a.Owner invested $25,000 cash into the business and received common shares in return.
b.Rented an office and paid one month's rent,$900.
c.Purchased $400 of supplies on account.
d.Performed services on account,$5,500.
e.Paid $2,000 cash for office furniture.
f.Owner received a dividend of $700.
g.Collected $1,200 on account.
Answer: 11ea83d4_69f1_2cd8_b139_712e44e5567d_TB5519_00_TB5519_00
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Chapter 3: Accrual Accounting and the Financial Statements
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Sample Questions
Q1) Rover Ltd.had $8,200 of supplies on hand at the beginning of the month.A count at the end of the month indicated $1,350 of supplies were still on hand.The adjusting entry at year end would include a:
A) debit to Supplies Expense for $6,850
B) credit to Supplies Expense for $6,850
C) credit to Supplies Expense for $1,350
D) debit to Supplies for $1,350
Answer: A
Q2) Interest Payable,Salaries Payable,and Accounts Payable are:
A) current assets
B) current liabilities
C) non-current assets
D) non-current liabilities
Answer: B
Q3) The closing entry made for dividends would include:
A) a debit to Dividends and a credit to net income
B) a debit to Retained Earnings and a credit to Dividends
C) a debit to net income and a credit to Dividends
D) a debit to Dividends and a credit to Retained Earnings
Answer: B
Page 5
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Chapter 4: Cash and Receivables
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Sample Questions
Q1) Outstanding cheques are added to the ending bank balance on the bank statement when preparing the bank reconciliation.
A)True
B)False
Q2) Which of the following items below may be made to reconcile a book balance to a bank balance?
A) a deposit in transit
B) an EFT receipt
C) outstanding cheques
D) an addition or subtraction to correct a bank error, as appropriate
Q3) A company has $50,000 in cash,$85,000 in short-term investments,$120,000 in net current receivables,and $145,000 in inventory.The total current liabilities of the firm are $275,000.The acid-test ratio of the company is:
A) 0.64
B) 0.93
C) 1.45
D) 1.76
Q4) Identify and briefly describe four ways to improve cash flows from sales and receivables.
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Chapter 5: Inventory and Cost of Goods Sold
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104 Flashcards
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Sample Questions
Q1) Which of the following would be included in the Inventory account on a merchandising company's balance sheet?
A) advertising costs
B) delivery costs
C) shipping costs from the manufacturer to the merchandising company
D) sales commissions
Q2) A purchase allowance is a decrease in the cost of purchases because the purchaser returned goods to the supplier.
A)True
B)False
Q3) Inventory turnover is calculated by:
A) dividing average inventory by cost of goods sold
B) dividing cost of goods sold by average inventory
C) multiplying average inventory by cost of goods sold
D) subtracting ending inventory from cost of goods sold
Q4) Inventory turnover is calculated by dividing average inventory by cost of goods sold.
A)True
B)False
Q5) What is the most important asset of a merchandising business?
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Chapter 6: Property, plant, and Equipment, and Intangible Assets
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Sample Questions
Q1) Amortization is not recorded on intangible assets. A)True
B)False
Q2) Equipment with a book value of $8,000 is sold for $1,000 cash.The statement of cash flows will report a:
A) $1,000 cash inflow in the operating activities section
B) $1,000 cash inflow in the investing activities section
C) $7,000 cash outflow in the operating activities section
D) $7,000 cash outflow in the financing activities section
Q3) IFRS requires significant components of a building to be depreciated separately. A)True
B)False
Q4) The cost of paving a parking lot should be charged to:
A) land
B) land improvements
C) immediate expense
D) repairs and maintenance expense
Q5) Return on assets measures how profitably management has used its assets.
A)True
B)False
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Chapter 7: Investments and the Time Value of Money
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Sample Questions
Q1) The investor should generally use the equity method of accounting for the investee if the investor owns what percentage of the outstanding stock of the investee?
A) 0%-15%
B) 20%-50%
C) any percentage greater than 50%
D) any percentage greater than 60%
Q2) Under ASPE a reporting an organization can use either the effective interest rate method or straight line to account for the amortization of their bond investment.
A)True
B)False
Q3) If 100% of a subsidiary's voting stock is acquired in the purchase of the subsidiary,goodwill is defined as the amount by which the purchase price paid by the parent company exceeds the:
A) market value of the net assets of the subsidiary
B) book value of the net assets of the subsidiary
C) total shareholders' equity of the subsidiary
D) balance in the investment in subsidiary account
Q4) Briefly explain the meaning of the term "present value."
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Chapter 8: Liabilities
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Sample Questions
Q1) Earnings per share (EPS)is calculated by:
A) dividing the average number of common shares outstanding throughout the year by net income
B) dividing net income by the average number of common shares outstanding throughout the year
C) dividing net income by the number of common shares outstanding at the end of the year
D) dividing the number of common shares outstanding at the end of the year by net income
Q2) A $10,000 bond quoted at 103 1/2 is selling for:
A) $9,662
B) $9,897
C) $10,104
D) $10,350
Q3) The dollar amount of a company's net income for each common share outstanding is referred to as:
A) the price-to-earnings ratio
B) income as a percentage of equity
C) earnings per share
D) cumulative retained earnings ratio
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Chapter 9: Shareholders Equity
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Sample Questions
Q1) JetNew issued 50,000 common shares on January 1,2017 at $8 each.Preferred shares were issued on March 15,2017 at $10 each with a dividend rate of $0.50.JetNew sold 20,000 of these shares.On November 15,in order to buy into the business,another shareholder offered up a building valued at $300,000 for 30,000 common shares.At the time of this transaction JetNew shares were trading at $9.Prepare the required journal entries.
Q2) The market price of a share of Omega 3 Company common shares is $110.If Omega 3 Company declares and issues a 30% stock dividend,the market price will,in theory,adjust to approximately:
A) $33
B) $70
C) $85
D) $143
Q3) When a cash dividend is declared:
A) the Cash account is debited
B) the Cash account is credited
C) the Retained Earnings account is debited
D) the Retained Earnings account is credited
Q4) Describe the rights typically enjoyed by common shareholders.
Q5) Explain the fundamental difference between retained earnings and share capital.
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Chapter 10: The Statement of Cash Flows
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Sample Questions
Q1) All of the following would appear on a direct method statement of cash flows except:
A) cash payments for interest and taxes
B) cash purchase of equipment
C) cash receipts from customers
D) net income
Q2) The purchase of land for cash and the sale of a capital asset are viewed as:
A) a negative and positive item on the statement of cash flows
B) a positive and negative item on the statement of cash flows
C) both positive items on the statement of cash flows
D) neither positive nor negative items on the statement of cash flows
Q3) Non cash activities such as an exchange of shares for a piece of equipment need to be disclosed either on a separate schedule at the bottom of the statement of cash flows or in a note to the financial statements.
A)True
B)False
Q4) Why is the statement of cash flows necessary?
Q5) In what way is free cash flow different from net cash flows as shown on a statement of cash flows?
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Chapter 11: Financial Statement Analysis
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Sample Questions
Q1) Name some common financial ratios used by investors to compare different companies.
Q2) Most financial analyses cover trends of three,five,or even 10 years.
A)True
B)False
Q3) Yukon Company has total current liabilities equal to $600,000 and working capital of $30,000.North Company has the same amount of working capital,but it has total current liabilities of $40,000.The company with the better working capital position is:
A) North Company
B) Yukon Company
C) They both have exactly the same working capital position. D) indeterminable with the information given
Q4) When performing vertical analysis on a balance,cash is compared to the total current assets figure.
A)True
B)False
Q5) The current ratio and the acid-test ratio measure a company's ability to pay current liabilities.State how each ratio is calculated and what it does to help in financial statement analysis.
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