1) Accountants Refer to an Economic Event As A

1) Accountants refer to an economic event as a
A.
transaction.
B.
purchase.
C.
sale.
D.
change in ownership.
2) Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?
A.
Recording
B.
Identification
C.
Communication
D.
Analysis
3) Communication of economic events is the part of the accounting process that involves
A.
preparing accounting reports.
B.
identifying economic events.
C.
quantifying transactions into dollars and cents.
D.
recording and classifying information.
4) The use of computers in recording business events
A.
has greatly impacted the identification stage of the accounting process.
B.
has made the recording process more efficient.
C.
does not use the same principles as manual accounting systems.
D.
is economical only for large businesses.
5) The private sector organization involved in developing accounting principles is the
A.
Feasible Accounting Standards Body.
B.
Financial Accounting Studies Board.
C.
Financial Auditors' Standards Body.
D.
Financial Accounting Standards Board.
6) The body of theory underlying accounting is not based on
A.
physical laws of nature.
B.
concepts.
C.
definitions.
D.
principles.
7) All of the financial statements are for a period of time except the
A.
income statement.
B.
retained earnings.
C.
statement of cash flows.
D.
balance sheet.
8) Auditing is
A.
the examination of financial statements by a CPA in order to express an opinion on their fairness.
B.
a part of accounting that involves only recording of economic events.
C.
conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.
D.
an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems.
9) After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
A.
the company's bank.
B.
stockholders' equity.
C.
financial statements.
D.
ledger accounts.
10) Posting
A.
should be performed in account number order.
B.
accumulates the effects of journalized transactions in the individual accounts.
C.
is accomplished by examining ledger accounts and seeing which ones need updating.
D.
involves transferring all debits and credits on a journal page to the trial balance.
11) Which of the following statements is true?
A.
Credits decrease assets and increase liabilities.
B.
Debits increase assets and increase liabilities.
C.
Credits decrease assets and decrease liabilities.
D.
Debits decrease liabilities and decrease assets.
12) An account will have a credit balance if the
A.
debits exceed the credits.
B.
credits exceed the debits.
C.
first transaction entered was a credit.
D.
last transaction entered was a credit.
13) On August 13, 2008, Dudbury Enterprises purchased office equipment for $1,000 and office supplies of $200 on account. Which of the following journal entries is recorded correctly and in the standard format?
A) Office Equipment 1,000
Account Payable 1,200
Office Supplies 200
B) Office Equipment 1,000
Office Supplies 200
Account Payable 1,200
C) Accounts Payable 1,200
Office Equipment 1,000
Office Supplies 200
D) Office Equipment 1,000
Office Supplies 200
Accounts Payable 1,200
A.
C
B.
A
C.
B
D.
D
14) Posting of journal entries should be done in
A.
chronological order.
B.
account number order.
C.
alphabetical order.
D.
dollar amount order.
15) After journal entries are posted, the reference column
A.
of the general journal will show "Dr" or "Cr".
B.
of the general journal will be blank.
C.
of the general ledger will show journal page numbers.
D.
of the general ledger will show account numbers.
16) Which one of the following is not a justification for adjusting entries?
A.
Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.
B.
Adjusting entries are necessary to ensure that revenue recognition principles are followed.
C.
Adjusting entries are necessary to ensure that the matching principle is followed.
D.
Adjusting entries are necessary to bring the general ledger accounts in line with the budget.
17) Accounts often need to be adjusted because
A.
there are never enough accounts to record all the transactions.
B.
many transactions affect more than one time period.
C.
management can't decide what they want to report.
D.
there are always errors made in recording transactions.
18) The preparation of adjusting entries is
A.
straight forward because the accounts that need adjustment will be out of balance.
B.
often an involved process requiring the skills of a professional.
C.
optional when financial statements are prepared.
D.
only required for accounts that do not have a normal balance.
19) The adjusted trial balance is prepared
A.
after financial statements are prepared.
B.
before the trial balance.
C.
after adjusting entries have been journalized and posted.
D.
to prove the equality of total assets and total liabilities.
20) If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause
A.
liabilities to be overstated.
B.
revenues to be understated.
C.
accounts receivable to be overstated.
D.
revenues to be overstated.
21) If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause
A.
assets to be understated.
B.
assets to be overstated.
C.
contra-expenses to be overstated.
D.
expenses to be understated.
22) The adjustments entered in the adjustments columns of a worksheet are
A.
not journalized until after the financial statements are prepared.
B.
not journalized.
C.
posted to the ledger but not journalized
D.
journalized before the worksheet is completed.
23) If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has
A.
suffered a net loss for the period.
B.
earned net income for the period.
C.
an error because debits do not equal credits.
D.
to make an adjusting entry.
24) The information for preparing a trial balance on a worksheet is obtained from
A.
general journal entries.
B.
financial statements.
C.
general ledger accounts.
D.
business documents.
25) The income summary account
A.
appears on the income statement.
B.
is a permanent account.
C.
appears on the balance sheet.
D.
is a temporary account.
26) Each of the following accounts is closed to Income Summary except
A.
Revenues.
B.
Expenses.
C.
Dividends.
D.
All of these are closed to Income Summary.
27) The net income (or loss) for the period
A.
is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.
B.
is found by computing the difference between the trial balance totals and the adjusted trial balance totals.
C.
is found by computing the difference between the income statement columns of the worksheet.
D.
cannot be found on the worksheet.
28) Closing entries are journalized and posted
A.
before the financial statements are prepared.
B.
at the end of each interim accounting period.
C.
at management's discretion.
D.
after the financial statements are prepared.
29) Which of the following is a true statement about closing the books of a corporation?
A.
Expenses are closed to the Expense Summary account.
B.
Revenues, expenses, and the dividends account are closed to the Income Summary account.
C.
Revenues and expenses are closed to the Income Summary account.
D.
Only revenues are closed to the Income Summary account.
30) Closing entries may be prepared from all but which one of the following sources?
A.
Adjusted balances in the ledger
B.
Income and Stockholders' equity statements
C.
Balance sheet
D.
Income statement and balance sheet columns of the worksheet
31) In analyzing financial statements, horizontal analysis is a
A.
principle.
B.
theory.
C.
requirement.
D.
tool.
32) Which one of the following is not a tool in financial statement analysis?
A.
Vertical analysis
B.
Ratio analysis
C.
Horizontal analysis
D.
Circular analysis
33) Horizontal analysis is also called
A.
trend analysis.
B.
common size analysis.
C.
linear analysis.
D.
vertical analysis.
34) The importance of a good system of internal controls was recognized with the passage of
A.
the Blue Sky Laws.
B.
the Sarbanes-Oxley Act of 2002.
C.
the Securities and Exchange Act of 1933.
D.
the Securities and Exchange Act of 1994.
35) Which one of the following is not an objective of a system of internal controls?
A.
Enhance the accuracy and reliability of accounting records
B.
Reduce the risks of errors
C.
Safeguard company assets
D.
Overstate liabilities in order to be conservative
36) Internal controls are not designed to safeguard assets from
A.
robbery.
B.
unauthorized use.
C.
natural disasters.
D.
employee theft.
37) Companies that are subject to, but fail to comply with, the Sarbanes-Oxley Act of 2002
A.
may be forced to sell their foreign subsidiaries.
B.
may be subject to fines and officer imprisonment.
C.
may do so legally by obtaining an exemption.
D.
will be automatically dissolved.
38) Certified Public Accounting firms which audit public companies are reviewed by:
A.
The Financial Auditing Standards Board
B.
The Public Company Accounting Oversight Board
C.
The Securities and Exchange Commission
D.
The American Institute of Certified Public Auditors
39) The primary body in the US that has responsibility for Generally Accepted Accounting Principles is:
A.
The Government Accounting Office
B.
The Internal Revenue Service
C.
The Federal Financial Accounting Standards Board
D.
The Securities and Exchange Commission
40) Allowing only the treasurer to sign checks is an example of
A.
establishment of responsibility.
B.
other controls.
C.
documentation procedures.
D.
segregation of duties.
41) Bank errors
A.
are corrected by making an adjusting entry on the depositor's books.
B.
are infrequent in occurrence.
C.
occur because of time lags
D.
must be corrected by debits.
42) If employees are bonded
A.
it is impossible for them to steal from the company.
B.
they have been insured against misappropriation of assets.
C.
it means that they are not allowed to handle cash.
D.
they have worked for the company for at least 10 years.