ACC280 Final Exam 50/50 correct answers

1) The accounting process is correctly sequenced as

A. identification, communication, recording

B. recording, communication, identification

C. identification, recording, communication

D. communication, recording, identification

2) Which of the following is an external user of accounting information?

a. Managers

b. Labor unions

c. Finance directors

d. Company officers

3) Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

A. Identification

B. Communication

C. Recording

D. Analysis

4) Generally accepted accounting principles are

A. income tax regulations of the Internal Revenue Service

B. standards that indicate how to report economic events

C. theories that are based on physical laws of the universe

D. principles that have been proven correct by academic researchers

5) Which one of the following is not an objective of a system of internal controls?

A. overstate liabilities in order to be conservative

B. Enhance the accuracy and reliability of accounting records

C. Reduce the risks of errors

D. Safeguard company assets

6) The private sector organization involved in developing accounting principles is the

A. Feasible Accounting Standards Body

B. Financial Accounting Studies Board

C. Financial Accounting Standards Board

D. Financial Auditors’ Standards Body

7) The entity responsible for setting International Accounting Standards is:

A. The Financial Accounting Foundation

B. The Financial Accounting Standards Board

C. The International Accounting Standards Board

D. The International Monetary Fund

8) Communication of economic events is the part of the accounting process that involves

A. recording and classifying information

B. identifying economic events

C. quantifying transactions into dollars and cents

D. preparing accounting reports

9) GAAP stands for

A. Generally Accepted Auditing Procedures

B. Generally Accepted Accounting Principles

C. Generally Accepted Auditing Principles

D. Generally Accepted Accounting Procedures

10) In recording an accounting transaction in a double-entry system

A. there must only be two accounts affected by any transaction.

B. the number of debit accounts must equal the number of credit accounts.

C. there must always be entries made on both sides of the accounting equation.

D. the amount of the debits must equal the amount of the credits.

11) The four primary financial statements are

A. the general ledger, the working trial balance, the general journal and the balance sheet

B. the balance sheet, the working trial balance, the income statement and the statement of cash flows

C. the cash account, the statement of stockholder’s equity, the year-end worksheet, and the balance sheet

D. the balance sheet, the income statement, the statement of stockholder’s equity and the statement of cash flows

12) Which of the following financial statements is a point in time report?

A. Balance sheet

B. Income statement

C. Statement of stockholder’s equity

D. Statement of cash flows

13) In recording an accounting transaction in a double-entry system,

A. the number of debit accounts must equal the number of credit accounts

B. there must always be entries made on both sides of the accounting equation

C. the amount of the debits must equal the amount of the credits

D. there must only be two accounts affected by any transaction

14) An account will have a credit balance if the

A. credits exceed the debits

B. First transaction entered was a credit

C. debits exceed the credits

D. last transaction entered was a credit

15) Which of the following statements is true?

A. Debits increase assets and increase liabilities.

B. Credits decrease assets and decrease liabilities.

C. Credits decrease assets and increase liabilities.

D. Debits decrease liabilities and decrease assets.

16) On June 1, 2008, Leno Inc. buys a copier machine for its business and finances this purchase with cash and a note. When journalizing this transaction, the company’s accountant will

A. use two journal entries

B. makes a compound entry

C. makes a simple entry

D. list the credit entries first, which is proper form for this type of transaction

17) Posting of journal entries should be done in

A. account number order

B. alphabetical order

C. chronological order

D. dollar amount order

18) Bank errors

A. occur because of time lags

B. must be corrected by debits

C. are infrequent in occurrence

D. are corrected by making an adjusting entry on the depositor’s books

19) A $2,000 advance payment for a 1-year insurance is recorded as

A. Insurance expense $2,000Cash $2,000

B. Cash $2,000Insurance expense $2,000

C. Prepaid insurance $2,000Cash $2,000

D. Prepaid insurance $2,000Insurance expense $2,000

20) Carson Company purchased a 2-year insurance policy for $4,800 on January 1, 2010. The $4,800 was debited to the Prepaid Insurance account. What adjustment should be made to record expired insurance January 31, 2010?

A. Debit insurance expense and credit prepaid insurance for $2,400.

B. Debit prepaid insurance and credit insurance expense for $200.

C. Debit prepaid insurance and credit insurance expense for $400.

D. Debit insurance expense and credit prepaid insurance for $200.

21) Can financial statements be prepared directly from the adjusted trial balance?

A. No, they cannot. The general ledger must be used.

B. Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts.

C. No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger after adjustments are posted. It has no other purpose.

D. Yes, they can because that is the only reason that an adjusted trial balance is prepared.

22) The information for preparing a trial balance on a worksheet is obtained from

A. financial statements

B. general ledger accounts

C. general journal entries

D. business documents

23) Auditing is

A. conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.

B. the examination of financial statements by a CPA in order to express an opinion on their fairness

C. a part of accounting that involves only recording of economic events.

D. an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems.

24) If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has

A. earned net income for the period

B. an error because debits do not equal credits

C. suffered a net loss for the period

D. to make an adjusting entry

25) After all of the account balances have been extended to the income statement columns of the work sheet, the totals of the debit and credit columns are $50,000 and $40,000, respectively. What is the amount of net income or net loss for the period?

A. $10,000 net income

B. $10,000 net loss

C. $50,000 net income

D. $90,000 net income

26) The income summary account

A. is a permanent account

B. appears on the balance sheet

C. appears on the income statement

D. is a temporary account

27) Joe is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

A. establishment of responsibility is violated.

B. documentation procedures are violated.

C. independent internal verification is violated.

D. segregation of duties is violated.

28) Which of the following is an income statement account?

A. Revenue

B. Salaries payable

C. Cash

D. Accounts payable

29) Adjusting entries are required

A. when revenues are recorded in the period in which they are earned.

B. when the company’s profits are below the budget.

C. when expenses are recorded in the period in which they are incurred.

D. because some costs expire with the passage of time and have not yet been journalized.

30) Which of the following is a balance sheet account?

A. Sales revenue

B. Salaries payable

C. Salaries expense

D. Service revenue

31) Allowing only the treasurer to sign checks is an example of

A. establishment of responsibility

B.  Documentation procedures

C. other controls.

D. segregation of duties

32) 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. financial statements

B. the company’s bank

C. stock holders’ equity

D. ledger accounts

33) In order to close the dividends account, the

A. income summary account should be debited

B. income summary account should be credited

C. retained earnings account should be credited

D. retained earnings account should be debited

34) The importance of a good system of internal controls was recognized with the passage of

A. the Securities and Exchange Act of 1933

B the Securities and Exchange Act of 1994

C the Sarbanes-Oxley Act of 2002

D. the Blue Sky Laws

35) All of the financial statements are for a period of time except the

A. statement of cash flows.

B. income statement

C. retained earnings

D. balance sheet

36) In preparing closing entries,

A. each revenue account will be credited

B. each expense account will be credited

C. the retained earnings account will be debited if there is net income for the period

D. the dividends account will be debited

37) Profit margin is a measure of

A. liquidity

B. profitability

C. solvency

D. risk

38) Working capital is

A. net income divided by sales

B. current assets minus current liabilities

C. current assets divided by current liabilities

D. total debt divided by total assets

39) An account will have a credit balance if the

A. last transaction entered was a credit.

B. First transaction entered was a credit.

C. credits exceed the debits.

D. debits exceed the credits.

40) Internal control is defined, in part, as a plan that safeguards

A. all balance sheet accounts

B. assets

C. liabilities

D. capital stock

41) The private sector organization involved in developing accounting principles is the

a. Financial Auditors’ Standards Body.

b. Feasible Accounting Standards Body.

c. Financial Accounting Studies Board.

d. Financial Accounting Standards Board.

42) Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of

A. inadequate internal control

B. duplication of effort

C. external verification

D. segregation of duties

43) If a company has overdrawn its bank balance, then

A. it cannot be detected by observing the balance of the cash account.

B. the cash account debits will exceed the cash account credits.

C. its cash account will show a debit balance.

D. its cash accounts will show a credit balance

44) Certified Public accounting firms that audit public companies are reviewed by

A. The Securities and Exchange Commission

B. The American Institute of Certified Public Auditors

C. The Public Company Accounting Oversight Board

D. The Financial Auditing Standards Board

45) The body of theory underlying accounting is not based on

A. definitions

B. physical laws of nature

C. concepts

D. principles

46) The entity responsible for setting International Accounting Standards is

A. The Financial Accounting Standards Board

B. The International Monetary Fund

C. The International Accounting Standards Board

D. The Financial Accounting Foundation

47) An employee authorized to sign checks should not record

A. cash disbursement transactions

B. sales transactions

C. owner cash contributions

D. mail receipts

48) In order to close the dividends account, the

A. retained earnings account should be debited.

B. retained earnings account should be credited.

C. income summary account should be credited.

D. income summary account should be debited.

49) Which one of the following is not an objective of a system of internal controls?

a. Safeguard company assets

b. Overstate liabilities in order to be conservative

c. Enhance the accuracy and reliability of accounting records

d. Reduce the risks of errors

50). Internal controls are concerned with

A. only manual systems of accounting

B. the extent of government regulations

C. safeguarding assets

D. preparing income tax returns