1. Acc 280 Final Exam
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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.
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2. 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.
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3. 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 (dr) 1,000
Account Payable (cr) 1,200
Office Supplies (cr) 200
B. Office Equipment (cr) 1,000
Office Supplies(dr) 200
Account Payable (dr) 1,200
C. Accounts Payable (dr) 1,200
Office Equipment (dr) 1,000
Office Supplies (cr) 200
D. Office Equipment(dr) 1,000
Office Supplies (dr) 200
Accounts Payable (cr) 1,200
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".
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4. 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.
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5. 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.
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6. 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.
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7. 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.
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8. 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.
43. The use of computers in recording business events
a. has made the recording process more efficient.
b. does not use the same principles as manual accounting systems.
c. has greatly impacted the identification stage of the accounting process.
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9. d. is economical only for large businesses.
44. Which of the following is an external user of accounting information?
a. Labor unions
b. Finance directors
c. Company officers
d. Managers
45. The origins of accounting are generally attributed to the work of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
e.
46. 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.
47. Which one of the following is not a part of an account?
a. Credit side
b. Trial balance
c. Debit side
d. Title
48. Credits
a. decrease both assets and liabilities.
b. decrease assets and increase liabilities.
c. increase both assets and liabilities.
d. increase assets and decrease liabilities.
49. A debit to an asset account indicates
a. an error.
b. a credit was made to a liability account.
c. a decrease in the asset.
d. an increase in the asset.
50. The normal balance of any account is the
a. left side.
b. right side.
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10. c. side which increases that account.
d. side which decreases that account.
51. The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and in a ledger.
d. first as a revenue and then as an expense.
52. An accounting time period that is one year in length, but does not begin on January 1, is
referred to as
a. a fiscal year.
b. an interim period.
c. the time period assumption.
d. a reporting period.
53. Management usually desires ________ financial statements and the IRS requires all businesses
to file _________ tax returns.
a. annual, annual
b. monthly, annual
c. quarterly, monthly
d. monthly, monthly
54. Which of the following time periods would not be referred to as an interim period?
a. Monthly
b. Quarterly
c. Semi-annually
d. Annually
55. Which of the following are in accordance with generally accepted accounting principles?
a. Accrual basis accounting
b. Cash basis accounting
c. Both accrual basis and cash basis accounting
d. Neither accrual basis nor cash basis accounting
56. The matching principle states that expenses should be matched with revenues. Another way
of stating the principle is to say that
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11. a. assets should be matched with liabilities.
b. efforts should be matched with accomplishments.
c. dividends to stockholders should be matched with stockholders'
investments.
d. cash payments should be matched with cash receipts.
57. 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.
58. Closing entries are necessary for
a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.
59. A post-closing trial balance will show
a. only permanent account balances.
b. only temporary account balances.
c. zero balances for all accounts.
d. the amount of net income (or loss) for the period.
60. The step in the accounting cycle that is performed on a periodic basis (i.e., monthly,
quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.
61. A current asset is
a. the last asset purchased by a business.
b. an asset which is currently being used to produce a product or service.
c. usually found as a separate classification in the income statement.
d. an asset that a company expects to convert to cash or use up within one
year.
62. The standards and rules that are recognized as a general guide for financial reporting are
called
a. generally accepted accounting standards.
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12. b. generally accepted accounting principles.
c. operating guidelines.
d. standards of financial reporting.
63. "Generally accepted" in the phrase generally accepted accounting principles means that the
principles
a. are proven theories of accounting.
b. have substantial authoritative support.
c. have been approved by the Internal Revenue Service.
d. have been approved for use by the managements of business firms.
64. The conceptual framework developed by the Financial Accounting Standards Board
a. was approved by a vote of all accountants.
b. are rules that all accountants must follow.
c. is viewed as providing a constitution for setting accounting standards for
financial reporting.
d. is legally binding on all accountants.
65. Accounting principles must be
a. proven and tested.
b. hypothesized and theorized.
c. developed or decreed.
d. universally accepted.
66. FASB has had the responsibility for developing accounting principles since the early
a. 1900s.
b. 1920s.
c. 1940s.
d. 1970s.
67. Which one of the following is primarily interested in the liquidity of a company?
a. Federal government
b. Stockholders
c. Long-term creditors
d. Short-term creditors
68. Which one of the following is not a characteristic generally evaluated in analyzing financial
statements?
a. Liquidity
b. Profitability
c. Marketability
d. Solvency
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13. 69. In analyzing the financial statements of a company, a single item on the financial statements
a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
c. is significant only if it is large.
d. should be accompanied by a footnote.
70. Short-term creditors are usually most interested in evaluating
a. solvency.
b. liquidity.
c. marketability.
d. profitability.
71. Long-term creditors are usually most interested in evaluating
a. liquidity and solvency.
b. solvency and marketability.
c. liquidity and profitability.
d. profitability and solvency.
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