Introduction to Accounting and Recording Transactions
Lead Author(s): Saylor Academy
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This question pack looks at introductory accounting concepts, covering balance sheets, revenue recognition, the accounting cycle and more.
This content is licensed under the Creative Commons Attribution 3.0 Unported License.
Financial reporting rules for financial accounting are set forth by which of the following?
International Standards Committee
Financial Accounting Standards Board
United States Federal Reserve
Which of the following covers a stated period of time and reports the company's revenues, expenses, and net income?
Statement of cash flows
Statement of retained earnings
______________ accounting involves preparing reports for external use, while ______________ accounting provides information for internal management.
All of the following are types of assets EXCEPT:
Complete the following statement. Under the revenue recognition principle, revenues should be earned and realized:
before they are spent.
before they are recognized.
after they are recognized.
after they are spent.
Expenses must match with related expenses, in accordance with which of the following principles?
Cash accrual principle
Happy Burger purchases a $40,000 food truck to expand its business. The owner calculates the useful life of the food truck to be 15 years, after which it will be completely depreciated. In this scenario, depreciation would be considered a(n) ______________ item.
In T‑accounts, credits are listed ______________, while debits are listed ______________.
on the right side, on the left side
on the left side, on the right side
next to the balance, below the balance
above the balance, next to the balance
You collect $1,000 in cash from a customer. This entry would be recorded as a ______________ on the ______________ side of a T‑account.
The owner's interest in a corporation would be recorded under what category on the Balance Sheet?
Things of value owned by a business are also known as?
What are the two types of adjusting entries commonly identified in financial accounting?
Deferred and accrued items
Accrued and depreciated items
Deferred and prepaid items
Depreciated and prepaid items
Which of the following accurately presents the fundamental accounting equation?
Assets + Liability + Equity = Capital
Assets ‑ Liability = Equity
Assets + Liability ‑ Equity = Net Income
Assets = Liability + Equity
Which of the following best defines a liability?
Expenses paid by a business
Pre‑paid payments received by a business
Debt owed by a business
Stock issued by a business
Which of the following contribute to shareholder's equity?
Cash paid in by investors
Both A and B
Which of the following is an example of a liability?
Which of the following are steps in the accounting cycle?
Analyze transactions, journalize transactions, and post entries
Post entries, track adjustments, and record post‑closing information
List source documents, correct transactions, and calculate post‑closing entries
Post transactions, track source documents, and balance entries
The fundamental difference between indirect and direct cash flow statements is how ______________ activities are recorded.
Income and expense accounts are examples of what type of account, and why?
Temporary accounts, because they are closed at the end of an accounting period
Temporary accounts, because they are only recorded once
Permanent accounts, because the amounts are accrued over time
Permanent accounts, because they are carried over from one accounting cycle to the next
Sip and Slurp is a local convenient store that has opened its first store. The owners have decided to record all transactions when they occur, even if cash is not exchanged. What type of accounting system is being used by this company?
To prepare a balance sheet from T‑accounts, you should do which of the following?
Add all account balances, and keep the running total.
Use the trial balances from all T‑accounts related to balance sheet items.
Only use the trial balances for revenue accounts.
Only use the trial balances for expense accounts.
To prepare an income statement from T‑accounts, you should do which of the following?
Close revenue accounts with credit balances to a special temporary account.
Close revenue accounts with debit balances to a special temporary account.
Close expense accounts with debit balances to a special temporary account.
Both A and C
Which of the following best describes what pro forma statements are and what information they convey?
Pro forma statements are public financial statements used to determine a company's profitability.
Pro forma statements are estimated financial statements that are often used for business plans or to forecast future cash requirements.
Pro forma statements are historical records used to determine the company's debt to equity ratio.
Pro forma statements are abbreviated balance sheets and only given to the company's owners.
Which of the following would be a transaction recorded on the statement of cash flows?
A company receives $150,000 in credit card late payments for the current fiscal year.
A company writes off over $1 million in bad debt expenses.
A company spends $10,000 to acquire a competitor company.
A company receives a tax notice from the IRS to pay $15,000 in back taxes.
Which scenario is an example that may lead to a non‑recurring item on the income statement?
A company purchases a new van paid in cash.
A company acquires a rival and offers more than the asking price.
Two companies merge and open a new warehouse.
A company decides to discontinue a product line and closes several factories as a result.
XYZ Enterprise had the following balances on its statement of cash flows. What can be concluded about its business activities between 2011 and 2012?
The company’s operations are in decline.
The company invested heavily in a new million dollar warehouse.
The company took out a loan for $750,450.
The company sold their large equipment for $250,000 in 2011.
When closing T‑accounts, which of the following steps must be taken?
Add all account balances, and keep the running total.
Reduce only revenue accounts to zero, and keep expense balances unchanged.
Reduce only dividend account balances to zero, and keep expense and revenue balances unchanged.
Reduce revenue, expense, and dividend account balances to zero.
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Course Designer: Llacey Simmons