HUI 58.doc

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1. The primary objective of financial accounting is: (Points : 5)
To serve the decision-making needs of internal users
To provide financial statements to help external users analyze an organization’s activities
To monitor and control company activities
To provide information on both the costs and benefits of looking after products and services
2. A credit is used to record: (Points : 5)
A decrease in an asset account
A decrease in an unearned revenue account
A decrease in a revenue account
An increase in an expense account
3. Net Income (Points : 5)
is debit equity
equals assets minus liabilities
is the excess of revenues over expenses
represents owner’s claims against assets
4. An adjusting entry could be made for each of the following EXCEPT: (Points : 5)
Prepaid expenses
Depreciation
Owner withdrawals
Unearned revenues
5. The accounting equation is: (Points : 5)
Assets = Liabilities + Equity
Revenue – Expenses = Net Income
Debits = Credits
Revenue = Equity
6. A subsidiary ledger (Points : 5)
Includes transactions not covered by special journals
Is a listing of all the accounts of a business
Is a listing of individual accounts and amounts with a common characteristic
Is also called a special journal
7. When posting, you transfer information from a(n) to a(n) . (Points : 5)
Balance sheet, income statement
Journal, ledger
Journal, income statement
Income statement, ledger
8. The closing process is necessary in order to: (Points : 5)
Calculate net income or net loss for an accounting period.
Ensure that all permanent accounts are closed to zero at the end of each accounting period.
Ensure that the company complies with state laws.
Ensure that net income or net loss and owner withdrawals for the period are closed into the owner’s capital account.
9. Accrued revenues: (Points : 5)
at the end of one accounting period often result in cash receipts from customers in the next period.
at the end of one accounting period often result in cash payments in the next period.
are also called unearned revenues.
are listed on the balance sheet as liabilities
10. The company paid $1,600 cash for rent of office space for the month. The journal entry is: (Points : 5)
Debit cash $1,600 and credit office space $1,600
Debit rent expense $1,600 and credit cash $1,600
Debit office space $1,600 and credit cash $1,600
Debit cash $1,600 and credit rent expense $1,600
11. The accounts receivable ledger: (Points : 5)
is for storing transaction data for customers
is for storing transaction data for individual customers
is for storing transaction data for individual creditors
is for storing transaction data for creditors
12. When the cost of an item is increasing, which method of inventory valuation will cause the highest net income? (Points : 5)
Specific identification
Weighted average
LIFO
FIFO
13. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold? (Points : 5)
$128
$124
$120
$130
14. Currently in the US accounting standards for private-sector companies are set by: (Points : 5)
Historical cost
FASB
SEC
GAAP
15. Which of the following is responsible for the internal controls and ethics policies of a company: (Points : 5)
Internal Auditors
External Auditors
Management
Employees that have been with the company for over 10 years
16. On a bank reconciliation, the amount of an unrecorded bank service charge should be: (Points : 5)
Added to the book balance of cash
Deducted from the book balance of cash
Added to the bank balance of cash
Deducted from the bank balance of cash
17. A properly designed internal control system: (Points : 5)
Lowers the company’s risk of loss
Insures profitable operations
Eliminates the need for an audit
Requires the use of non-computerized systems
18. Adjusting entries (Points : 5)
Affect only income statement accounts
Affect only balance sheet accounts
Affect both income statement and balance sheet accounts
Affect only cash flow statement accounts
19. Prepaid expenses, accumulated depreciation, and unearned revenues would all be reported on the: (Points : 5)
Income statement
Statement of cash flows
Balance sheet
Statement of owner’s equity
20. The accounting concept that requires financial statement information to be supported by independent, unbiased evidence other than someone’s belief or opinion is: (Points : 5)
Monetary unit assumption
Going-concern assumption
Time-period assumption
Objectivity