Accounting Basics

Question 1

A debit to a liability account will _____________ (increase, decrease) the normal balance in the account.

Answer 1

decrease

Question 2

A list of all of the names of the accounts in the general ledger (without account balances) is a ________ of accounts.

Answer 2

chart

Question 3

A listing of all of the accounts available in the general ledger is a __________ of accounts.

Answer 3

chart

Question 4

A long-term asset used in a business that is not depreciated.

Answer 4

Land

Question 5

A major element of the income statement that reports fees earned and sales of products.

Answer 5

revenues

Question 6

A major element of the income statement that reports the costs that have been used in order to obtain revenues during the accounting period.

Answer 6

expenses

Question 7

A manufacturer’s or a merchandiser’s goods on hand are reported in this asset account.

Answer 7

Inventory

Question 8

Accounting software facilitates recording business _______________.

Answer 8

transactions

Question 9

Allocating the cost of a long-lived asset to expense over its useful life is known as __________________.

Answer 9

depreciation

Question 10

Amounts owed to employees and suppliers are reported as _______________ on the balance sheet.

Answer 10

liabilities

Question 11

An entry on the right side of a T-account.

Answer 11

Credit

Question 12

An entry to the left-side of an account.

Answer 12

Debit

Question 13

Because the accounting system used in the U.S. requires at least one debit and one credit, we refer to the accounting system as _____________-entry.

Answer 13

Double

Question 14

Cash and other assets that will turn to cash within one year of the balance sheet date are reported as _____________ assets.

Answer 14

current

Question 15

Costs that are matched with revenues in the current period.

Answer 15

Expenses

Question 16

Depreciation is an allocation technique; it is not a ________________ technique.

Answer 16

valuation

Question 17

Every transaction that gets recorded in the general ledger involves ______ or more accounts.

Answer 17

two

Question 18

Fees that a company has received from its customers in advance of being earned are deferred to the balance sheet account ____________ Fees.

Answer 18

Unearned

Question 19

GAAP is the acronym for _______________ accepted accounting principles.

Answer 19

Generally

Question 20

Generally accepted accounting guidelines are referred to as _______________.

Answer 20

principles

Question 21

Generally, assets are reported at their historical ______ or less.

Answer 21

cost

Question 22

If a corporation’s stock is publicly traded, its net income must also be reported on the income statement as earnings per ___________.

Answer 22

share

Question 23

In the case of two acceptable alternatives, this guideline directs the accountant to select the alternative that results in less profit and less asset (or more liability).

Answer 23

conservatism

Question 24

Insurance premiums that had been paid in advance but have expired in the current period should be reported in the current period as Insurance __________.

Answer 24

expense

Question 25

Known as the book of original entry, it lists transactions in order by date.

Answer 25

Journal

Question 26

Most liability accounts have this word as part of their title.

Answer 26

Payable

Question 27

One part of stockholders’ equity is _____________ earnings.

Answer 27

retained

Question 28

Sales minus the cost of goods sold is the __________ profit.

Answer 28

gross

Question 29

SG&A is the acronym for ____________, general and administrative expenses.

Answer 29

Selling

Question 30

Some people refer to the income statement as the profit and ______ statement.

Answer 30

loss

Question 31

Sometimes inventory is reported at an amount that is __________ than cost.

Answer 31

lower

Question 32

Stockholders’ ________ is the difference between a corporation’s assets and liabilities.

Answer 32

equity

Question 33

The ‘books’ of the company that contains all of the accounts is the general _______________.

Answer 33

ledger

Question 34

The _______ to the financial statements will disclose the company’s significant accounting policies.

Answer 34

notes

Question 35

The ________-basis of accounting requires that revenues be reported on the income statement when they are earned and expenses be reported when they are incurred.

Answer 35

accrual

Question 36

The accounting equation is __________.

Answer 36

Assets = Liabilities + Owner’s (Stockholders’) Equity

Question 37

The accounting equation remains in balance because of __________-entry accounting.

Answer 37

double

Question 38

The accounting guideline that prevents assets from being reported at amounts greater than their cost is the __________ principle.

Answer 38

cost

Question 39

The accounting term used to describe an entry made on the left side of a T-account.

Answer 39

Debit

Question 40

The accrual basis of accounting is more effective than the cash basis in reporting the ________________ of a business.

Answer 40

profitability

Question 41

The accruing of expenses that pertain to the revenues being reported is required because of the ___________ principle.

Answer 41

matching

Question 42

The amounts a company owes its suppliers are reported in the account Accounts __________.

Answer 42

payable

Question 43

The balance sheet classification that reports the obligations of the company.

Answer 43

Liabilities

Question 44

The balance sheet reports amounts as of a ________ in time.

Answer 44

point

Question 45

The balance sheet reports amounts that apply at a particular ____________ in time.

Answer 45

point

Question 46

The basic accounting ______________ include cost, matching, full disclosure, etc.

Answer 46

principles

Question 47

The basic accounting ______________ is Assets = Liabilities + Owner’s Equity.

Answer 47

equation

Question 48

The basis or method of accounting that is less effective than the accrual basis in measuring profitability.

Answer 48

Cash

Question 49

The basis or method of accounting where expenses are reported as they are incurred rather than when they are paid.

Answer 49

Accrual

Question 50

The book value of an asset or liability is also known as the ________________ amount.

Answer 50

Carrying

Question 51

The bottom line of the income statement is ______ income.

Answer 51

net

Question 52

The cost of equipment minus its accumulated depreciation is its _________ or carrying value.

Answer 52

book

Question 53

The entry to record depreciation is first entered in the ___________ journal.

Answer 53

general

Question 54

The financial statement also known as the statement of financial position is the _________ sheet.

Answer 54

balance

Question 55

The financial statement that explains how cash and cash equivalents have changed during an accounting period is the statement of ________ flows.

Answer 55

cash

Question 56

The financial statement that reports revenues, gains, expenses, and losses is the _________ statement.

Answer 56

income

Question 57

The financial statement that reports the financial position of a company as of an instant or point in time is the ________________ sheet.

Answer 57

balance

Question 58

The financial statement that reports the revenues and expenses of a company for a period of time is the ________________ statement.

Answer 58

income

Question 59

The financial statements that are issued between a company’s annual financial statements are referred to as _____________ financial statements.

Answer 59

interim

Question 60

The heading of the income statement and the cash flow statement indicates the _________ of time covered by the financial statement.

Answer 60

period

Question 61

The income statement and the statement of cash flows report amounts covering a ___________ of time.

Answer 61

period

Question 62

The inventory cost flow assumption that results in less reported profits and taxable income during years of continuously rising costs is _______-in, first-out.

Answer 62

last

Question 63

The minimum number of accounts affected when each transaction is recorded.

Answer 63

Two

Question 64

The net income of a company is sometimes referred to as the ____________ line (of the income statement).

Answer 64

bottom

Question 65

The owner’s equity section of a corporation’s balance sheet is known as shareholders equity or _______________________ equity.

Answer 65

stockholders

Question 66

The required financial statements include the balance sheet, the income statement, and the statement of cash __________.

Answer 66

flows

Question 67

The systematic allocation of the cost of equipment and buildings used in a business from the balance sheet to the income statement over the useful life of the asset.

Answer 67

Depreciation

Question 68

The title of the asset account that reports the unexpired cost of insurance premiums that have already been paid is _____________ Insurance.

Answer 68

prepaid

Question 69

The title of the liability account that reports amounts that were received by the company before they were earned is ________________ Revenues.

Answer 69

Unearned

Question 70

The type of balance sheet account used to report cost of prepaid insurance premiums that have not expired as of the balance sheet date.

Answer 70

Asset

Question 71

This component of Property, Plant & Equipment is not depreciated.

Answer 71

Land

Question 72

When a company provides a service and allows the customer to pay in 30 days, the account to be debited is Accounts _____________________.

Answer 72

Receivable

Question 73

When a sale is made on credit, it will also increase the company’s Accounts ____________.

Answer 73

Receivable