Accounting Concepts

Question 1

Gross revenues refer to the total amount of sales made by a company during an accounting period after deductions are made. (T/F)

Answer 1

False

Question 2

Which of the following statements is false regarding the statement of cash flows?
A. There are 3 types of cash flows: cash flows from operating activities, from investing activities, and from financing activities
B. The statement of cash flows is often used in tandem with the income statement to determine a company’s true financial performance
C. The statement of cash flows reports a company’s sources and uses of cash during the accounting period
D. The statement of cash flows shows a company’s financial position at a specific point in time

Answer 2

D

Question 3

When looking at a set of financial statements on which statement would you find notes payable, current assets, retained earnings, and acc depreciation?
A. Statement of cash flows
B. Income statement
C. Statement of changes in owners equity
D. Balance sheet

Answer 3

D

Question 4

The accounting framework that an entity follows depends on the rules of the jurisdiction in which the entity operates. T/f

Answer 4

T

Question 5

Delta, a CFE, was hired to serve as an expert accounting witness in a case of alleged financial statement fraud. As part of her expert testimony, delta explained how under IFRS, management must make every effort to ensure that the company’s financial statements are complete, neutral, and free from error, delta was explains the concept of:
A. Comparability
B.faithful representation
C. Going concern
D. None

Answer 5

B

Question 6

Which if the following is the correct accounting model?
A. A=lia+oe
B. A=lia-oe
C. A+lia=oe
D. None

Answer 6

A

Question 7

The statement of cash flows includes the following categories: cash flows from strategic activities, cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. T/f

Answer 7

F

Question 8

Calculating _______ determines a company’s earnings for an accounting period by deducting its operating expenses from gross profit.
A. Gross revenues
B. Net profit
C. Net sales
D. Cogs

Answer 8

B

Question 9

If a fraudster wants to conceal the removal of a liability from the books, which of the following actions will not balance the accounting equation?
A. Increasing a different liability
B. Increasing revenue
C. Increasing owners equity
D. Increasing an asset

Answer 9

D

Question 10

As a sale is made, the appropriate charges for cogs, or other expenses directly corresponding to the sale, should be recorded in the same accounting period. T/f

Answer 10

T

Question 11

Chapman inc. has always used the fifo inventory valuation method when calculating its cogs. This is also the standard inventory valuation method for other comparable entities in Chapman industry. Chap and controlled wants to change to the weighted- average cost method bc it will make chaplains net income appear much larger than the fifo valuation method. This is reflected in which of the qualitative characteristics of financial reporting?
A. Comparability
B. Going concern
C. Valuation
D. Relevance

Answer 11

A

Question 12

David runs a local catering company. He keeps his books on a calendar year and uses the accrual basis of accounting. In December of Y1, a customer placed an order with him to cater the food for a party that would take place feb of Y2. The contract was signed and the balance was paid in full when the order was placed in December. When should David report the revenue from this party and the associated expenses of catering it?
A. It does not matter bc it is up to David to decided whether he reports the revenue and expenses in Dec or Feb
B. The revenue should be recorded in Dec when David received the cash, and the expenses should be recorded in feb after the party takes place
C. Both the revenue and expenses should be recorded in Dec
D. Both the revenue and expenses should be recorded in feb

Answer 12

D

Question 13

Which of the following appears on the balance sheet?
A. Current assets
B. Expenses
C. Revenues
D. Cogs

Answer 13

A

Question 14

Generally speaking, ____ is the proper basis for initially recording a piece of equipment on a company’s books.
A. Current market value
B. Historical cost
C. Appraised value
D. Eat replacement value

Answer 14

B

Question 15

If a fraudster wants to conceal the misappropriation of cash, which of the following actions will or result in a balanced accounting equation?
A. Decreasing another asset
B. Reducing owners equity
C. Decreasing a liability
D. Creating an expense

Answer 15

A

Question 16

Which of the following is true regarding the balance sheet?
A. Balance sheets are usually manipulated by understating assets or overstating liabilities
B. The accounts that appear on the balance sheet include revenues and expenses
C. The balance sheet shows the financial performance of a company over a certain period of time, such as a quarter or a year
D. Assets are generally presented in the balance sheet in order of liquidity

Answer 16

D

Question 17

I’m the accrual basis accounting, revenues are generally recognized when goods are delivered or services are provided to a customer. T/f

Answer 17

T

Question 18

According to the going concern disclosure requirements, if there is substantial doubt about a company’s ability to fulfill its financial obligations over a reasonable period of time, it must be disclosed in the company’s financial statements. T/f

Answer 18

T

Question 19

The assumption that a business will continue indefinitely is reflected in the accounting concept of:
A. Going concern
B. Comparability
C. Objective evidence
D. Relevance

Answer 19

A

Question 20

Entries to the left side of an account are referred to as credits while entries to the right side of an account are referred to as debits. T/f

Answer 20

F

Question 21

Which accounting principle requires corresponding expenses and revenue to be recorded in the same accounting period?
A. Going concern
B. Comparability
C. Matching
D. Faithful representation

Answer 21

C

Question 22

The statement in owners equity acts as the connecting link between which 2 financial statements?
A. Income statement and balance sheet
B. Income statement and statement of cash flows
C. Balance sheet and statement of retained earnings
D. Statement of cash flows and balance sheet

Answer 22

A

Question 23

Revenue should not be recognized for work that is to be performed in subsequent accounting periods, even though the work might currently be under contract. T/f

Answer 23

T

Question 24

Assets, liabilities, and owners equity are all items that appear in a company’s balance sheet. T/f

Answer 24

T

Question 25

US GAAP and IFRS are considered rules based accounting frameworks. T/f

Answer 25

F

Question 26

If compliance with GAAP would be significantly more expensive than a different method that is not GAAP, use if N alternative method is permitted. T/f

Answer 26

F

Question 27

The management at a publicly traded company may choose which set of financial reporting practices it wants its company to follow. T/f

Answer 27

F

Question 28

Which of the following could be used to balance the accounting equation is cash were stolen?
A. Reducing a liability
B. Increasing another asset
C. Reducing revenue
D. All

Answer 28

D

Question 29

The qualitative financial reporting characteristic of comparability prohibits any change in an accounting principle previously employed. T/f

Answer 29

F

Question 30

Which of the following types of accounts are increased by credits?
A. Revenue
B. Liability
C. Owner equity
D. All

Answer 30

D

Question 31

It is considered acceptable practice to deviate from GAAP in which of the following circumstances?
A. There is concern that assets or income would be overstated
B. Following GAAP would produce misleading results
C. It is common practice in the industry to give particular transactions a specific accounting treatment
D. All

Answer 31

D

Question 32

Which of the following statements is true regarding the statement of cash flows?
A. The statement of cash flows shows a company’s financial position at a specific point in time
B. The statement of cash flows is often used in tandem with the income statement to determine a company’s true financial performance
C. The statement of cash flows is not always necessary bc most companies operate under cash basis accounting rather than accrual basis accounting
D. There are 4 types of cash flows: operating, investing, financing, and revenue

Answer 32

B

Question 33

Julia runs a printing company and has an antique printing press that she uses in her business. She purchased the press from a friend for 5000. Similar presses are selling on the market today for about 8000. Julia has a colleague who recently paid 9000 for and antique printing press. According to the historical cost basis of asset measurement, how much should Julia initially record the printing press for on her books?
A. 5000
B. 9000
C. 8000
D. 3000

Answer 33

A

Question 34

Which of the following is an acceptable justification for a departure from GAAP?
A. Departing from GAAP would make the company appear more profitable
B. Following GAAP is significantly more expensive than using an alternative method
C. The literal application of GAAP would result in misleading financial statements
D. None

Answer 34

C

Question 35

Most companies present which if the following as the first line item on the income statement?
A. Net profit
B. Operating expenses
C. The he cash balance
D. Net sales

Answer 35

D

Question 36

The _____ details how much profit or loss a company earned over a particular period of time.
A. Balance sheet
B. Statement of cash flows
C. Statement of changes in owners equity
D. Income statement

Answer 36

D

Question 37

Which of the following statements is true regarding gross profit?
A. Gross profit is another term for net income
B. Gross profit is equal to revenues minus operating expenses
C. Gross profit is the top line of the income statement
D. Gross profit is equal to net sales minus cogs

Answer 37

D

Question 38

Which of the following is false regarding cash basis accounting?
A. Cash basis accounting focuses on tracking a company’s future cash flow
B. Cash basis accounting is simpler to use than accrual basis accounting
C. Expenses are recorded in the accounting system as soon as they are paid
D. Revenues are recorded in the accounting system when a company receives cash

Answer 38

A

Question 39

Which of the following types of accounts are decrease by debits?
A. Revenue
B. Owners equity
C. Liabilities
D. All

Answer 39

D