Final Exam 101 -- MyAccountingLab Test 1 Flashcards
The accounting equation is
Assets = Liabilities + stockholders’ equity
What is NOT an objective of an internal control system
Risk minimization
To compute ending retained earnings on the statement of retained earnings
net income is added to the beginning retained earnings and dividends are subtracted from the beginning retained earnings
A petty cash fund
is established to pay on-the-spot purchases
Notes payable, accounts payable, taxes payable, and salaries payable are all examples of
liabilities
The revenue principle requires that a business record revenue when the business
delivers goods or services to a customer
To be useful, accounting information must have the fundamental qualitative characteristic of
relevance and faithful representation
A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting, when does the doctor recognizes revenue?
in March
Net income is computed as
Revenues - Expenses
If a bookkeeper mistakenly records a disbursement as $36 instead of the correct amount of $63, the error should be shown on the bank reconciliation as a
$27 deduction from the books
When services are performed on account
accounts receivable is increased
The left side of a T-account is always the
Debit Side
Goods purchased on account for future use in the business, such as store supplies, are called
Prepaid Expenses
Which accounts will be closed?
Which account will NOT be closed?
Dividends – will be closed
Service Revenue – will be closed
Utilities Expense – will be closed
Cash – will NOT be closed
What increases retained earnings?
Net Income
Any event that has a financial impact on the business and can be measured reliable is a(n)
transaction
the accounting period that ends on a date other than December 31 is called a
fiscal year
Adjusting entries are
prepared at the end of the accounting period to update certain accounts
When a company borrows cash from the bank
liabilities are increased
The rules for recording accounting transactions include all of the following - bad question
bad question
when preparing the financial statements
assets, liabilities, and stockholders’ equity are reported on the balance sheet
What appears on the balance sheet
Assets, Liaiblities, Stockholders’ equity
The correct data flow from one financial statement tot he next is
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
At the end of the current accounting period, account balances weer as follows: Cash $15,000 Accounts Receivable $20,000 Common Stock $8,000 Retained Earnings $14,000 Liabilities for the period were...
$13,000
Assets = Liabilities + Stockholders’ Equity
or
Assets - Liabilities = Stockhodlers’ Equity
or
Assets - Stockholders’ Equity = Liabilities
Verifiabilitiy means that the information
must be capable of being checked for accuracy
The 3 main components of the fraud triangle are
Motive (pressure)
Opportunity and
Rationalization
A system of handling cash receipts by mail whereby customers remit payments directly to the bank, rather than through the company’s mail is a(n)
lock-box system
When preparing a bank reconciliation, which of the following items should be added to the book balance
EFT receipts
Collection Items
The primary way that fraud is prevented and detected is through a proper system of
internal control
What is a correct statement about GAAP and IFRS?
The FASB and the IASB are working toward convergence of standards
What is a correct statement about the methods of accounting?
GAAP requires accrual accounting
A company received cash in exchange for issuing stock. This transaction increased assets and
Increased equity
The Financial Accounting Standards Board is responsible for establishing
generally accepted accounting principles (GAAP)
Under accrual accounting, revenue is recorded
when the services are performed, regardless of when the cash is received
The acronym GAAP stands for
generally accepted accounting principles (GAAP)
Regarding financial statement elements
revenues are inflows of resources that increase retained earings
A construction company paid $80,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $90,000. When the balance sheet was prepared, the value of the equipment was $83,000. At what amount should the equipment be recorded in the records of the company?
$80,000 – historical principal
What is the allocation of cost of an asset over the asset’s useful life?
Depreciaion
What are the two most common types of fraud impactnig financial statements ?
fraudulent financial reporting
misappropriation of assets
If a company fails to record a sale on account
assets on the balance sheet will be understated
