Pre-Assessment Flashcards
What is an example of a macro factor in planning a budget?
Interest rates
Which organization is focused on developing generally accepted accounting principles (GAAP) within the United States?
Financial Accounting Standards Board (FASB)
Which statement is a financial accounting statement?
Income statement
What is a benefit of adopting a single set of international accounting standards?
More uniform financial reporting among international companies
What is a drawback of the United States using International Financial Reporting Standards (IFRS)?
It would cost U.S. companies time and money in the short term to adopt.
What must an accountant record when journalizing a transaction?
Description of the transaction
Which financial statement is used to ensure that all debits and credits balance?
Trial balance
Which account balance is entered in the balance sheet columns from the adjusted trial balance?
Accounts receivable
Which step should an accountant perform next after analyzing source documents to determine their effects on the basic accounting equation?
Journalize the transactions
How is a worksheet used?
To help prepare adjusting entries and financial statements
Which accounts do closing entries move to retained earnings?
Expense and revenue
Why does a stockholder’s equity need to be completed prior to preparing a balance sheet?
The amount of ending balance from the statement of stockholder’s equity must be presented on the balance sheet.
Which account appears on a post-closing trial balance?
Capital stock
How can accounting technology affect small businesses?
By simplifying the daily posting of routine transactions with accounting packages
A company has a lease that requires the company to pay its annual office space rent in advance on December 31 of each year. On a quarterly basis, this expense totals $10,000.
How should the rent expense be recorded on the firm’s books in the following year to account for this transaction?
It should be recorded as a decrease of $40,000 in the asset accounts under prepaid rent.
When are revenue and expenses recognized in accrual basis accounting?
Revenue is recognized when earned, and expenses are recognized when incurred.
Which account will be a part of the adjusting journal entry to record the interest that has been incurred, but not paid, on a note payable?
Interest payable
What information is contained in the balance sheet and the income statement?
The balance sheet contains assets, liabilities, and stockholder’s equity, and the income statement contains revenues and expenses.
Which statement reflects effective internal controls?
Each check should be matched to an approved invoice or payment authorization.
A firm sells a truck to a customer for $35,000, and the customer is required to pay for the vehicle within 90 days.
How is this purchase entered on the firm’s accounts receivable ledger?
$35,000 debit
Which method is used when calculating uncollectible accounts expense using the income statement approach?
Percentage of net credit sales
A firm has the following assets and liabilities:
Cash: $10,500
Accounts Receivable: $35,000
Allowance for Doubtful Accounts: $2,000
Accounts Payable: $8,000
After preparing a classified balance sheet, what should the firm’s total assets and liabilities be?
Total assets of $43,500, and total liabilities of $8,000
What should a journal entry include when a company purchases inventory on account?
Increase in liabilities
An examination of Company A’s finances shows assets of $50,000 and stockholder’s equity of $45,000.
What are the liabilities for Company A?
$5,000
A corporation paid $5,000 in gross pay to its employees for the current month’s payroll.
Which entry is needed?
Debit wages expense $5,000
A company has four employees who are paid every two weeks. Each biweekly payroll has a total expense of $7,500 and covers ten working days. The company accountant is completing the bookkeeping for January, which includes four days of the current pay period.
Which adjustment will need to be entered for these accruals?
Credit salary payable for $3,000
What determines the frequency of deposits of federal income taxes withheld and Social Security and Medicare taxes?
Amount owed by the firm
Which concept is measured by the current ratio?
Liquidity
Which characteristic of an organization is assessed using financial statement analysis?
Solvency
How can potential creditors use financial statement analysis?
To determine a company’s ability to pay short-term debts
What does horizontal analysis evaluate?
Increases or decreases in financial statement information over a period of time
Which financial statement(s) contain the information needed to compute the current ratio?
Balance sheet
Which financial statement(s) contain the information needed to compute return on sales?
Income statement
Why would an accountant conduct financial forecasting?
To determine if a company will need additional investors
Mindy owns a small accounting firm that is considering increasing their prices for some services. She calls the entire staff of 10 accountants to vote on which services should make price changes.
Which type of decision-making style is Mindy using?
Democratic
James is a manager at a university. He has been asked to make a decision regarding the need for new employees. He asks Mary for advice, as she has made similar decisions in the past.
What role in the RACI matrix does Mary hold?
Consulted
Alex received accounting information via a message that was formatted with a header that included date, to, from, and subject lines.
Which form of communication was used?
Memorandum
Which form of communication should be used to convey to investors about the successes and future plans of the company?
Business report
Where should deadlines be included in a business letter?
Conclusion
Leticia knows that the income statement she is preparing for her organization will be shared with investors who are not accounting professionals.
What should Leticia do to ensure effective communication with the investors?
Have a verbal discussion with the investors to provide additional feedback after they have had an opportunity to read the income statement
