Prelim exam Flashcards
Which method of recording bad debt is consistent with accrual accounting?
A. Allowance method
B. Direct write-off method
C. Percent of sales method
D. Percent of accounts receivable
A. Allowance method
It is measured at face value in the statement of financial position
A. Accounts receivable
B. Inventory
C. PPE
D. Cash
D. Cash
What internal control feature is specific to petty cash?
A. Separation of duties
B. Assignment of responsibilities
C. Imprest system
D. Proper authorization
C. Imprest system
Which of the following item must be added to the cash balance per ledger in preparing a bank reconciliation that ends with an adjusted cash balance
A. Notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor
B. No sufficient fund (NSF) customer check
C. Service charge
D. Erroneous bank debit
A. Notes receivable collected by the bank in favor of the depositor and credited to the account of the depositor
An entity uses the allowance method to recognize doubtful account expense. What is the effect of a collection of an account previously written off
A. No effect on both allowance for doubtful accounts and doubtful accounts expense
B. No effect on allowance for doubtful accounts and decrease in doubtful account expense
C. Increase in allowance for doubtful accounts and no effect on doubtful account expense
D. Increase in allowance for doubtful accounts and decrease in doubtful account expense
C. Increase in allowance for doubtful accounts and no effect on doubtful account expense
Which is the best way to discourage a sales clerk from using sales invoice to make a cash sale to a customer and then pocketing the cash and destroying the company’s copy of the sales invoice?
A. Verification of sales invoice
B. Separation of duties for making the sale and recording the sale in the journal
C. Authorization of sales invoice
D. Serialization of sales invoice
D. Serialization of sales invoice
These receivables are the result of the normal operating undertakings of a firm
A. Trade receivables
B. Non-trade receivables
C. Bonds receivable
D. Tax refund
Trade receivables
What is a compensating balance?
A. Saving account balance
B. Minimum deposit required to be maintained in connection with a borrowing arrangement
C. Demand deposit account balance
D. Temporary investment serving as collateral for an outstanding loan
B. Minimum deposit required to be maintained in connection with a borrowing arrangement
It is the process of determining the monetary amounts of the transaction to be carried or recognized in the financial statements
A. Estimating
B. Measuring
C. Accounting
D. Communicating
B. Measuring
It is an extensive network of approvals by authorized individuals acting independently to ensure that all disbursements by check are proper
A. Electronic funds transfer system
B. Computerized system
C. Voucher system
D. Verifiable system
C. Voucher system
Which internal control is being applied if the work assignment for one employee is designed to check on the work of another employee?
A. Independent internal verification
B. Documentation procedures
C. Double duties
D. Separation of duties
A. Independent internal verification
It is used by companies to avoid frequent changes in catalogs, alter prices for different quantities purchased, or hide the true invoice price from the competitors
A. Cash discounts
B. Trade discounts
C. Sales returns and allowances
D. Time value of money
B. Trade discounts
Which activity in the accounting process means recognition or non-recognition of accountable events?
A. Classifying
B. Journalizing
C. Summarizing
D. Identifying
D. Identifying
What is the main product of the accounting process?
A. Special-purpose financial statements
B. General purpose financial statements
C. Unaudited financial statement
D. Economical financial statements
B. General purpose financial statements
After recording all the business transactions, Kenneth posted all the transactions in their corresponding ledgers. Which communicating process did he perform?
A. Classifying
B. Summarizing
C. Recording
D. Investigating
A. Classifying
Which of the following is NOT a part of cash?
A. Currency
B. Checking account balance
C. Money market instrument
D. Saving account balance
C. Money market instrument
Mia accounted for all of ABC Company’s sales transactions in the its journal for November. Which communicating process did she perform?
A. Investigating
B. Classifying
C. Summarizing
D. Recording
Recording
What value are the accounts receivable normally reported?
A. Historical cost
B. Fair market value
C. Net realizable value
D. Present value
Net realizable value
When an imprest petty cash fund is used, which of the following statements is TRUE?
A. The balance of the petty cash fund should be reported the statement of financial position as a long term investment
B. The reimbursement of the petty cash fund should be credited to the cash account
C. The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account
D. Entries that include a credit to cash account should be recorded at the time the payments from the petty cash fund are made
B. The reimbursement of the petty cash fund should be credited the cash account
Which of the following is NOT acceptable in estimating uncollectible accounts receivable?
A. No estimate of uncollectible accounts is made, but accounts are written off when it is determined that accounts cannot be collected
B. The estimate of uncollectible accounts is based on the percentage of sales for the period
C. The estimate of uncollectible account is based on the percentage of the accounts receivable at the end of the period
D. The estimate of uncollectible accounts is based on an aging schedule
A. No estimate of uncollectible accounts is made, but accounts are written off when it is determined that accounts cannot be collected
Which of the following is NOT considered as a cash equivalents?
A. A three year treasury note maturing on January 31 of the next year purchased by the entity on October 1 of the current year
B. A three year treasury note maturing on January 31 of the next year purchased by the entity on December 1 of the current year
C. A 90 day treasury bull
D. A 60 day money market placement
A. A three-year treasury note maturing on January 31 of the next year purchased by the entity on October q of the current year
