Financial accounting final
Using an invoice, rather than the seller's opinion of the value, to document the value of equipment, is
based on the _______ principle. ANS:objective evidence
In a balance sheet, prepared according to the T-account form, the total liabilities and owners' equity
amounts to $2,875,000. Therefore, in a balance sheet, prepared according to a reporting from, the total
assets will be equal to: ANS:$2,875,000
A company has a cash inflow of $300,000 and a cash outflow of $400,000. Therefore, its cash flow has...
ANS:decreased by $100,000
The upward valuation of land subsequent to its purchase violates the _______
principle. ANS:cost
A company that accounts transactions at the moment of receipt or payment of the money is following a
ANS:cash basis approach
A balance sheet has a total debit side of $ 2,000,000. The total liabilities are $500,000. Therefore, the
total Onwers' equity is: ANS:$1,500,000
The following are balance sheet accounts for Blair's Catering:
Accounts payable $5,000
Accounts receivable $4,000
Michael Johnson, Capital $15,000
Cash $1,000
Equipment $10,000
Food supplies $2,000
Prepaid rent $3,000
,Based the information above, the total equity of this company is then: ANS:$15,000
The income statement, prepared according to the reporting form, shows a total sales of $7,500,500. The
total profit is equal to $1,250,000. Therefore, the total cost here is: ANS:$1,250,500
Assuming a business will continue until the assets are fully utilized is in accordance with the _______
principle. ANS:going concern
Keeping records for a business separate from the owner's personal affairs is in keeping with the _______
principle ANS:business entity
The branch of accounting that involves reviewing and evaluating documents, records, and control
systems is called: ANS:auditing
Regardless of the size of an operation's accounting department, the diversity of its responsibilities, or
the number and types of reports produced, the accounting staff is responsible for providing: ANS:service
Which of the following statements best describes the accounting principle of objective evidence? ANS:It
requires supporting documents for accounting transactions whenever possible
Under accrual-based accounting, revenue is recognized ANS:when revenues are earned
Statement I:
Revenues are sales to customers during a period, reduced by returns or discounts.
Statement II:
Cost of sales (or cost of goods sold) consist of (I) direct labor; (ii) direct materials; and (iii) manufacturing
overhead. ANS:Both statements are correct
Which of the following events would be recorded as an accounting event? ANS:A guest purchases a meal
in a food outlet.
Statement I:
Revenues must not be earned and realized before being considered.
,Statement II:
Expenses must not be matched with revenues. ANS:Both statements are incorrect
Statement I:
The total assets under the T-account balance sheet form differ from the total assets under the reporting
form balance sheet.
Statement II:
The total assets under the T-account balance sheet form are equal to the total liabilities & owners'
equity under the reporting form balance sheet. ANS:Statement 1 is incorrect; statement 2 is correct
Statement I:
The balance sheet is a guide to the solvency of a company.
Statement II:
The balance sheet is a snapshot of the financial position of a company at a particular data.. ANS:Both
statements are correct
, Statement I:
Income statement is the most widely followed report by the media and investment community.
Statement II:
Income statement details revenue, expenses, and profits during a particular period. ANS:Both
statements are correct
Statement I:
Accounting is a process of identifying, measuring and communicating non-economic information that
will allow for informed judgements and decisions by the users.
Statement II:
Accounting is bookkeeping + summarizing + interpreting. ANS:Statement 1 is incorrect; statement 2 is
correct
The generally accepted accounting principle of matching requires that: ANS:expenses be matched with
the revenues they generate
Statement I:
Assets are the things that a company owns or is owed.
