University of Central Florida (UCF) ACG2021 Principles of Financial Accounting Exam 1 Practice Test

These questions are part of the practice quiz. Start practicing

• What is the average time between purchasing or acquiring inventory and receiving cash proceeds from its sale?
• What is amortization and what type of asset does it apply to?
• How does a periodic inventory system determine cost of goods sold?
• Costs of assets acquired in one period that will be expensed in a future period.
• Which statement best describes the relationship between unearned revenue and revenue earned over time?
• Which statement regarding dividends and retained earnings is true?
• Which entries are used to record events that have occurred but have not yet been entered in the accounts, such as recognizing insurance expense for prepaid policies?
• Under GAAP, which measurement attribute is typically used for assets and liabilities unless fair value is permitted?
• Costs of assets acquired in one period that will be expensed in a future period.
• What is the effect of issuing stock for cash on the balance sheet?
• Which statement about current assets on the balance sheet is true?
• What is the adjusting entry for depreciation?
• Under LIFO, how is ending inventory determined in periods of rising prices?
• How does paying a cash dividend affect the accounting equation?
• Dividends are found on which financial statement?
• Recording depreciation for a period affects which two accounts?
• What is the fundamental rule of double-entry accounting?
• Which financial statements are prepared directly from the adjusted trial balance?
• Which term describes amounts owed to creditors?
• A service performed on account for $500 increases which two accounts?
• What is the difference between working capital and the current ratio?
• Which accounts are affected by the depreciation adjusting entry?
• What is the process of transferring debit and credit information from the journal to the individual accounts in the general ledger?
• What is the difference between Accounts Payable and Notes Payable?
• Which pair of account types has debit-normal balances?
• Beginning Retained Earnings is 25,000. During the period, Revenues are 90,000 and Expenses are 60,000, and Dividends are 12,000. Ending Retained Earnings are:
• Which account type has a credit-normal balance?
• What is net realizable value?
• Net income is Revenues minus Expenses. If Revenues are 100,000 and Expenses are 75,000, Net Income is 25,000. Beginning Retained Earnings are 40,000 and Dividends are 15,000. Ending Retained Earnings are:
• Net cash provided by operating activities differs from net income because it
• What is the difference between a journal entry and posting to the general ledger?
• What effect does purchasing treasury stock have on stockholders' equity?
• What is a trial balance?
• In a perpetual inventory system, purchase of inventory on account affects which accounts?
• Which term describes resources owned by a company?
• Beginning Retained Earnings is 60,000. Net Income is 30,000. Dividends are 5,000. Ending Retained Earnings is:
• Which financial statement summarizes the changes in stockholders' equity over an interval of time?
• Which term describes the amounts earned from selling products or services?
• When computing cash flow from operating activities, which item is typically added back because it is noncash?
• What is the effect of paying a previously accrued expense?
• Under accrual accounting, revenue is recognized when earned and expenses when incurred. Which scenario illustrates this concept?
• Stockholders' equity is composed of which components?
• Which term describes the summary of the effects of all transactions related to a particular item over a period of time?
• How does the allowance method differ from the direct-write-off method?
• If product returns occur, how is it recorded in the period of sale and adjust for returns?
• Which statement best represents the basic accounting equation that must balance after every transaction?
• Closing entries serve to reset which accounts for the new period?
• Beginning Retained Earnings is 20,000; Net Income is 100,000; Dividends are 0. Ending Retained Earnings is:
• Which of the following is found on the Income Statement?
• Which of the following is a typical example of a deferral adjusting entry?
• What is the effect of recording a sale on account for a service company on the accounting equation?
• How does the purchase of equipment with cash impact the cash flow statement?
• In accounting, accounts that carry their balances to the next period are called.
• What is the difference between cash basis income statement and accrual basis income statement?
• Which of the following is a contra-asset account?
• Cash payments to stockholders (owners).
• Net realizable value of accounts receivable is best described as the accounts receivable balance minus what?
• Which statement is true? Net Income equals Revenues minus Expenses.
• What is the lower of cost and market (LCM) rule?
• An adjusting entry is required when a company has prepaid insurance of $6,000 for the next 12 months and one month has expired. Choose the correct adjusting entry.
• Who are trained individuals hired by a company as independent party to express a professional opinion of the accuracy of that company's financial statements?
• Which document is the initial chronological record where a transaction is first recorded?
• What is an indirect method for preparing the cash flow from operating activities?
• What would you include in a balance sheet for current liabilities?
• Which term describes the inflow of resources from selling goods or services?
• How do adjusting entries affect net income and asset/liability balances?
• When recording amortization for an intangible asset, which entry is correct?
• Which financial statement reports changes in retained earnings and overall equity due to net income and dividends?
• How do you record accrued interest expense at year-end?
• Which statement about net income is true?
• Which statement best describes how retained earnings change?
• What does the accounting equation express?
• What is the role of the general ledger in the accounting cycle?
• Which document is typically used to record a sale to a customer?
• Which of the following statements describes the effect of recording a sale on account for a service company?
• Which of the following is NOT typically classified as a current liability?
• Which of the following is an example of an accrual adjusting entry?
• Which item is the list of all account names used to record a company's transactions?
• What is the adjusting entry to recognize revenue earned but not yet billed (accrued revenue)?
• Cash in advance from a customer for products or services to be provided in the future.
• How is a write-off of an uncollectible account recorded under the allowance method?
• Beginning Retained Earnings is 75,000; Net Income is 25,000; Dividends are 10,000. Ending Retained Earnings is:
• What is the effect of a note payable issued for cash on the accounting equation?
• Depreciation expense is reported on which financial statement?
• Under the allowance method, recognizing bad debt expense affects net income and assets by which description?
• When are adjusting entries prepared in the accounting cycle?
• Which term is the asset's historical cost less accumulated depreciation?
• What is the standard entry to record depreciation expense?
• The balance sheet accounts where the balances are carried forward from period to period.
• Which change would most directly increase ending Retained Earnings?
• Amount shareholders have invested in the business.
• Retained earnings reflect which of the following?
• Under accrual accounting, when is revenue recognized?
• If a company pays its supplier, what is the journal entry?
• Which principle requires expenses to be recognized in the same period as the revenues they help generate?
• What is the term for the process of moving the debit and credit details from the journal into the general ledger accounts?
• Under FIFO, the ending inventory is comprised of which costs?
• What term is used for a listing that reflects the updated balances after making year-end adjustments?
• What is the normal balance of Accumulated Depreciation?
• How do you record revenue that has been earned but not yet billed to the customer?
• Which formula computes straight-line depreciation per period?
• Liquid assets owned by the company.
• An adjusting entry to recognize accrued expenses increases which accounts?
• How does depreciation affect the income statement and balance sheet?
• Which of the following correctly records a sales return in the period of sale?
• Which of the following is found on the Balance Sheet?
• Cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends.
• If a company borrows cash from a bank, what happens to the accounting equation?
• What is the adjusting entry to recognize revenue that was previously recorded as unearned revenue but is now earned?
• Which of the following is a typical current liability?
• Which account increases when recording accrued interest payable at year-end?
• Which item is a component of stockholders' equity?
• Beginning Retained Earnings is 150,000; Net Income is 50,000; Dividends are 0. Ending Retained Earnings is:
• What is the purpose of an adjusted trial balance?
• If a company incurs an expense on account, which entry would be recorded?
• A contra-asset account is best described as?
• Which listing shows all accounts and their balances after adjusting entries have been recorded?
• Beginning Retained Earnings is 60,000; Net Income is 25,000; Dividends are 5,000. Ending Retained Earnings is:
• Which entry would record a purchase of equipment on credit?
• What is the adjusting entry for accrued expenses at period end (e.g., salaries)?
• GAAP is an acronym for which set of accounting guidelines?
• Which term is defined as the rules of financial accounting?
• The adjusting entry for a prepaid expense at period end serves to
• How do you record expenses that have been incurred but not yet paid as of the reporting date?
• Define accruals vs prepayments with examples.
• Total amounts owed to creditors for loaning money to the company.
• If a company receives cash in advance for services to be performed later, this creates which type of account and how does it affect the financial statements?
• The period during which financial statements are prepared and transactions are aggregated is called the accounting period.
• When a company purchases equipment for cash, which accounts are affected and how?
• Promises to pay cash in the future to creditors when purchasing supplies or materials.
• A company issues common stock for cash. How does this affect the accounting equation and which section of the cash flow statement shows this?
• What is the collection of all accounts and their balances called, used to track all transactions?
• Which statement best describes gross profit and how it is calculated?
• An adjusting entry to record accrued revenue increases which accounts?
• Under the allowance method, what is the effect of writing off a specific uncollectible account on total assets?
• What is the adjusting entry for a prepaid expense at the end of the period?
• What is net income and where is it reported?
• Which of the following best describes 'closing entries'?
• The component of owner's equity representing contributed capital from shareholders is called
• What is the impact of depreciation on the income statement and balance sheet?
• How is revenue recognized for services performed but not yet billed (accrued revenue)?
• Which statement correctly distinguishes prepaid expenses from accrued expenses?
• Which term represents the owners' residual interest in the assets after liabilities are subtracted?
• What is the purpose of closing entries?
• Deferred Revenue is recorded when
• What is the typical sequence of the accounting cycle (high level)?
• Which account represents the cumulative amount of depreciation expensed against a specific asset?
• Which sequence represents the typical steps of the accounting cycle from start to closing entries?
• Net realizable value measures the net amount expected to be collected from which asset after allowances?
• Which equation shows a company's resources equal creditors' and owners' claims to those resources?
• Which of the following accounts has a debit-normal balance?
• If a service is performed for cash, what is the journal entry?
• If services are performed on account, what is the journal entry?
• Which term describes the costs of providing products and services?
• When adjusting for unearned revenue, what happens if revenue is recognized partially?
• What is the basic accounting equation?
• What is the purpose of adjusting entries at period end?
• What does GAAP require about measurement attributes for most assets and liabilities?
• Which document lists all accounts and their balances at a specific date, showing total debits and credits?
• Which financial statement would you consult to assess a company's financial position as of a date?
• What is the effect on the financial statements of earning revenue on a $1,000 service performed on account?
• How does the adjusted trial balance facilitate preparation of financial statements?
• Entries that transfer balances of all temporary accounts (revenues, expenses, and dividends) to the balance of the Retained Earnings account.
• Under a perpetual inventory system, how is the purchase of inventory recorded?
• What is the purpose of the Trial Balance in the accounting process?
• Under a periodic inventory system, compute COGS given Beginning Inventory = 8,000; Purchases = 40,000; Ending Inventory = 7,000.
• Which of the following statements about trial balance is true?
• Which financial statement reports the company's revenues and expenses over an interval of time?
• The process of allocating the cost of an asset to expense over its useful life.
• Under the indirect method, which item is typically added back to net income as a noncash adjustment?
• Which term refers to the costs of operating a business, such as salaries, rent, and utilities?
• Beginning Retained Earnings is 50,000. Net Income is 25,000. Dividends are 10,000. Ending Retained Earnings is:
• Which term represents the owners' claims to the resources of the company?
• Which of the following is not typically presented as a primary financial statement?
• Explain the allowance method for uncollectible accounts and why it is preferred over the direct write-off method.
• Which financial statement presents the financial position of the company on a particular date?
• Name two formats for the income statement and one difference between them?
• Which statement best describes the matching principle?
• What is the purpose of a statement of cash flows?
• Amounts the company expects to collect from customers based on the delivery of service or products.
• Ending retained earnings can be calculated as beginning retained earnings plus net income minus dividends. If beginning RE is 12,000, net income is 4,000, and dividends are 1,500, what is ending retained earnings?
• Why is GAAP important for financial accounting?
• What term describes an economic event that initiates the accounting process?
• Temporary accounts are closed to Retained Earnings at period end. Which account is the target of these closing entries?
• Which statement best describes the bank reconciliation?
• Revenues, expenses, and dividends are closed out at the end of each accounting period and transferred to Retained Earnings so that the new period begins with a zero balance for these accounts.
• When salaries that were accrued at year-end are paid in the following period, what is the entry?
• What is the overarching impact of adjusting entries on the financial statements?
• Which of the following is a typical current liability?
• What is the purpose of the Allowance for Doubtful Accounts?
• Beginning Retained Earnings is 30,000; Net Income is 20,000; Dividends are 20,000. Ending Retained Earnings is:
• In a perpetual inventory system, record a $5,000 sale on account with a cost of goods sold of $3,000. Which journal entries are correct?
• If a company purchases supplies on account, what is the journal entry?
• Which statement best describes permanent versus temporary accounts?
• Which statement best describes par value stock versus no-par stock?
• Why is an adjusted trial balance prepared before financial statements?
• Which balance increases when recording bad debt expense under the allowance method?
• What is a prepaid expense?
• Which statement accurately describes accrual basis accounting?
• Which concept equals the difference between revenues and expenses?
• Which financial statement measures activities involving cash receipts and cash payments over an interval of time?
• Ending retained earnings is calculated as beginning retained earnings plus net income minus dividends. If beginning retained earnings are 20,000, net income is 15,000, and dividends are 5,000, what is ending retained earnings?
• How is depreciation recorded for a piece of equipment with cost $50,000, accumulated depreciation $10,000, and estimated life 5 years?
• Which of the following transactions increases equity?
• Which items are typically adjusted in a bank reconciliation?
• Under the allowance method, how is an uncollectible account written off?
• What is a typical source document used to record cash received from a customer?
• Which term describes a chronological record of all transactions affecting a firm?
• How is an accrued expense recorded in journal entry form?
• A type of account that is intended to have its balance be the opposite of the normal balance of its companion account.
• Which principle requires recognizing expenses in the same period as the revenues they help generate?
• What is accrual basis accounting?
• Under LIFO in a period of rising prices, which costs are included in COGS?
• Under cash-basis accounting, when are revenues recorded and expenses recorded?
• Measure business activities of a company and communicate those measurements to external parties for decision-making purposes.
• How is unearned revenue adjusted as services are performed?
• Which statement is used to verify that total debits equal total credits across all accounts before financial statements are prepared?
• Under the indirect method, which item is used to reconcile net income to net cash provided by operating activities?
• Beginning Retained Earnings is 90,000; Net Income is 15,000; Dividends are 5,000. Ending Retained Earnings is:
• Which statement describes revenue recognition under accrual accounting?
• Under FIFO, the cost of ending inventory is determined by which of the following?
• Which of the following is an asset typically reported on the balance sheet?
• Which statement best describes unearned revenue?
• Which statement is true about the relationship between Net Income and Retained Earnings?
• Accounts that represent amounts expected to be collected from customers for delivered services or products are called
• What is the difference between a permanent account and a temporary account?
• Which of the following would be classified as financing activities in the cash flow statement?
• Which account is used to record the allocation of the cost of a long-term asset to expense over its useful life?
• In a perpetual inventory system, what entry records the sale of inventory on account?
• What is the monetary unit principle?
• What is the purpose of closing entries?
• Which step is the final part of the high-level accounting cycle sequence?
• What does the going concern assumption imply for financial statements?
• Under accrual-basis accounting, when are revenues recorded and when are expenses recorded?
• Which statement best describes the purpose of accumulated depreciation?
• How are current assets classified on the balance sheet?
• Where are dividends typically reported in the financial statements?
• According to the revenue recognition principle, revenue should be recorded in which period?
• Beginning Retained Earnings is 45,000; Net Income is 0; Dividends are 0. Ending Retained Earnings is:
• Beginning Retained Earnings is 100,000. Net Income is 50,000. Dividends are 0. Ending Retained Earnings are: