Sample Basic Accounting Principles Questions
1) The Conceptual _________________ was a discussion memorandum issued by the FASB in the 1970s. Out of this came the FASB Statements of Financial Accounting Concepts.
2) Accounting Research ________________ were issued between 1939 and 1959. The ARBs remain a source of accounting principles unless superseded by the APB or FASB.
3) _______________ practices or peculiarities allow for modifications of accounting principles. Often this involves companies that are regulated by the federal government, such as banks, utilities, investment firms, and insurance companies.
4) The matching principle requires that expenses be matched with the related __________________ reported on the income statement.
5) Conservatism is often associated with this rule for inventory valuation. (acronym)
6) The assumption that the purchasing power of the dollar is constant is the __________________ unit assumption.
7) A qualitative characteristic associated with verifiability and "you can depend on it".
8) The cost principle is often referred to as the ______________ cost principle.
9) As a result of this principle, assets are recorded at the amount spent to acquire them rather than the amount that will be received when they are sold.
10) Accrual accounting is associated with this principle.
Accounts Receivable and Bad Debts Expense
Sample Accounts Receivable and Bad Debts Expense Questions
1) A company might borrow money by using its accounts receivable as ______________ for the loan.
2) To remind customers of the amount it owes, a company will mail ______________ to these customers. This document will show the open or unpaid invoices.
3) When goods are shipped FOB _____________ point, the sale and accounts receivable will occur at the seller's dock.
4) "2/10, net 30" is an example of credit __________.
5) Under the allowance method, the write-off of a bad account will involve two current ________ accounts.
6) Usually the Allowance for Doubtful Accounts will have a __________ balance.
7) The aging of accounts receivable is associated with the percentage of _____________ method for determining the amount of Bad Debts Expense.
8) The calculation of the accounts receivable turnover ratio is net credit sales divided by the ___________ balances of accounts receivable.
9) A company that is in the business of purchasing accounts receivable.
10) The allowance account to accounts receivable is a ________-asset account.
Activity Based Costing and Overhead
Sample Activity Based Costing and Overhead Questions
1) Another name for "factory" overhead is ___________________ overhead.
2) This overhead rate is computed prior to the start of the accounting year and is based on budgeted overhead costs divided by budgeted units of activity.
3) To assign costs to products or departments.
4) In an ABC system the cost of the material added to each item manufactured is a ___________-level cost.
5) A system where a manufacturer maintains very little inventory of components and relies on its suppliers to deliver the components only when needed. (acronym)
6) The series of activities that add value when a manufacturer converts raw materials into products is referred to as the supply ______________.
7) Manufacturing overhead is a cost of the ________________ manufactured.
8) The ___________ method of allocating service department costs will not allocate a service department's costs to another service department.
9) These units are used in process costing when the products in a department are not yet finished at the end of an accounting period.
10) Items that have been manufactured but have not yet been sold are counted as finished goods _____
Sample Adjusting Entries Questions
1) Customer deposits for future services will be listed under which financial statement category? (assets, liabilities, expenses, etc.)
2) The accounting principle that requires expenses to be reported on the income statement when they occur rather than when they are paid.
3) A prepaid expense is reported as which type of account? (asset, liability, expense, etc.)
4) Depreciation is the systematic ________________ of the cost of an asset (used in a business) to expense over the useful life of the asset. (It is not a valuation technique.)
5) The time _________ assumption is also known as the periodicity assumption. It means that an ongoing business can be divided into years, quarters, months, etc.
6) On December 1 a company purchased $700 of supplies—approximately a three-month supply. On December 1 the asset Supplies was debited for $700. On December 31 the company needs to prepare a prepayment-type ___________ entry.
7) Adjusting entries are used to convert accounting information from the cash basis of accounting to the ______________ basis of accounting.
8) The typical number of accounts involved in an adjusting entry.
9) An adjusting entry to recognize that part of a customer's prepayment has been earned will include a __________ to a liability account.
10) The accrued interest that the bank has earned but has not yet ______________ is reported as a debit balance in the account Interest Receivable.
Sample Balance Sheet Questions
1) A company's own stock that has been repurchased but has not been retired is __________________ stock.
2) The basic _________________ equation is A = L + OE.
3) The accounting principle that prevents assets from being reported at their current value.
4) The balance sheet classification under which a company reports customer deposits and receipts for services that have not yet been performed.
5) Banks and others who have lent money or supplied goods and services on credit.
6) A detailed listing of a company's accounts receivable sorted by the date of sale or the due date of the receivable is known as an ___________ of accounts receivable.
7) Money market accounts and a U.S. Treasury bill that matures in 45 days are examples of cash _______________________.
8) A balance sheet issued between the end-of-year balance sheets is referred to as an __________________ financial statement.
9) Balance sheet accounts are often referred to as real or ____________________ accounts.
10) The cost flow assumption that will result in older costs remaining on the balance sheet. (acronym)
Sample Bank Reconciliation Questions
1) Cash that has been received by a company but is not yet deposited in the bank account is said to be a deposit in ______________.
2) The balance per books before adjustment will come from the general _____________.
3) Checks that have been written but have not cleared the bank account on which they are written are known as _______________________ checks.
4) Outstanding checks are adjustments to the balance per ___________.
5) If a check is written for $89 and clears the bank for $89, but it is recorded in the company's records as $98, the $9 difference is ________ to the balance per books when reconciling the bank statement.
6) Adjusting the balance per the bank and adjusting the balance per the books so that the adjusted balance of each is the same amount is known as a bank _______________________.
7) Journal ____________ need to be written in order to record the items shown as adjustments per the books on the bank reconciliation.
8) A check drawn on a bank account where the balance was insufficient to cover the amount of the check. (acronym)
9) If a company receives a postdated check from one of its customers as payment on an accounts receivable, the check cannot be considered as the asset ___________ until the date of the check.
10) The name appearing on a check after the words "Pay to the order of" is known as the __________.
Sample Bonds Payable Questions
1) An increase in the market interest rates for bonds will cause the selling price of an existing bond to __________ (decrease, increase).
2) A long-term asset that is restricted for retiring bonds payable when they mature is a bond __________ fund.
3) Bonds without specific _________________ are unsecured bonds known as debentures.
4) When the premium on bonds payable is _______________ by the issuer, the carrying value of the bonds will decrease.
5) Bonds that mature on a single date are referred to as _______ bonds.
6) If an 8% bond is offered in a market that demands 7.9% interest, the amount received by the issuer will be ________ (less, more) than its face amount.
7) If the issue price of a new bond (excluding any accrued interest) is less than the bond's face amount, the difference is recorded as ______________ on Bonds Payable.
8) The effective interest rate method results in a correlation between a bond's interest expense and its carrying or __________ value.
9) The proceeds of a 9% $400,000 bond issued at 101 will be four hundred _______ thousand dollars plus accrued interest.
10) A bond maturing in three years will be reported on the issuer's balance sheet as a long-term
Sample Bookkeeping Questions
1) A loan payment will usually consist of two components: ______________ and interest.
2) If employees are paid biweekly, they will receive twenty-______ paychecks per year.
3) A listing of the accounts receivable according to the dates of the open invoices is an _________ of receivables.
4) The matching principle requires that the ___________ incurred to earn revenues be reported in the same period as the revenues.
5) The allocation of a plant asset's cost to expense over its useful life.
6) A journal is the book of original _________.
7) Asset and revenue accounts are contained in the general __________.
8) Debit is associated with this side of an account.
9) Revenue accounts will normally have this type of balance.
10) Gross profit is sales minus the cost of goods ______.
Break-even Point and Cost Estimation
Sample Break-even Point and Cost Estimation Questions
1) When using one of the techniques for analyzing a mixed cost, it is important to prepare a scatter- ______ of all of the observations to be certain that the data does not contain an outlier.
2) The coefficient of _______________, represented by r2, indicates the percentage change in the dependent variable (e.g. total cost in the shipping department) that is explained by the change in the independent variable (e.g. the number of parcels shipped).
3) The break-even point in sales dollars can be found by dividing the fixed costs and expenses by the contribution margin _______ or percentage.
4) Make or buy decisions usually rely on cost behavior in the ________-run.
5) A high degree of correlation does not guarantee that there is a _________-and-effect relationship between the independent and dependent variables.
6) A company has one product with a selling price of $20 and variable costs and expenses of $8 per unit. The fixed costs and expenses are $32,000 and the company has a target profit of $28,000. To reach the target profit, the company must sell ________ thousand units of the product.
7) A product sells for $20 and it has variable costs and expenses of $8 per unit. The contribution margin ratio for this product is ________ percent.
8) A product sells for $30 and has variable costs and expenses of $18 per unit. The fixed costs and expenses are $20,000. The break-even point in sales dollars is _________ thousand dollars.
9) Total fixed costs and expenses divided by the contribution margin per unit gives you the break-even point in ________.
10) The number of independent variables in multiple regression is ______ or more.
Cash Flow Statement
Sample Cash Flow Statement Questions
1) The conversion of bonds into common stock is an example of _____________________ information that is reported outside of the three major sections of the statement of cash flows.
2) Companies using the indirect method must also disclose the amount paid for ___________ and income taxes.
3) Cash __________ (plural) from financing activities occur when a corporation issues equity securities, bonds, and long-term notes.
4) The purchase of _____________ stock will be reported as a decrease in the cash provided by financing activities.
5) The ________ (gain, loss) on the sale of an asset used in a company's business will be a deduction to the cash provided by operating activities under the indirect method.
6) The _________________ (similar to repurchase or retirement) of bonds payable will decrease the cash provided by financing activities.
7) The 2009 statement of cash flows of ABC Corp. explains the change in the cash and ________ equivalents from December 31, 2008 through December 31, 2009.
8) The entire____________ from the sale of an asset used in the business will be reported as an increase in the cash provided by investing activities.
9) An increase in Accounts __________ would be an increase in the cash provided by operating activities under the indirect method.
10) Cash _________ (opposite of inflows) from investing activities occur when a corporation purchases equipment to be used in the business and when it makes a long-term investment in another corporation.
Chart of Accounts
Sample Chart of Accounts Questions
1) A __________ of accounts is a listing of the accounts to which transactions can be posted.
2) The chart of accounts contains the account names and account numbers for the following types of accounts: ____________ sheet accounts and income statement accounts.
3) The chart of accounts contains the accounts in the company's ___________ ledger.
4) A contra-asset account will have a _____________ balance.
5) Asset accounts will normally have ___________ balances.
6) Inexpensive accounting ______________ comes with charts of accounts already setup for various types of companies.
7) Interest Expense and Interest Revenue/Income accounts are classified as 'Other' or 'Non-_____________________.'
8) Account ____________ are not part of a chart of accounts.
9) Unearned Revenues and Customer Deposits are _______________ accounts.
10) Interest owed on Notes Payable will be recorded as a credit in ______________ Payable.
Debits and Credits
Sample Debits and Credits Questions
1) When an amount is entered on this side of an account, we say the account was debited.
2) A listing of all of the accounts in the general ledger with the debit amounts in one column and the credit amounts in another column is a _________ balance.
3) A journal entry with just two accounts is a ___________ journal entry.
4) When a corporation declares these, there needs to be an entry to debit Retained Earnings and to credit a liability account.
5) A company's accounts are housed in the general _______________.
6) When a transaction is recorded, there are at least _________ accounts involved.
7) The difference between a sole proprietorship's total assets and its total liabilities is ___________'s equity.
8) Costs that have been used to earn revenues.
9) This type of account is credited when the proceeds from the sale of an asset used in the business exceeds its book value.
10) Fees that have been earned are recorded in this type of account.
Sample Depreciation Questions
1) Instead of the physical life of an asset, depreciation is based on the _________ life of the asset.
2) This is to natural resources as depreciation is to constructed assets used in a business.
3) When the cash proceeds from the sale of an asset used in the business is less than the asset's book value at the time of the sale, it results in a ________ being reported on the income statement.
4) The cost of an asset minus the asset's accumulated depreciation is the asset's ___________ value.
5) A change in an estimate will not change the amounts reported in _____________ years.
6) Changing the useful life of an asset will change the reported amounts of depreciation for the current year and the ___________ years.
7) An estimated value used in computing depreciation.
8) The cost of an asset minus the estimated salvage value is the asset's ________________ cost.
9) The sum-of-the-years' __________ is an accelerated depreciation method.
10) Another name for the estimated scrap or salvage value of an asset at the end of its useful life.
Evaluating Business Investments
Sample Evaluating Business Investments Questions
1) The _______________ rate of return does NOT use cash flows.
2) The _____ present value is the difference between the discounted cash going out and the discounted cash coming in.
3) One step in determining the net present value of a project is to discount the future cash flows by the ___________ rate of return. Also referred to as the targeted, desired, minimum, or hurdle rate of return.
4) When deciding on replacing an old piece of equipment, the cost of the old equipment should be viewed as a _________ cost, since it is not relevant to the decision.
5) A corporation's cost of capital is a _____________-average of its cost of common stock, cost of preferred stock, and the cost of its long-term debt.
6) Payback determines the _________ it takes to recover an investment without discounting any amounts.
7) The depreciation amount used for book or financial statement purposes is often different from the depreciation amount used for the _______ return.
8) The ______ value of an asset is its cost minus its accumulated depreciation.
9) The _____________ rate of return uses discounted cash flows.
10) Since most companies cannot accomplish all of the capital expenditures that have been identified as needed, companies rank the projects according to priority, profitability, etc. as part of a process known as capital _______________.
Sample Financial Accounting Questions
1) Cost, full disclosure, and matching are three of the basic accounting ______________.
2) The FASB is responsible for developing new accounting _____________, which will become part of GAAP.
3) GAAP is the acronym for generally ___________ accounting principles.
4) Large companies must use the _________-basis of accounting, rather than the cash-basis of accounting.
5) A corporation's annual report to the SEC is the Form _______-K.
6) The difference between the amounts of assets and liabilities is stockholders' __________.
7) The balance sheet is also referred to as the statement of financial __________.
8) If a corporation's stock is _________-traded, it will have additional financial reporting requirements.
9) Distributions of some of a corporation's net income to the stockholders.
10) The word for an entry on the right side of an account.
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Sample Improving Profits Questions
1) Revenues and expenses that are past, and revenues and expenses that will be the same whether or not a decision is made, can be ______________ from an analysis of whether or not to take an action.
2) When a company has a limited number of machine hours available, the number of machine hours is often referred to as a __________________.
3) A manufacturer with a limited amount of hours available will maximize its profits in the short run when it produces and sells the items with the highest contribution margin per ________.
4) Costs that are partly fixed and partly variable are ___________ costs.
5) For decisions involving the ___________ run, a company might find its profit increasing when it takes actions that result in revenues increasing more than the increase in variable costs.
6) Relevant amounts for a decision are the amounts that will _____________ if an action is taken.
7) In the ________ run, companies' revenues must cover all of the costs and expenses, variable and fixed.
8) Marginal cost is used to describe the cost of the very next unit. _________________ cost is used to describe the cost of the next several units.
9) A visual aid for seeing how a mixed cost behaves is a ___________ of the cost at various levels of activity. This also allows you to see if some data is not reasonable.
10) On a per unit basis, fixed costs become _________________ as volume increases.
Sample Income Statement Questions
1) The accounting principle that encourages the accrual basis of accounting.
2) Amount before income tax expense.
3) A change in an accounting ________________ is reported only in the current and future periods' income statement. For example, a change in the useful life of an asset being depreciated.
4) Results when a long-term asset is sold for less than its book value.
5) Interest expense is an example of this type of expense.
6) Results when a long-term asset is sold for more than its book value.
7) Selling, General & Administrative expenses are also referred to as _______________ expenses.
8) A year other than a calendar year.
9) Organization that establishes the accounting rules. (acronym)
10) The cost of goods available minus ____________inventory equals the cost of goods sold.
Inventory and Cost of Goods Sold
Sample Inventory and Cost of Goods Sold Questions
1) The ___________ -average cost is associated with the perpetual system of inventory.
2) A manufacturer assigning direct materials, direct labor, and both variable and fixed overhead to its production output is referred to as ____________________ (or full) costing.
3) _____________ identification might be used instead of FIFO, LIFO, and average when determining the cost of goods sold and the ending inventory.
4) If a retailer's net ______________ of merchandise during an accounting period was $200,000 and its inventory decreased by $20,000 during that period, the income statement will report the cost of goods sold as $220,000.
5) Inventory is reported on the balance sheet as a ____________ asset.
6) Inventory is reported at this amount if it is lower than cost. The "M" in LCM.
7) This inventory cost flow assumption will result in lower profits when there is deflation in the cost of the inventory items. (accronym)
8) The inventory system where the Inventory account is increased whenever merchandise is purchased and is decreased whenever merchandise is sold.
9) A method of estimating ending inventory when both the cost and retail amounts are known.
10) When goods are shipped FOB Shipping Point, the __________ will incur freight-in costs.
Lower of Cost or Market
Sample Lower of Cost or Market Questions
1) Another term for "limitation". (For example, the ceiling or floor for replacement cost.)
2) "Market" in LCM is the constrained replacement cost whether by purchase or production. In other words LCM will apply to a merchant and to a __________________.
3) The upper limit for the market amount in LCM is also referred to as the _____________.
4) When cost is less than the floor, the LCM rule requires that ________ be used.
5) __________ profit is subtracted from NRV in order to determine the floor in LCM.
6) The type of gain that occurs when the value of items in a company's inventory increases.
7) The "R" in NRV.
8) Only in exceptional cases will ARB No. 43 allow inventory to be reported at more than cost. One of these exceptional cases would involve precious ______________ (plural).
9) If you desire to have the most conservative results from LCM, you should apply the LCM rule to every inventory _________.
10) The result on the income statement when an adjustment is made to reduce inventory from cost to market.
Sample Payroll Accounting Questions
1) ________ salary or wages is the amount an employee earns before deductions are made for payroll taxes and other items.
2) This represents both Social Security and Medicare taxes. (acronym)
3) A person providing services to a company who is not deemed to be an employee of the company is referred to as an _____________________ contractor.
4) The additional 50% that employers pay when employees work more than 40 hours in one week is known as the overtime ______________.
5) Health insurance benefits provided to retirees are part of _______-retirement benefits.
6) Accruing vacation expense when it is earned by an employee instead of recording the expense when the vacation is taken is an application of the _______________ principle.
7) A person paid in this manner will receive 26 paychecks per year.
8) The employer must remit ______ times the amount required to be withheld from employees for Social Security and Medicare taxes.
9) The tax withheld from employees and not matched by the employer is the federal ___________ tax.
10) The amount a person "clears" on their paycheck is the employee's ______ pay.
Present Value and Bonds
Sample Present Value and Bonds Questions
1) The effective interest rate method provides perfect correlation between a bond's interest expense on the corporation's income statement and the bond's ____________ value on the corporation's balance sheet.
2) A bond maturing in three years will be reported as a long-term _____________on the issuing corporation's balance sheet.
3) The difference between each year's bond interest expense and the cash paid for interest is the amount of _________________ of a bond's discount or premium.
4) The amortization of the premium on bonds payable will result in bond interest expense being ________ (less, more) than the cash payment for interest.
5) The __________ interest rate is used to discount a bond's interest payments and the bond's maturity amount to their present values.
6) An advantage for issuing bonds instead of common _______ is that the interest is deductible on the corporation's income tax return.
7) A bond's interest payments form an _____________ annuity.
8) A bond's _________-to-maturity is also the effective interest rate.
9) An increase in the market interest rates will cause the market value of a bond to __________ (decrease, increase).
10) A 20-year bond has a stated interest rate of eight percent per year with the interest paid semiannually. If the market interest rate is ten percent, the present value factor to be used will be based on 'i' equal to _________ percent.
Sample Standard Costing Questions
1) For inventory valuation in a standard cost system, standard costs are applied to the good _____________.
2) Standard costs are more helpful in determining whether a company operated ___________________ (effectively or efficiently) in producing its output during the accounting period.
3) This direct labor variance occurs when the direct labor is paid an hourly wage that is different from the standard hourly wage.
4) Because of seasonal fluctuations, manufacturing overhead standards are likely predetermined for the entire __________.
5) The total manufacturing overhead variance is the difference between the actual overhead costs incurred and the standard overhead costs __________ to the good output.
6) A variance that occurs when the actual direct labor hours are different from the standard number of direct labor hours.
7) When the actual cost of an input is less than the standard cost of an input, it is a _________________ variance.
8) If a company has variances that are very significant and its inventory balances have increased significantly, some of the variance balances should be allocated (or prorated) to ________________.
9) The fixed overhead volume variance is also referred to as the _________________ volume variance.
10) The variable manufacturing overhead variance occurring when the actual variable overhead costs are different from the costs expected for the actual inputs.
Sample Stockholders' Equity Questions
1) A type of preferred stock that entitles its owners to receive past omitted dividends plus the current dividend before the common stockholders receive a dividend.
2) The maximum number of shares of stock that a corporation can issue is the ________________ number of shares of stock.
3) Dividends declared by a corporation, but not yet paid, are reported on the balance sheet as a __________________.
4) A 15% stock dividend is considered to be a ____________ (small, large) stock dividend.
5) A corporation's stock that has been repurchased by the corporation but has not been retired is _____________ stock.
6) The percentage of ownership in a corporation is dependent upon the number of _________ of stock owned.
7) When stock is issued for something other than cash, such as land, the land and the stock are recorded at the fair market ___________ of the land or the stock issued whichever is more clearly determinable.
8) One component of the book value of preferred stock is its ________ price.
9) Appointed by the board of directors of a corporation to carry out its policies.
10) Corporations may not report a _______ or loss on the sale of its treasury stock