MIDTERM EXAM - FINANCIAL ACCTG & REPORTING

Which of the following is not the main objective of accounting?

• Systematic recording of transactions

• Ascertaining profit or loss

• Ascertainment of financial position

• Solving tax disputes with tax authorities

The comparison of financial statement of one year with that of another is possible only when ------------concept is followed

• Going concern

• Accrual

• Consistency

• Materiality

Which of these statements about accrual accounting is true?

• Revenue is recorded only when payments are received, while expenses are recognized when they're incurred.

• All revenue from prepayments should be recognized when the payment is received, while expenses accrue over the life of the obligation.

• If the business has provided the goods or services and can reasonably expect to receive cash, it can recognize the revenue in that period.

• The matching principle dictates that expenses should be recognized when they are incurred, regardless of when revenue is recognized.

When are liabilities recorded under the accrual basis of accounting?

• When incurred

• When paid

• At the end of the fiscal year

• When bank accounts are reconciled

Which is true about time in accounting?

• Current liabilities are debts payable within 2 years.

• Balance sheets reflect a company’s financial position at a certain point in time.

• The time value of money is a finance concept, not relevant in accounting.

• Accounts receivable are more easily collected as time passes.

How are a company’s financial statements used?

• For internal analysis

• For external negotiation

• For compliance

• All of the above

Answer explanation

Which of the following scenarios increases accounts payable?

• A customer fails to pay an invoice.

• A supplier delivers raw materials on credit.

• Office supplies are purchased with cash.

• None of the above

A trial balance will not balance if

• a journal entry is posted twice.

• a wrong amount is used in journalizing.

• incorrect account titles are used in journalizing.

• a journal entry is only partially posted.

The standard form of a journal entry has the

• debit account entered first and indented.

• credit account entered first and indented.

• debit account entered first at the extreme left margin.

• credit account entered first at the extreme left margin

Which of the following journal entries is recorded correctly and in the standard format?

• Wages Expense ..................................................................   600  

           Cash .............................................................................                      1,500

  Advertising Expense ...........................................................   900

• Wages Expense ..................................................................                         600

  Advertising Expense ...........................................................                        900

  Cash ....................................................................  1,500

• Cash .....................................................................................   1,500

          Wages Expense ...........................................................                           600

         Advertising Expense ....................................................                     900

• Wages Expense ..................................................................   600

  Advertising Expense ...........................................................   900  

           Cash ............................................................................                     1,500