Accounting Fundamentals Exam Study Guide

The closing entry for expenses includes a debit to: ________ and a credit to all expense accounts.

• Accounts Payable

• Retained Earnings

• Revenue

• Cash

The financial statement that represents the accounting equation is the: ________.

• Statement of changes in equity

• Balance sheet

• Statement of cash flows

• Income statement

A company might hold a large amount of cash relative to noncash assets for which of the following reasons?

• To avoid paying dividends to shareholders.

• All of the other answers represent reasons for large cash holdings.

• Because it is required by law in all countries.

• To reduce its tax liability on profits.

The statement of stockholders' equity includes which of the following for the period?

• Detailed list of all company assets.

• Net income for the period only.

• Changes in stockholders' equity accounts.

• Cash flows from operating activities.

Current assets in a classified balance sheet are typically listed in order of: ________.

• Value

• Liquidity

• Maturity

• Alphabetical order

Long-term productive assets used in the normal course of business are typically classified as: ________.

• Inventory.

• Intangible assets.

• Property, plant, and equipment.

• Current liabilities.

Which of the following would not be recorded as a cash sale? ________

• A customer who pays by cheque

• A customer who buys on account

• A customer who pays in cash

• A customer who pays by debit card

Which of the following elements is part of the fraud triangle? Motivation, Rationalization, and Opportunity are the three elements.

• Accountability

• All of the other answers are elements of the fraud triangle.

• Confidentiality

• Integrity

The percentage-of-receivables method for accounting for uncollectible accounts focuses on the:

• Gross amount of receivables.

• Net amount expected to be collected.

• Amount of bad debts written off during the year.

• Total sales for the period.

Paying for supplies previously purchased would have what effect on the accounting equation?

• Assets increase and liabilities increase.

• Liabilities increase and owner's equity decreases.

• Assets decrease and liabilities decrease.

• Assets increase and owner's equity increases.