FINAL EXAM - PRACTICE TEST 1: ACC201 - Principles of Accounting

The primary objective of financial accounting is to:

• Serve the decision-making needs of internal users.

• Provide accounting information that serves external users.

• Monitor consumer needs, tastes, and price concerns.

• Provide information on both the costs and benefits of looking after products and services.

• Know what, when, and how much product to produce.

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

• Time-period assumption.

• Business entity assumption.

• Going-concern assumption.

• Revenue recognition principle.

• Measurement (Cost) principle.

If assets are 300,000 and liabilities are 300,000 and liabilities are 300,000andliabilitiesare 192,000, then equity equals:

• $108,000.

• $192,000.

• $300,000.

• $492,000.

• $792,000.

An example of an operating activity is:

​​ ​ ​ ​

• Paying off a loan.

• Paying wages.

• Purchasing office equipment.

• Borrowing money from a bank.

• Selling stock.

A business's source documents:

• Include the ledger.

• Provide objective evidence that a transaction has taken place.

• Must be in electronic form.

• Are records of all increases and decreases in specific asset.

• Include the chart of accounts.

Unearned revenues are generally:

• Revenues that have been earned and received in cash.

• Revenues that have been earned but not yet collected in cash.

• Liabilities created when a customer pays in advance for products or services before the revenue is earned.

• Recorded as an asset in the accounting records.

• Increases to owners' capital.

A debit is used to record an increase in all of the following accounts except:

• Supplies

• Cash

• Accounts Payable

• Owner's Withdrawals

• Prepaid Insurance

A double-entry accounting system is an accounting system:

• That records each transaction twice.

• That records the effect of each transaction in at least two accounts with equal debits and credits.

• In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits.

• That allows total credits to be greater than total debits

• That allows total debits to be greater than total credits.

The accounting principle that requires revenue to be recorded when earned is the:

• Expense recognition (matching) principle.

• Revenue recognition principle.

• Time period assumption.

• Accrual reporting principle.

• Going-concern assumption.

Adjusting entries made at the end of an accounting period accomplish all of the following except:

• Updating liability and asset accounts to their proper balances.

• Assigning revenues to the periods in which they are earned.

• Assigning expenses to the periods in which they are incurred.

• Assuring that financial statements reflect the revenues earned and the expenses incurred.

• Assuring that external transaction amounts remain unchanged.