WorksheetsAccounting Study Guide 3
Total questions: 33
Worksheet time: 17mins
The period of time from buying goods and services to collecting cash from customers is the accounting cycle
True
False
Expenses are the costs of operating the business that are paid for in the period covered by the income statement
True
False
If a company decides to record an expenditure made this period as an expense, when it should have been recorded as an asset, net income will be overstated in the current period as a result
True
False
If revenues are not growing faster than expenses, then net income will decrease
True
False
When expenses exceed revenues in a period, stockholders’ equity will increase
True
False
Dividing up the continuing life of a company into shorter periods is called the time period assumption
True
False
GAAP does not allow cash basis accounting to be used in external financial reports
True
False
Unearned Revenue is reported on the balance sheet as a liability
True
False
Costs that benefit future periods are reported as assets
True
False
When cash is paid before the related expense is incurred, an asset is reported on the balance sheet.
True
False
A company does not need to record the receipt of a bill for utilities used during this year if the company will not pay the bill until next year
True
False
Net income is increased when accounts receivable are collected
True
False
If the total of debits equals the total of credits on the trial balance, it means that the accounting records do not contain any errors
True
False
A net profit margin of 15.4% means that the company used 84.6 cents of each sales dollar to cover costs and expenses.
True
False
To evaluate a company’s net profit margin, it is best to compare it to another company in the same industry
True
False
When accrual basis accounting is used, net income equals the amount of cash generated by the business
True
False
It is possible for a company to be profitable, yet not have enough cash to pay its bills
True
False
Net income is based on estimates
True
False
Which of the following would not be considered an operating activity?
Pay employees for work completed
Purchase supplies on account
Purchase equipment for cash
Sell goods to customers
Which of the following is not an operating activity?
Paying off a loan to the bank
Receiving cash from customers for services rendered
Paying employees for work completed
Billing customers for services rendered but not yet paid for
Which of the following is an operating activity?
Repaying a bank loan
Paying a dividend to owners
Purchasing a new building
Purchasing goods to be offered for sale
Which of the following represents a subtotal rather than an account?
Advertising Expense
Service Revenue
Supplies Revenue
Total Revenues
Which of the following items is not a specific account in a company's chart of accounts?
Income of Tax Expense
Sales Revenue
Unearned Revenue
Net Income
Which of the following would not be reported on the income statement?
Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period.
Rent expense in the amount of rent paid during the period for use of a storage facility in the current period.
Revenue in the amount of services provided to customers who promise to pay in the next period.
Cost of land purchased with cash for future use
Which of the following statements about the income statement of a company that was formed 10 years ago is correct?
Reports a Net Loss for the year if expenses are more than revenues.
Reports the financial effects of activities that have occurred since the company’s inception.
Reports the amount of the increase in stockholders’ equity this year as a result of the company’s operations
Reports Net Income which is not an account in the ledger.
During 2016, a company provided services for cash of $21,000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income (loss) for the year is:
$13,300
$1,700
$22,700
$6,300
Which of the following statements about accrual basis accounting is correct?
If a company uses accrual basis accounting, the company should not record revenue until payments is actually received.
If a company uses accrual basis accounting, the company should, the company should record expenses in the same period as the revenues they generate.
IFRS does not allow accrual basis accounting for external reporting of income.
The items reported on the income statement continue to have an impact beyond the current
Which of the following statements about the cash basis of accounting is correct?
It can lead to a distorted view of the company’s financial performance.
It is the only acceptable method for external reporting
It reports revenues when earned and expenses when incurred
It is used when cash is paid at the same time as the cost is incurred, but is not used when cash is paid before the expense is incurred
The Fastbank Motorcycle Service Company wins a $10 million bid to provide the repair services for a recall on a popular brand of motorcycles. No money is exchanged. The repair services are expected to be performed early next year. How will these events affect the balance sheet prepared at the end of this year?
Accounts Receivable will increase by $10 million
Both Accounts Receivable and Accounts Payable will each increase by $10 million
Both Accounts Receivable and Stockholders' Equity will each increase by $10 million
These events will not impact the balance sheet
The Rainbow House Painting Company has been contracted to paint a house for $3,600. One-half of that amount will be paid up front; the rest will be paid upon satisfactory completion. Rainbow should recognize the revenue when
the work begins
the first payment is recieved
half of the work is complete and half of the payments have been received
the work is complete
Which of the following statements about cash basis accounting and accrual basis accounting is correct?
Net income is generally larger under accrual basis accounting than cash basis accounting.
GAAP does not require the use of accrual basis accounting for external reporting.
Accrual basis accounting and cash basis accounting will always produce the same amount of net income.
Accrual basis accounting provides a better measure of operating performance than cash basis accounting
A company's revenue recognition policy
affects the income statement but not the balance sheet.
defines when its revenue should be collected
is usually described in the notes to a company's financial statements
states that revenues should not be recorded until payments are received from customers
During June, the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers. The company uses the accrual basis of accounting. How will these events affect the company’s financial statements?
The income statement shows the effects of the transactions in May
The income statement shows the effects of the transactions in June
The balance sheet shows no effect from the transactions in May
The balance sheet shows no effect from these transactions in May or June
