MCQS 1 Land is purchased by making a cash down payment of $40,000 and signing a note payable for the balance of $130,000. The journal entry to record this transaction in the accounting records of the purchaser includes: a)A credit to Land for $40,000. b)A debit to Cash for $40,000. c)A debit to Land for $170,000. d)A debit to Note Payable for $130,000. MCQS 2 The accounting principle that assumes that a company will operate in the foreseeable future is: a)Going concern. b)Objectivity. c)Liquidity. d)Disclosure. MCQS 3 Total assets must always equal total liabilities plus total owners' equity. a)True b)False MCQS 4 In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting.) a)$4,000 is paid in January for equipment with a useful life of four years. b)$1,800 is paid in January for a two-year fire insurance policy. c)$1,200 cash dividends are declared and paid. d)$900 is paid to an attorney for legal services rendered during the current year. MCQS 5 Which of the following is not a correct form of the Accounting Equation? (a) Assets = Claims (b) Assets = Liabilities + Owner Equity (c) Assets – Liabilities = Owner’s Equity (d) Assets + Owner’s Equity = Liabilities MCQS 6 Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates: a)The accounting equation. b)The stable-dollar assumption. c)The business entity concept. d)The cost principle. MCQS 7 The cash account of Grande Home Improvement Store shows the following: a debit on June 1 for $25,000; a credit on June 5 for $10,000, a debit on June 16 for $14,000, and a credit on June 27 for $8,000. What is the balance in the cash account at the end of June? a)$39,000 debit. b)$21,000 debit. c)$18,000 credit. d)$21,000 credit. MCQS 8 Bruno's Pizza Restaurant makes full payment of $8,300 on an account payable to Stella's Cheese Co. Stella's would record this transaction with a: a)Debit to Accounts Payable for $8,300. b)Credit to Cash for $8,300. c)Credit to Accounts Receivable for $8,300. d)Credit to Accounts Payable for $8,300. MCQS 9 Eton Corporation purchased land in 1998 for $190,000. In 2014, it purchased a nearly identical parcel of land for $430,000. In its 2014 balance sheet, Eton valued these two parcels of land at a combined value of $860,000. Reporting the land in this manner violated the: a)Cost principle. b)Principle of the business entity. c)Objectivity principle. d)Going-concern assumption. MCQS 10 Accounting entries involve a minimum of __ accounts. a)3 b)2 c)5 d)Unlimited
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
MCQS 1
Land is purchased by making a cash down payment of $40,000 and signing a note payable for the balance of $130,000. The
a)A credit to Land for $40,000.
b)A debit to Cash for $40,000.
c)A debit to Land for $170,000.
d)A debit to Note Payable for $130,000.
MCQS 2
The accounting principle that assumes that a company will operate in the foreseeable future is:
a)Going concern.
b)Objectivity.
c)Liquidity.
d)Disclosure.
MCQS 3
Total assets must always equal total liabilities plus total owners' equity.
a)True
b)False
MCQS 4
In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting.)
a)$4,000 is paid in January for equipment with a useful life of four years.
b)$1,800 is paid in January for a two-year fire insurance policy.
c)$1,200 cash dividends are declared and paid.
d)$900 is paid to an attorney for legal services rendered during the current year.
MCQS 5
Which of the following is not a correct form of the
(a) Assets = Claims
(b) Assets = Liabilities + Owner Equity
(c) Assets – Liabilities = Owner’s Equity
(d) Assets + Owner’s Equity = Liabilities
MCQS 6
Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates:
a)The accounting equation.
b)The stable-dollar assumption.
c)The business entity concept.
d)The cost principle.
MCQS 7
The cash account of Grande Home Improvement Store shows the following: a debit on June 1 for $25,000; a credit on June 5 for $10,000, a debit on June 16 for $14,000, and a credit on June 27 for $8,000. What is the balance in the cash account at the end of June?
a)$39,000 debit.
b)$21,000 debit.
c)$18,000 credit.
d)$21,000 credit.
MCQS 8
Bruno's Pizza Restaurant makes full payment of $8,300 on an account payable to Stella's Cheese Co. Stella's would record this transaction with a:
a)Debit to Accounts Payable for $8,300.
b)Credit to Cash for $8,300.
c)Credit to
d)Credit to Accounts Payable for $8,300.
MCQS 9
Eton Corporation purchased land in 1998 for $190,000. In 2014, it purchased a nearly identical parcel of land for $430,000. In its 2014 balance sheet, Eton valued these two parcels of land at a combined value of $860,000. Reporting the land in this manner violated the:
a)Cost principle.
b)Principle of the business entity.
c)Objectivity principle.
d)Going-concern assumption.
MCQS 10
Accounting entries involve a minimum of __ accounts.
a)3
b)2
c)5
d)Unlimited
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