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22 Cards in this Set

  • Front
  • Back
True or False
The accrual basis of accounting does a better job of matching revenues and expenses in the same accounting period than the cash basis of accounting
True
True or False
U.S. companies may file their financial statements with the SEC using either the cash basis or the accrual basis of accounting.
False
The accrual basis of accounting records revenue when it is earned and expenses when they are paid.
False
True or false
The cash basis is the preferred method for external financial reporting
False
Retained Earnings represents?
the cumulative amount of net income earned by the company since it started business less dividends paid to stockholders
On Feb. 10 your company sold merchandies to a customer for $600 on account. When the customer pays for the merchandise on Feb. 28, your company should?
Increase cash $600 and decrease accounts receivable $600.
Some businesses choose to be organized as corporations because?
1. They can raise larger amounts of money to grow the business by selling shares of stock to investors.
2. The owners who have invested in the business cannot lose more than the amount they have invested.
3. Shareholders can sell their shares to other investors in the stock market.
Can you use cash when adjusting entry?
No
In February a compny received $10,000 in cash from a customer for landscaping services to be provided in April and May. This is an example of?
a deferred revenue.
Which one of the following items should NOT appear on the income statement?

A. Interest Revenue
B. Salaries Expense
C. Cost of goods sold
D. Dividends
D. Dividends
Adjusting entries are recorded at the end of each accounting period in order to?
Bring account balances up to date before the financial statements are prepared.
The unadjusted trial balance shows us?
if the accounting equation is in balance
Which of the following is NOT a financial statement issued by a corporation for external financial reporting?

A. Statement of Retained earnings
B. Statement of cash flows
C. Income statement
D. Adjusted trial balance
Adjusted trial balance
Which of the following accounts is increased by a credit?

A. Accounts receivable
B. Equipment
C. Insurance Expense
D. Sales Revenue
D. Sales Revenue
Which on of the followin statements regarding the income statement prepared using the accrual basis of accounting is true?

A. Net Income represents the amount of increase or decrease in cash from the beginning to the end of the year.
B. It may include some estimated amounts.
C. It shows the increase or decrease in the volume of the company during the year.
D. All of the above are true.
B. It may include some estimated amounts
On september 1, 2010, a company paid $4,800 for a 2-year insurance policy, with coverage beginning on Sept. 1. The payment was recorded in the Prepaid Insurance account. The adjusting entry on December 31, 2010, would be?
Decrease prepaid insurance by $800 and increase insurance expense by $800
Generally accepted accounting principles (GAAP) are?
determined by the Financial Accounting Standards Board (FASB) in the U.S.
A company purchased $90,000 of new delivery vans on January 1, 2011, paying 1/3 in cash and signing a note for the remainder. What is the effect on the accounting equation?
Total assets increase by $60,000 and Liabilities increase by $60,000.
The current ratio for company A is 1.24 and for company B is .90. We would interpret these ratios to mean that?
Company A has more assets than Company B.
The Securities and Exchange Commission (SEC) is?
A federal government agency responsible for regulation public companies in the U.S.
A company pays its hourly employees $3,500 for a five day work week each Friday. December 31, the end of the company's fiscal year, falls on Tuesday. The adjusting entry on December 31 would be?
Increase wages expense $1,400 and increase wages payable $1,400.
During the closing process at the end of the fiscal year all of the following accounts would be closed, except for?
Supplies