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STUDY Office Accounting Ch.1-3 Exam

accounting
is a system of gathering financial information about a business and reporting this information to users.
analyzing
is looking at events that have taken place and thinking about how they affect the business.
recording
is entering financial information about events into the accounting system.
classifying
is sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.
false
Reviewing the events that have taken place and determining how this affects the business is called interpreting.
true
Stockholders have very little influence on business decisions.
CIA
An internal auditor can achieve professional recognition in internal auditing by receiving which of the following certificates?
true
Generally accepted accounting principles are procedures and guidelines to be followed in the accounting and reporting process.
false
The principal accounting officer of a company is called a public accountant.
corporation
Stockholders own which type of business?
false
A CMA is a Certified Marketing Auditor.
false
Writing or using one of the latest technological advances to enter a transaction in the accounting records is called summarizing.
merchandising business
A business that purchases a product from another business to sell to customers is called a
false
Cost accounting is used to develop a financial plan for a company.
marketing analysis
Public accountants do NOT offer which of the following services?
analyzing
Examining a transaction or event to determine its fundamental significance to the business so that the relevant information may be properly processed is called
proprietorships
Which of the following does NOT use nonprofit accounting guidelines and procedures?
the language of business
Since financial information is communicated in accounting terms, accounting is said to be
true
Since financial information is communicated in accounting terms, accounting is said to be the “language of business.”
decrease assets and decrease liabilities
Tyler paid $3,700 on account to the company from which equipment was purchased on credit. This transaction would
true
If owner’s equity and liabilities increased during the period, then assets must also have increased.
false
Liabilities represent an “inside” interest in a business.
decrease assets and decrease owner’s equity.
Sue Lee paid $1,200 for office rent. This transaction would
Other terms used for owner’s equity include net worth and capital.
true
Withdrawing cash from a business entity will result in an increase in owner’s equity.
false
The terms “profit and loss statement” or “operating statement” are sometimes used as synonyms for the balance sheet.
false
According to the business entity concept, a proprietor may include nonbusiness assets and liabilities in the business entity’s accounting records.
false
Since insurance lasts for several months, it is recorded as owner’s equity.
false
The income statement and statement of owner’s equity provide information covering a period of time.
true
Since supplies last for several months, they are recorded as assets.
true
An example of an expense is
supplies consumed
Financial statements commonly prepared by businesses include an income statement, a statement of owner’s equity, and a balance sheet.
true
Recognizing the effects of transactions on assets, liabilities, owner’s equity, revenue, and expenses of a business is the processing function.
true
Meghan started her business by investing $30,000 in cash. This transaction would
increase assets and increase owner’s equity
To debit an account is to enter an amount on the left side of the account.
true
An increase or decrease in any asset, liability, owner’s equity, revenue, or expense is always accompanied by an offsetting change within the basic accounting elements.
true
When services are performed for which payment will be received later, accounts receivable increases.
true
Liability accounts normally have debit balances.
false
The trial balance
shows the current date.
The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called
double-entry accounting.
A credit represents a decrease in
an asset
The balance of a T account is on the side with the larger footing.
true
Revenues decrease owner’s equity.
false
Footings in T accounts
are unnecessary when there is only one entry.
Prepaid insurance and supplies are assets because they will provide benefits for more than one month.
true
Payment of a telephone bill represents an increase in a(n)
expense
A trial balance is a formal business report.
false
At least two accounts are affected by every transaction.
true
A trial balance is taken periodically to check the equality of the debits and credits.
true
The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called complex-entry accounting.
false
The standard T account includes all of the following EXCEPT
the current date
A trial balance is a list of all accounts showing the title and balance of each account.
true
The owner’s capital account normally has a credit balance.
true
A cash payment on a loan affects which of the following accounts?
Cash and Notes Payable
The purchase of a supply of markers for three months should be recorded as an increase in revenue and a decrease in cash.
false
A credit increases liabilities and owner’s equity.
true
An increase in an asset account may be offset by a(n)
increase in owner’s equity
Payment of rent decreases the Cash account.
true
If services for the month total $7,000 in cash and $1,500 on account, the revenue account increases $8,500
true
The accounting equation must remain in balance.
true
Revenues received during an accounting period increase owner’s equity.
true
If owner’s equity and liabilities increased during the period, then assets must also have increased.
true
Expenses represent a decrease in liabilities.
false
The accounting equation shows the relationship among the three basic accounting elements?assets, revenues, and owner’s equity.
false
The financial statement that should be completed first is the
income statement
Expenses that are incurred in operating the enterprise increase owner’s equity.
false
The statement of owner’s equity shows the state of the business on a specific date.
false
An accounts payable is an unwritten promise to pay a supplier for assets purchased or services rendered.
true
If the revenue of a period exceeds the expenses, the excess represents a net loss.
false
The income statement provides information about events over a period of a month, year, or other period of time.
true
Which phase of the accounting process involves recognizing the effect of transactions on assets, liabilities, owner’s equity, revenue, and expenses of a business?
processing
Writing or using one of the latest technological advances to enter a transaction in the accounting records is called summarizing.
false
Certified Public Accountant is a professional designation that a public accountant can earn by passing a written exam and completing a specific amount of work experience.
true
The Financial Accounting Standards Board develops generally accepted accounting principles to provide some assurance that companies are reporting business activities in a similar manner.
true
Examining a transaction or event to determine its fundamental significance to the business so that the relevant information may be properly processed is called
analyzing
The six major steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting.
true
The person who reviews the operating and accounting control procedures adopted by management to make sure the controls are adequate may be referred to as a(n)
internal auditor
Accountants design accounting information systems and analyze and interpret information.
true
The principal accounting officer of a company is called a public accountant.
false
Reviewing the events that have taken place and determining how this affects the business is called interpreting.
false
A business that makes a product to sell is called a manufacturing business.
true

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