Staff Accounting Assessment

What is the difference between accounts receivable (AR) and accounts payable (AP)?

AR represents amounts owed to the entity for services performed. AR increases as a debit when an invoice or receipt is generated for services provided and decreases when paid or written off as a an allowance for bad debts

AP represents amounts owed to the vendors for services performed. AP increases as a credit when an invoice or receipt is generated for services provided and decreases when paid or written off

When a company is using double-entry accounting, what elements of a given ledger must be equal?

Debits and credits must be equal

What are two or three types of special journals?

Sales journal, purchase journal, cash receipt journal

If a company has three bank accounts for processing payments, what is the minimum number of ledgers it needs?

3 ledgers

What methods have you used for estimating bad debt?

Percentage of credit sales method

Why is it easier for someone to perpetrate fraud using a journal entry than with a ledger?

There are less controls that safeguard the company from fraudulent journal entries. Ledgers typically have less access.

Which enterprise resource planning (ERP) systems have you used?

Auditors are not granted access to ERP systems

What is your experience with developing or monitoring business metrics?

Which of the following is not a core financial statement?

The Trial Balance

The income statement, which presents the results of operations, can be prepared in many forms including:

Single Step Income Statement

Condensed Income Statement

Common Sized Income Statement

Which of the following account types increase by debits in double-entry accounting?

Assets, Expenses, Losses

Which of the following is true?

Accounts receivable are found in the current asset section of a balance sheet.

Accounts receivable increase by credits.

Accounts receivable are generated when a customer makes payments.

Accounts receivable become more valuable over time.

Accounts receivable are found in the current asset section of a balance sheet.

A company that uses the cash basis of accounting will:

Record revenue when it is collected.

What are the main sections on a balance sheet?

Assets, liabilities, equity

How are a company's financial statements used?

For internal analysis

For external negotiation

For compliance

All of the above

All of the above

Which of the following scenarios increases accounts payable?

A customer fails to pay an invoice.

A supplier delivers raw materials on credit.

Office supplies are purchased with cash.

None of the above

A supplier delivers raw materials on credit.

Which of the following must a certified public accountant (CPA) have in-depth knowledge of to pass the CPA licensing exam? (Check all that apply.)

Accounting software packages

Auditing

Derivatives

International banking laws

Auditing

Derivatives- wrong

What is the result of the following transaction for Company A? Company A's customer is unable to pay for a previous credit sale in accordance with Company A's 90-day payment terms. The customer makes a promissory note to Company A that extends payment over a 24-month term including 5% interest.

No result because the customer didn't pay.

Accounts receivable increases because of the interest.

A note receivable is recorded in non-current assets.

Company A records the loan as a liability.

A note receivable is recorded in non-current assets.

When are liabilities recorded under the accrual basis of accounting?

When incurred

Which is true about time in accounting?

Balance sheets reflect a company's financial position at a certain point in time.

When a company purchases property, plant, and equipment, how is it reflected on the statement of cash flows?

As a use of cash in the "cash from investing activities" section.

What would the journal entry be for a company that takes out a five-year, $100,000 business loan?

Cash 100,000

Note Payable 100,000

Debit $100,000 current asset, Credit $100,000 non-current liabilities

Which accounts are associated with cost of goods sold?

Accrued interest

Depreciation

Dividends

Inventory

Inventory

Which organizations are involved in development of US Generally Accepted Accounting Principles (GAAP)? (Check all that apply.)

Financial Accounting Standards Board (FASB)

Government Accounting Standards Board (GASB)

Securities and Exchange Commission (SEC)

Federal Accounting Standards Advisory Board (FASAB

Financial Accounting Standards Board (FASB)

Securities and Exchange Commission (SEC)

-wrong

Which inventory valuation method reflects the most current market value for inventory on hand?

First-in-First-Out (FIFO)

Which of the following statements is not true about intercompany accounting?

Intercompany transactions are between two units within the same legal entity.

Intercompany transactions are eliminated in consolidated parent financial statements.

They can significantly impact taxes.

Intercompany transactions are between different legal entities under the same parent control.

Intercompany transactions are between two units within the same legal entity.

Which is the method of depreciation used for US tax returns that is not GAAP-compliant?

Units of production method- wrong

Modified accelerated cost recovery systems- correct

What is the most-used method to amortize intangible assets on a company's financial statements?

Straight-line method

Sum of the years' digits method

Double-declining balance method

Units of production method

Straight-line method

Which financial statement is a report of a company's revenues and expenses during a certain time period?

Income Statement

After making a sale of $3,000, where $1,200 is paid in cash and $1,800 is sold on credit, how would a company go about updating its balance sheet?

Cash 1,200

Acc Receivable 1,800

Retained Earnings 3,000

Which is not an example of financing cash flow?

Paying off a debt of $25,000

Investing in equipment worth $90,000

Paying $12,000 worth of dividends to shareholders

Issuing $42,000 worth of shares

Investing in equipment worth $90,000

Which side of the ledger account are debits recorded on?

Left

Are assets on the balance sheet recorded at their estimated fair market value?

Sometimes; it's situational-wrong

False

Increasing an asset involves crediting the account.

False

Unearned revenues are recorded on a company's balance sheet under which kind of account?

Liability

What is the minimum number of accounts that accounting entries can have?

Two

The listing of all the financial accounts within a company's general ledger is called the _____.

Chart of accounts

Which is not classified as a current asset?

Property

Which formula is used to calculate operating income?

Gross Income - Operating Expenses = Operating Income

Which of these statements about accrual accounting is true?

Revenue is recorded only when payments are received, while expenses are recognized when they're incurred.

All revenue from prepayments should be recognized when the payment is received, while expenses accrue over the life of the obligation.

If the business has provided the goods or services and can reasonably expect to receive cash, it can recognize the revenue in that period.

The matching principle dictates that expenses should be recognized when they are incurred, regardless of when revenue is recognized.

The matching principle dictates that expenses should be recognized when they are incurred, regardless of when revenue is recognized.- wrong

If the business has provided the goods or services and can reasonably expect to receive cash, it can recognize the revenue in that period.

In a journal entry, a debit decreases which of the following accounts?

Accounts Payable

Which describes the double-declining balance depreciation method?

The depreciation expense is larger in the first few years and gets smaller as time goes on.

Which one of these WILL NOT yield earnings before interest and taxes (EBIT)?

Sales + Taxes + Interest