BA 220 Exam Practice Questions

accounting

d) all above

1. measures business activities

2. processes data into report and communicates the data to decision makers

3. is often called the language of business

which of the following have unlimited liability for a company’s debts?

general partner in a limited liability partnership

the 2 types of accounting are

financial and managerial

the owner of a ___ is personally liable for all the business debts

proprietorship

information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. The qualitative characteristic of information is called:

faithful representation

which statement is false?

the most commonly used accounting practices are essentially the same under both U.S. GAAP and IFRS

to be useful, accounting information must have the fundamental qualitative characteristics of:

relevance and faithful representation

verifiability means that the accounting information

must be capable of being checked for accuracy, completeness, and reliability

the principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is

historical cost

A construction company paid $81,000 cash for land used in the business. At the time of purchase, the land had a list price of $88,000. When the balance sheet was prepared, the fair value of the land was $84,000. At what amount should the land be reported on the balance sheet of the company?

$81,000

___ is the element in the fraud triangle that results from weak internal controls

opportunity

if a company prepares its financial statements three years after the end of its accounting period, it has violated the qualitative characteristic of:

timeliness

the two most common types of fraud impacting the financial statements are

fraudulent financial reporting and misappropriation of assets

the 3 main components of the fraud triangle are

motive, opportunity, and rationalization

fraudulent financial reporting is also called

cooking the books

for a new business, the beginning balance of retained earnings equals

zero

the components of internal control do NOT include

safeguard assets

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DO include:

control environment, risk assessment, control procedures

in the buyer’s records, the purchase of supplies on account would

increase assets and increase liabilities

a company borrowed $15,000 from the bank by signing a long-term note. How does this transaction affect the accounting equation?

add $15,000 to Cash and $15,000 to Notes Payable

The revenue principle deals with the following

when to record revenue and the amount of revenue to record

the revenue principle requires that a business records revenue when the business

performs a service or delivers a product and not before

one way the risk of not collecting receivables can be managed is

separate cash-handling duties from record-keeping duties

the bookkeeper recorded a deposit of $100 as $10. On the bank reconciliation, this will be a(n)

addition of $90 to the balance per books

a debit entry will

decrease a liability account and increase an expense account

a credit entry will

decrease an expense account

expenditures capitalized as long-lived assets generally include those expenditures that

are material in amount and that have an economic benefit to the entity that extends beyond the current year

depreciation straight line method w/ salvage value

(cost-salvage value)/useful life

which of the following is not a principal form of business organization

limited unregistered business

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IS a principal form of business organization:

partnership, sole proprietorship, and corporation

the balance sheet equation can be represented by

all the answers are correct

1. assets=liabilities + stockholders’ equity

2. assets-liabilities=stockholders equity

3. net assets=stockholders equity

stockholders equity refers to which of the following

the ownership right of the stockholder of the entity

the principle of full disclosure means that the reporting entity must fully disclose

all necessary information to prevent all users of financial statements from being mislead

the principle reason for reconciling the cash balance per books with the balance shown on the bank statement is to

determine the amount of cash in the account actually available to the entity

for which of the following reconciling items would an adjusting entry be necessary on the company’s books

a bank service charge

an organization’s system of internal control is designed primarily to

provide an operating framework for all employees as they work to achieve the organization’s goals

one of the most important reasons for having a system of internal control is to

improve the effectiveness and efficiency of the operations of the organization

which of the following is an objective of financial reporting by business enterprises

financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them

which of the following is not an internal control procedure for cash

payments should be made with cash

a check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

added to the balance per books

for which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation

deposit of $600 recorded by the bank a $60

which one of the following is not an objective of a system of internal controls

fairness of the financial statements

which of the following items on a bank reconciliation would require an adjusting entry on the company’s books

a bank service charge

which one of the following is an internal user of financial information

management

a key difference between management accounting and financial accounting reports is that management accounting reports tend to ___

have longer reporting intervals

if a company buys inventory on account, we

credit accounts payable

a ledger

is where transactions are posted to after they are initially recorded

a journal

is where transactions are initially recorded