Question 1

The three basic steps of the systematic accounting process used to capture and report the financial effects of a company's activities are:
A)Picture,Name,Analyze.
B)Analyze,Record,Summarize.
C)Analyze,Journalize,Report.
D)Analyze,Capture,Report.

Accepted Answer

The three basic steps of the systematic accounting process are analyzing the financial effects of a company's activities, recording those effects in the accounts, and summarizing the accounts in financial statements. This process is commonly known as the accounting cycle or accounting process. The steps in the process are sometimes expressed in different ways, but they typically involve analyzing transactions, journalizing them in the appropriate accounts, and then preparing a trial balance, adjusting entries, an adjusted trial balance, and financial statements. Choice B accurately addresses the three basic steps.

Question 2

A client has settled his outstanding credit account with your company; at the same time,you have just received cash for inventory that you sold at cost.What is the overall impact of these concurrent changes on the current ratio?
A)There is no impact.
B)The inflow of cash caused the current ratio to rise.
C)Depends on the actual dollar amounts.
D)None of the choices are correct.

Accepted Answer

The current ratio is unaffected because both transactions increase both current assets (cash) and current liabilities (with the settlement of the credit account) or do not affect liabilities but keep assets constant (selling inventory at cost simply converts one asset form to another without changing the total value of current assets).

Question 3

The Delivery Company has placed an order for $2,000 of supplies and intends to pay on account once the goods have been received.Transaction analysis requires the accounting clerk to,
A)record supplies as an asset on the order date,but wait to record the liability until supplies are received.
B)record supplies as an asset and credit accounts payable on the order date.
C)record supplies as an asset and debit accounts payable on the order date.
D)do nothing.

Accepted Answer

Transaction analysis involves recognizing the effects of transactions on the accounting equation only when the transaction has actually occurred. In this case, since the goods have not been received, no transaction has occurred yet from an accounting perspective. Therefore, no entry is made until the goods are received and the company has an obligation to pay.

Question 4

On March 3,2018,your company pays $4,000 to acquire supplies.Should this be a recognized accounting transaction? If so,what accounts are affected and by how much each?

Accepted Answer

The answer of On March 3,2018,your company pays $4,000 to...

Question 5

Your company has just sold some inventory.What impact does this have on the company's current ratio?
A)There is no impact; the current ratio remains the same.
B)The current ratio will increase as a result of sale.
C)The current ratio will decline as a result of the sale.
D)More information is needed to determine the impact.

Accepted Answer

The impact on the current ratio from selling inventory depends on several factors, such as how the proceeds from the sale are used (e.g., to pay off current liabilities, to purchase more inventory, or to hold as cash) and the profit margin on the sale. Without this information, it's impossible to determine the exact impact on the current ratio.

Question 6

The two sources of financing available to businesses are known as,
A)common and preferred shares.
B)common shares and loans.
C)equity and liabilities.
D)equity and debt.

Accepted Answer

The two sources of financing available to businesses are equity and debt. Equity financing involves selling ownership shares in the company to investors, while debt financing involves obtaining loans that must be repaid with interest. Both types of financing have their advantages and disadvantages, and companies will typically use a combination of both to meet their financing needs.

Question 7

When dealing with claims on company assets,:
A)owners take precedence over creditors.
B)creditors take precedence over owners.
C)owners and creditors are treated equally.
D)All of the choices are possible; it depends on the situation.

Accepted Answer

Creditors have priority over owners (shareholders) when it comes to claims on a company's assets, especially in cases of liquidation or bankruptcy. This is because the company's obligations to its creditors must be satisfied before any distributions can be made to owners or shareholders.

Question 8

If a purchase of supplies for $400 was mistakenly recorded as a credit to Supplies,but the cash paid for the supplies was correctly recorded,what would be the effect on the accounting equation?

Accepted Answer

The answer of If a purchase of supplies for $400...

Question 9

According to the accounting equation,ceteris paribus,which of the following could offset an increase in profits so as to maintain equality?
A)Dividends,common shares or liabilities decrease; alternatively,assets increase.
B)Dividends or assets increase; alternatively,common shares or liabilities decrease.
C)Dividends,assets,or common shares increase; alternatively,liabilities decrease.
D)Dividends,assets,or liabilities increase; alternatively,common shares decrease.

Accepted Answer

An increase in profits increases equity. To maintain the accounting equation (Assets = Liabilities + Equity), an increase in dividends or assets (which reduces equity or increases the other side of the equation) or a decrease in common shares or liabilities (which reduces the right side of the equation) can offset the increase in profits.

Question 10

The Supply Company buys $30,000 of equipment and funds the purchase through liquidating common shares that it owns.What is the impact of this transaction on the basic accounting equation?
A)There is no effect.
B)Only the left-hand side is impacted.
C)Only the right-hand side is impacted.
D)Both the right-hand side and left-hand side are impacted.

Accepted Answer

The answer of The Supply Company buys $30,000 of equipment...

Question 11

On January 1,2018,NWK,Inc.'s assets were $300,000 and its shareholders' equity was $140,000.During the year,assets increased $15,000 and liabilities decreased $10,000.What was the shareholders' equity on December 31,2018?

Accepted Answer

The answer of On January 1,2018,NWK,Inc.'s assets were $300,000 and...

Question 12

The basic accounting equation can be represented as:
A)A = L + SE
B)SE = A - L
C)A - SE = L
D)All of these choices are correct.

Accepted Answer

All the choices represent the basic accounting equation in different forms. A) Assets = Liabilities + Shareholder's Equity, B) rearranges the equation to solve for Shareholder's Equity, and C) rearranges the equation to solve for Liabilities.

Question 13

Which of the following are the three steps applied to daily transactions in the accounting cycle?
A)Analyze,record,summarize.
B)Present,process,summarize.
C)Determine,Scrutinize,record.
D)Analyze,determine,record.

Accepted Answer

The three steps applied to daily transactions in the accounting cycle are analyze (identify the relevant transaction), record (enter the transaction into the appropriate account), and summarize (prepare financial statements to communicate the results of the transactions). Choice A is the only answer that includes those three steps.

Question 14

The Demand Company buys $30,000 of equipment and funds half the purchase through liquidating common shares that it owns,while incurring an informal promise to pay the remainder at the end of the month.What is the impact of this transaction on the basic accounting equation?
A)Only the left-hand side is impacted.
B)Only the right-hand side is impacted.
C)Both sides are impacted and the right-hand side equals the left-hand side.
D)Both sides are impacted and the right-hand side does not equal the left-hand side.

Accepted Answer

This transaction impacts both sides of the basic accounting equation. The left-hand side (assets) increases by $30,000 from the purchase of equipment, and the right-hand side (liabilities and equity) also increases by $30,000 from the issuance of common shares and the informal promise to pay the remaining amount at the end of the month. Both sides are impacted and the right-hand side equals the left-hand side.

Question 15

Use the following information as of December 31,2018 to calculate the amounts of cash and retained earnings.The company's total assets are $36,000.This company doesn't have other accounts.

Accepted Answer

The answer of Use the following information as of December...

Question 16

A debit balance in the retained earnings account can result from:
A)expenses exceeding revenues.
B)a loss exceeding the amount of profit previously recorded in retained earnings.
C)dividends being greater than accumulated earnings.
D)All of the choices are correct.

Accepted Answer

A debit balance in the retained earnings account can result from any of the choices listed in options A, B, or C. Therefore, all of the answer choices are correct.

Question 17

When analyzing transactions and exploring their financial effects,journals are used to:
A)summarize the effects on each account; organized by date.
B)summarize the effects on each account; organized by account.
C)record the daily effects of the transactions; organized by date.
D)record the daily effects of the transactions; organized by account.

Accepted Answer

Journals are used to record the daily effects of transactions, organized by date. This allows for a chronological record of all financial transactions as they occur.

Question 18

Pizza Place Co.went ahead and prepaid one of its expenses,but the clerk looking after the transaction mistakenly debited the transaction as an expense.As a result,:
A)The Trial Balance will have Debits = Credits.
B)The Trial Balance will have Debits > Credits.
C)The Trial Balance will have Debits < Credits.
D)All of the choices are correct.

Accepted Answer

The trial balance will still balance (Debits = Credits) because the error was within the debit side of the ledger, merely misclassifying the type of debit (expense vs. prepaid expense), not affecting the overall balance between debits and credits.

Question 19

A company goes ahead and purchases inventory.The impact on the current ratio is:
A)zero,if inventory was purchased using cash.
B)positive,if CA < CL to start with and inventory is purchased on credit.
C)negative,if CA > CL to start with and inventory is purchased on credit.
D)All of the choices are correct.

Accepted Answer

The current ratio is affected by changes in current assets (CA) and current liabilities (CL). Purchasing inventory with cash (a current asset) does not change the total current assets, thus not affecting the current ratio (A). If inventory is purchased on credit when CA < CL, it increases current liabilities without immediately affecting current assets, worsening the current ratio (B). Conversely, if CA > CL and inventory is purchased on credit, it increases both current assets (inventory) and current liabilities (the payable), which can either improve or worsen the current ratio depending on the proportionate increase, but generally, it's seen as a negative impact because it increases liabilities (C). Therefore, all choices correctly describe scenarios that affect the current ratio.

Question 20

For each of the following,indicate how the line item would be categorized on a classified balance sheet.
CA (current asset)
LTA (long-term asset)
CL (current liability)
LTL (long-term liability)
SE (shareholders' equity)
____ Property and Equipment
____ Contributed Capital
____ Accrued Liabilities
____ Supplies
____ Deferred Revenue
____ Retained Earnings
____ Wages Payable
____ Accounts Receivable
____ Inventory
____ Bonds Payable
____ Accounts Payable

Accepted Answer

The answer of For each of the following,indicate how the...

Quiz 2: The Balance Sheet

The three basic steps of the systematic accounting process used to capture and report the financial effects of a company's activities are:

A client has settled his outstanding credit account with your company; at the same time,you have just received cash for inventory that you sold at cost.What is the overall impact of these concurrent changes on the current ratio?

The Delivery Company has placed an order for $2,000 of supplies and intends to pay on account once the goods have been received.Transaction analysis requires the accounting clerk to,

On March 3,2018,your company pays $4,000 to acquire supplies.Should this be a recognized accounting transaction? If so,what accounts are affected and by how much each?

Your company has just sold some inventory.What impact does this have on the company's current ratio?

The two sources of financing available to businesses are known as,

When dealing with claims on company assets,:

If a purchase of supplies for $400 was mistakenly recorded as a credit to Supplies,but the cash paid for the supplies was correctly recorded,what would be the effect on the accounting equation?

According to the accounting equation,ceteris paribus,which of the following could offset an increase in profits so as to maintain equality?

The Supply Company buys $30,000 of equipment and funds the purchase through liquidating common shares that it owns.What is the impact of this transaction on the basic accounting equation?

On January 1,2018,NWK,Inc.'s assets were $300,000 and its shareholders' equity was $140,000.During the year,assets increased $15,000 and liabilities decreased $10,000.What was the shareholders' equity on December 31,2018?

The basic accounting equation can be represented as:

Which of the following are the three steps applied to daily transactions in the accounting cycle?

The Demand Company buys $30,000 of equipment and funds half the purchase through liquidating common shares that it owns,while incurring an informal promise to pay the remainder at the end of the month.What is the impact of this transaction on the basic accounting equation?

Use the following information as of December 31,2018 to calculate the amounts of cash and retained earnings.The company's total assets are $36,000.This company doesn't have other accounts.

A debit balance in the retained earnings account can result from:

When analyzing transactions and exploring their financial effects,journals are used to:

Pizza Place Co.went ahead and prepaid one of its expenses,but the clerk looking after the transaction mistakenly debited the transaction as an expense.As a result,:

A company goes ahead and purchases inventory.The impact on the current ratio is: