Monday, January 27, 2014- Chapters 1 & 2 Review

Create a T- Account for the cash balance at the end of this business cycle:

Beginning Balance: $6000

Purchased computer equipment with cash for $2000

Received money on a previously unpaid account in total of $200

Issued stock to new investors and received $1500

Paid a supplier $400

Cash

Multiple Choice- Chapters 1 & 2

  1. The duality of effects concept means that:
  1. Each transaction must be recorded two times – in the T-account and in the journal.
  2. Two people are involved in each accounting transaction
  3. Each event can be approached from two points of view
  4. Each transaction has at least two different effects on the assets, liabilities, or stockholders’ equity of a business.
  1. How would the purchase of supplies giving an informal promise to pay at the end of the month affect assets, liabilities, and stockholders’ equity?
  1. + Assets; + Stockholders’ Equity
  2. +Assets; +Liabilities
  3. –Assets; - Liabilities
  4. There is no effect on the accounting equation because this event is not a transaction
  1. Which of the following statements regarding the debit/credit framework is not correct?
  1. Assets are increased by debits and decreased by credits
  2. Liabilities are increased by credits and decreased by debits
  3. Stockholders’ equity is increased by credits and decreased by debits
  4. All of the above are correct statements
  1. A transaction can best be described as:
  1. Any internal or external event taking place in a business
  2. An event that impacts the accountant personally
  3. An event that involves the IRS
  4. An event that effects assets, liabilities, or stockholders’ equity and its effects are direct and measurable
  1. A classified balance sheet reports:
  1. Assets and liabilities based on whether they are internal events or external exchanges
  2. Assets and liabilities in either current or long-term categories
  3. Assets and liabilities based on whether they are real or fraudulent.
  4. All of the above are true statements about a classified balance sheet
  1. Which of the following is not part of the basic accountings equation?
  1. Expenses
  2. Liabilities
  3. Assets
  4. Stockholders’ Equity
  1. A company that sells new stock certificates to investors who can then sell that stock on the stock exchange is referred to as a:
  1. Private company
  2. Internal company
  3. External company
  4. Public company
  1. Which of the following statements regarding stockholders’ equity is not correct?
  1. The owners have a claim on amounts they contributed to the business by purchasing the company’s stock.
  2. Stockholders’ claim equal the company’s liabilities plus assets.
  3. The owners have a claim on amount the company has earned through profitable business operations.
  4. The goal of most businesses is to generate profits because this increases stockholders’ equity, which allows owners to get more money back from the company than they put in (a return on their investment)
  1. In response to recent cases involving fraud and the misrepresentation of financial results of some companies, which of the following was created by the US Congress?
  1. SEC
  2. SOX
  3. GAAP
  4. AICPA
  1. So that they can report whether, beyond reasonable doubt, the financial statements represent what they claim to represent and whether they comply with GAAP, auditors must follow rules approved by the various bodies including the
  1. PCAOB
  2. GAO- Government Accounting Office
  3. SEC
  4. CEO of the firm