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Financial Statements and Accounting Transactions

Financial Statements and Accounting Transactions MCQs

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The financial position of the business on a given date is reported on the

Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Changes In Owner’s Equity

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The net profit or loss for a particular period of time is reported on the

Income Statement
Balance Sheet
Trial Balance
Statement of Changes In Owner’s Equity

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The investment of cash into the business results in a/an

increase in cash and a decrease in capital
increase in cash and an increase in capital
decrease in cash and an increase in capital
increase in fees earned and an increase in capital

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The purchase of supplies for cash will result in a/an

increase in cash and a decrease in capital
increase in cash and an increase in supplies
increase in supplies and a decrease in cash
increase in equipment and an increase in capital

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Services rendered for cash will result in a/an

increase in cash and a decrease in capital
increase in cash and an increase in fees earned
decrease in cash and an increase in fees earned
increase in fees earned and an decrease in capital

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Cash is received from a client for office rental space.

cash increases and rental fees earned decreases
cash increases and rental fees earned increases
cash decreases and capital increases
cash decreases and withdrawals increases

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Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting princi...

Continuing-concern concept
Business entity principle
Realization principle
Objectivity principle

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Which of the following is a formal written promise to pay a definite sum of money on demand or at a fixed or determinable future date?

Account payable
Account receivable
Note payable
Prepaid insurance policy

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Peter Atli decided to pay himself a salary of $3,000 per month for the work he performs for his business, a single proprietorship. Each time a cheque ...

Salaries Expense
Capital
Peter Atli, Withdrawals
Owner Salary Expense

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The personal telephone bill of Junior Sample was paid by issuing a cheque from the business chequing account. No business calls had been made from Jun...

Junior, Capital
Cash
Junior, Withdrawals
Telephone Expense

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Which of the following accounts is NOT a liability?

Accounts Payable
Accounts Receivable
Salaries Payable
Notes Payable

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Assets total $50,000 and Liabilities total $10,000. The equity of the business must total

$4,000
$40,000
$400
$40

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The resulting amount when total liabilities are subtracted from total assets is known as

owner’s equity or net assets
net income or net loss
total expenses
total revenue

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A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting the financial affairs and activities of a business...

an accounting concept
an accounting principle
the basic accounting equation
objectivity principle

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Using a sales invoice as the basis for recording a sale of merchandise is an example of using which accounting principle or concept for recording tran...

Recognition principle
Objectivity principle
Realization principle
Continuing-concern concept

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Which of the following statements is true?

a salary paid to a partner is an expense to the partnership
a salary paid to a proprietor is an expense to the proprietorship
a salary paid to a shareholder is an expense of the corporation
the business entity principle does not apply to corporations

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Keith Manich deposited $5,000 in a bank account he established for a pet store that he is going to own and operate as KM’s Pets. Recording the depos...

increase an asset, increase a liability
decrease an asset, decrease a liability
increase an asset, increase owner’s equity
decrease an asset, decrease owner’s equity

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Better-Cars Selection, a used car dealer, has total assets and liabilities of $50,000 and $18,000, respectively. The firm constructed a shelter for it...

increase by $12,000
remain unchanged
decrease by $12,000
increase by $500, each month

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The owner of a computer services business was able to acquire a new computer, valued at $5,000, by establishing an account with the computer vendor, C...

increase an asset, increase a liability
decrease an asset, decrease a liability
increase an asset, increase owner’s equity
decrease an asset, decrease owner’s equity

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A sole proprietor recorded the payment of an account payable to an office supplies store. Recording the transaction will

increase an asset, increase a liability
decrease an asset, decrease a liability
increase an asset, increase owner’s equity
decrease an asset, decrease owner’s equity

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If during the accounting period the assets increased by $7,000, and the owner’s equity decreased by $3,000, then the liabilities must have

increased by $10,000
increased by $4,000
decreased by $4,000
decreased by $10,000

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One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection procedures. When the firm pays the student her...

increase an asset, increase a liability
decrease an asset, decrease a liability
increase an asset, increase owner’s equity
decrease an asset, decrease owner’s equity

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Which is NOT true of common-size comparative statements?

each item is shown as a percentage of some total of which it is a part
dollar amounts are generally not shown
the net change in each item, on a year-to-year basis, is not shown
total assets are used as a total against which all assets are measured

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plant and equipment had the largest percentage gain from 1998 to 2000
cash had the greatest percentage decrease between 2000 and 2001
cash increased at a faster rate than total assets from 1998 to 2001
cash was always the same percentage of total assets

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sales have increased 200% since 1998
net income has increased 16.67% since 1998
gross profit on sales has increased 66.67% since 1998
net income as a percentage of sales has decreased

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working capital is $52,000, current ratio is 1.17
current ratio is 2.0 , acid-test ratio is 1.15
working capital is $10,000 , acid-test ratio is 1.15
working capital is $52,000, current ratio is 1.76

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Net sales were $450,000, and the accounts receivable turnover was 5.5 times. What is the average accounts receivable?

not determinable from the information provided
$24,750
$81,818
$90,000

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The cost of goods sold was $240,000. Beginning and ending merchandising inventory balances were $20,000 and $30,000, respectively. The merchandise inv...

8.0 times
12.0 times
7.0 times
9.6 times

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The days’ sales in inventory is 73. The cost of goods sold is $720,000. The net sales are $1,020,000. The beginning inventory was $82,000. What is t...

$98,360
$144,000
$139,726
$82,000

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Total asset turnover is a component of:

solvency
profitability
comparability
operating efficiency

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Which change in the following ratios would be regarded as generally favorable by creditors but generally unfavorable by shareholders?

debt to equity ratio changed from 1:2 to 1:2.5
current ratio changed from 2:5 to 3:4
debt to equity ratio changed from 2:5 to 1:3
return on total assets changed from 10% to 12.5%

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Which of the following formulas and its results is not correct?

Formula: Net sales/Average total assets Result: Total asset turnover
Formula: (Net income/Net sales) x 100 Result: Profit margin
Formula: (Net inc./Average total assets) x 100 Result: Return on total assets employed
Formula: (Total liabilities/Total assets) x 100 Result: Equity ratio

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Which of the following ratios would not be considered a measurement of short-term liquidity?

current ratio
days’ sales uncollected
debt ratio
acid-test ratio

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Which of the following ratios would be of the least interest to the short-term creditor of the business?

current ratio
times interest earned
acid-test ratio
working capital ratio

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Net income is not used as a numerator or a denominator in which of the following financial ratios?

return on total assets employed
times fixed interest charges earned
return on common shareholders’ equity
profit margin measurement

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Net sales were $360,000. The cost of goods sold was $180,000. Operating expenses were $120,000. The ending balance of the Accounts Receivable account ...

16.67%
20.0%
40.0%
33.3%

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The denominator in the formula to calculate the return on common shareholders’ equity is:

book value of the common shares
average total assets
total equity
total contributed capital

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Which of the following formulas is used to calculate a price-earnings ratio?

dividends per share / earnings per share
current market price per share / earnings per share
net income less preferred dividends / number of com. shares outstanding
dividends per share / market price per share

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The balance of the Common Shares account was $400,000 for the entire fiscal year. Net income for the year was $40,000, of which 25% was distributed to...

40.0
4.0
12.0
2.5

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The market price per share is $32. The price earnings ratio is 5.0. The earnings per share are:

$160
50% of the market price per share
25.60
$6.40

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the 1998 debt-to-equity ratio was 1 to .80
the earnings per share in 2001 were $0.40
the book value per share in 1999 was $3.08
earnings per share in 1998 were $0.15

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Which line is NOT correct?

Ratio: Current ratio; Type of measurement: Short-term liquidity
Ratio: Return on total assets; Type of measurement: Operating efficiency
Ratio: Dividend yield; Type of measurement: Capital structure
Ratio: Equity ratio; Type of measurement: Long-term risk and capital structure

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Details of each class of stock must be reported:

On the face of the balance sheet only.
In disclosure notes only.
On the face of the balance sheet or in disclosure notes.
On the face of the balance sheet and in disclosure notes.

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