Question 1

Which of the following best describes the matching principle in financial accounting?

Accepted Answer

Expenses are matched to the revenues they help generate in the same period.

Question 2

A company purchased inventory for $5,000 on account. Which journal entry correctly records this transaction?

Accepted Answer

Debit Inventory $$5,000; Credit Accounts Payable 5$$,000

Question 3

Which of the following is NOT a component of internal control?

Accepted Answer

Financial leverage

Question 4

A company uses the FIFO method for inventory costing. If the cost of inventory is rising, which statement is true?

Accepted Answer

Ending inventory will be valued at the most recent costs.

Question 5

Which equation correctly represents the basic accounting equation?

Accepted Answer

$$Assets = Liabilities + Stockholders' Equity$$

Question 6

A company estimates that $2,000 of its accounts receivable will be uncollectible. Which entry should be made?

Accepted Answer

Debit Bad Debt Expense $$2,000; Credit Allowance for Uncollectible Accounts 2$$,000

Question 7

Which of the following is a temporary account that is closed at the end of the accounting period?

Accepted Answer

Sales Revenue

Question 8

A company purchased equipment for $10,000. The equipment has a useful life of 5 years and no salvage value. What is the annual straight-line depreciation expense?

Accepted Answer

$$\frac{10,000}{5} = 2,000$$

Question 9

Which of the following transactions would increase both assets and liabilities?

Accepted Answer

Purchasing inventory on account

Question 10

Which statement best describes the accrual basis of accounting?

Accepted Answer

Revenues are recorded when earned and expenses when incurred, regardless of cash flow.

Question 11

A company had beginning inventory of $$8,000, purchases of 12$$,000, and ending inventory of $6,000. What is the cost of goods sold?

Accepted Answer

$$8,000 + 12,000 - 6,000 = 14,000$$

Question 12

Which of the following is NOT a type of adjusting entry?

Accepted Answer

Purchase of inventory

Question 13

Which of the following is a permanent account?

Accepted Answer

Accounts Receivable

Question 14

A company sells goods FOB shipping point. Who pays for the shipping and when does ownership transfer?

Accepted Answer

Buyer pays shipping; ownership transfers at shipment.

Question 15

Which of the following is true about the allowance method for uncollectible accounts?

Accepted Answer

An estimate of uncollectible accounts is made and recorded as an expense in the same period as the related sales.

Question 16

Which of the following is NOT a major element of the fraud triangle?

Accepted Answer

Profitability

Question 17

A company uses the periodic inventory system. Which entry is made at the end of the period to record cost of goods sold?

Accepted Answer

Debit Cost of Goods Sold; Credit Inventory

Question 18

Which of the following is a difference between US GAAP and IFRS?

Accepted Answer

IFRS allows revaluation of property, plant, and equipment; US GAAP does not.

Question 19

A company has sales of $$50,000, cost of goods sold of 30$$,000, and operating expenses of $10,000. What is the gross profit?

Accepted Answer

$$50,000 - 30,000 = 20,000$$

Question 20

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To ensure the company’s cash records match the bank’s records.

Accounting 201 Final Exam Review: Comprehensive Study Notes

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