What is Financial Management?

Financial Management

Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow. It includes the administration and maintenance of financial assets. Besides, financial management covers the process of identifying and managing risks.

The primary concern of financial management is the assessment rather than the techniques of financial quantification. A financial manager looks at the available data to judge the performance of enterprises. Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance.

Some experts refer to financial management as the science of money management. The primary usage of this term is in the world of financing business activities. However, financial management is important at all levels of human existence because every entity needs to look after its finances.

Financial Management: Levels

Broadly speaking, the process of financial management takes place at two levels. At the individual level, financial management involves tailoring expenses according to the financial resources of an individual. Individuals with surplus cash or access to funding invest their money to make up for the impact of taxation and inflation. Else, they spend it on discretionary items. They need to be able to take the financial decisions that are intended to benefit them in the long run and help them achieve their financial goals.

From an organizational point of view, the process of financial management is associated with financial planning and financial control. Financial planning seeks to quantify various financial resources available and plan the size and timing of expenditures. Financial control refers to monitoring cash flow. Inflow is the amount of money coming into a particular company, while outflow is a record of the expenditure being made by the company. Managing this movement of funds in relation to the budget is essential for a business.

At the corporate level, the main aim of the process of managing finances is to achieve the various goals a company sets at a given point of time. Businesses also seek to generate substantial amounts of profits, following a particular set of financial processes.

Financial managers aim to boost the levels of resources at their disposal. Besides, they control the functioning on money put in by external investors. Providing investors with sufficient amount of returns on their investments is one of the goals that every company tries to achieve. Efficient financial management ensures that this becomes possible.

WHAT IS PETTY CASH?

Definition:

Petty cash refers to small amounts of cash kept on hand in a business. (The term "petty" comes from "petite," or "small.") There are two reasons to keep petty cash:


* To make change for customers or patients
* To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking. Most retail businesses keep a cash drawer as do health care practices.

PETTY CASH BOX

Every purchase using petty cash must be documented in the same way as other business income and expenses. Using a petty cash log or petty cash slips will help capture these expenses so they can be used to offset income for business tax purposes.


Keep as much cash as you need in your cash drawer, but not too much, so it isn't a temptation for employees or robbers.
Also Known As: Cash on Hand
Examples: The petty cash drawer was used to make change and pay for incidental business expenses.

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 14

MULTIPLE CHOICE QUESTIONS

Select the appropriate response.

1. Which of the following characteristics is considered to be an advantage of the corporate form of organization?

a. Avoidance of double taxation
b. Limited liability of stockholders
c. Low level of regulation
d. The absence of a perpetual existence

HELP ME!

2. Of the following characteristics, which is not generally regarded as a right of common shareholders?

a. Preemptive right
b. Voting rights
c. Preference in liquidation
d. Transferability of shares

HELP ME!

3. The appropriate journal entry to record the issue of 1,000 shares of $1 par-value common stock, which is issued for $4 per share would be:

a. Cash 4,000
Common Stock 4,000

b. Cash 4,000
Common Stock 1,000
Paid-in Capital in Excess of Par 3,000

c. Cash 4,000
Common Stock 1,000
Retained Earnings 3,000

d. Cash 1,000
Paid-in Capital in Excess of Par 3,000
Common Stock 4,000

HELP ME!

4. If 1,000 shares of $10 par-value common stock are issued in exchange for land with a fair market value of $25,000, the land and common stock (along with any additional paid-in capital) should be recorded at:

a. $0
b. $1,000
c. $10,000
d. $25,000

HELP ME!

5. Jackson Corporation has 500,000 shares of common stock outstanding. On April 10, the board of directors declared a $0.60 per share cash dividend, to be paid to stockholders of record on April 25. The dividend was distributed on June 6. The proper journal entry to record on June 6 is:

a. Dividends Expense 300,000
Cash 300,000

b. Dividends Payable 300,000
Cash 300,000

c. Retained Earnings 300,000
Cash 300,000

d. Dividends Payable 300,000
Retained Earnings 300,000

HELP ME!

6. Dividends omitted on preferred shares that must be paid before common shareholders are entitled to be paid are referred to as:

a. Participating
b. Callable
c. Cumulative
d. In arrears

HELP ME!

7. Magic Corporation paid $100,000 in dividends. The corporation had 10,000 shares of common stock outstanding and 5,000 shares of $100 par value 5% preferred stock. The preferred stock was two years in arrears prior to the current year. How much was paid to the common stockholders?

a. $0
b. $25,000
c. $50,000
d. $75,000

HELP ME!

8. In reviewing corporate equity on a balance sheet, what would be included in the description "Total Capital Stock"?

a. Par value of preferred
b. Par value of common
c. Paid-in capital in excess of par value
d. Both (a) and (b)

HELP ME!

9. Which of the following statements about treasury stock is false?

a. Gains are not recorded on treasury stock transactions, but losses are.
b. Acquiring treasury stock causes stockholders' equity to decrease.
c. Treasury stock is reported as a deduction from stockholders' equity.
d. The excess of the sales price of treasury stock over its cost should be credited to Paid-in Capital from Treasury Stock.

HELP ME!

10. Elmer Company has 500,000 shares of common stock authorized. The stock has a par value of $1.50 per share, and 150,000 shares are outstanding. The company declared a 5% stock dividend at a time when the market value was $7 per share. What entry, if any, should Elmer record for the declaration?

a. No entry

b. Retained Earnings 11,250
Common Stock 11,250

c. Retained Earnings 52,500
Stock Dividend Distributable 11,250
Paid-in Capital in Excess of Par 41,250

d. Stock Dividends Payable 11,250
Retained Earnings 41,250
Common Stock 52,500

HELP ME!

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 13

MULTIPLE CHOICE QUESTIONS

1. The present value factor at 8% for one period is 0.92593, for two periods is 0.85734, for three periods is 0.79383, for four periods is 0.73503, and for five periods is 0.68058. Given these factors, what amount should be deposited in a bank today to grow to $100 three years from now?

a. $100/0.79383
b. $100/(0.92593/3)
c. ($100/0.92593 + $100/0.85734 + $100/0.79383)
d. $100 X 0.79383

HELP ME!

2. You are thinking of borrowing $250,000 to buy a new house. If you are going to finance this purchase at 12% interest per annum, and make 360 level monthly payments to pay off the loan, how much will your payments be?

a. $250,000/360
b. $250,000/present value factor for lump sum at 360 months and 1% per period
c. $250,000/present value factor for annuity of 360 months at 1% per period
d. $250,000 X present value factor for annuity of 360 months at 1% per period

HELP ME!

3. Assume that Kamchatny Vladimir borrowed $100,000 on January 1 of Year 1, at 5% interest per annum. On December 31, of Year 1, an $8,000 payment is made. On December 31, of year 2, another $8,000 payment is made. Using normal assumptions about interest and principal reduction, how much is the unpaid balance of Vladimir's loan after the second payment?

a. $100,000
b. $94,000
c. $93,850
d. 84,000

HELP ME!

4. Bonds payable should be disclosed on the balance sheet.

a. At their face value minus any unamortized premiums.
b. At their face value plus any unamortized premiums.
c. At their maturity value.
d. At their face value.

HELP ME!

5. When the contract interest rate for a bond exceeds the effective interest rate of the bond, then:

a. The price of the bond will be equal to the future cash flow associated with the bond.
b. The bond will be issued at a premium.
c. The bond will be issued at a discount.
d. The face value of the bond will fluctuate over its life.

HELP ME!

6. On June 1, Surge Corporation issued $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 19X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record issuance of the bonds is:

a. Cash 100,000
Bonds Payable 100,000

b. Cash 96,000
Discount on Bonds Payable 4,000
Bonds Payable 100,000

c. Cash 104,000
Bond Interest Payable 4,000
Bonds Payable 100,000

d. Cash 96,000
Bond Interest Expense 4,000
Bonds Payable 100,000

HELP ME!

7. On April 1, 20X1, German Corporation issued $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. The proper entries to record bond interest expense for the (entire) year ended 20X1 would include a decrease in interest expense for premium amortization in the amount of (round to the nearest dollar and assume straight-line amortization):

a. $0
b. $117
c. $150
d. $200

HELP ME!

8. Jeske Company issued $1,000,000 of 8% bonds at a time when the market rate of interest was 10%. If the bonds were issued at a $50,000 discount and interest was paid annually, how much was interest expense for the first full year of the bond issue (utilize the effective-interest amortization technique)?

a. $76,000
b. $80,000
c. $95,000
d. $100,000

HELP ME!

9. When interest payment dates on a bond are June 1 and December 1, and the bond is sold on July 1, the amount of cash received at issuance will be:

a. Decreased by accrued interest from July 1 to December 1.
b. Decreased by accrued interest from June 1 to July 1.
c. Increased by accrued interest from July 1 to December 1.
d. Increased by accrued interest from June 1 to July 1.

HELP ME!

10. Billings Corporation retired $1,000,000 face of bonds payable. At the time of the retirement, the bonds had unamortized discount of $20,000, and all interest accruals and payments were current. Under the outstanding covenants, Billings was required to pay the bond holders 103.

a. The transaction caused Billings to recognize a loss of $50,000.
b. The transaction caused Billings to recognize a gain of $50,000.
c. The transaction caused Billings to recognize a loss of $30,000.
d. The transaction caused Billings to recognize a gain of $20,000.

HELP ME!

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 12

MULTIPLE CHOICE QUESTIONS

Select the appropriate response.

1. Typical current liabilities include:

a. Prepayments by customers.
b. Travel advances to employees.
c. The principal portion of a mortgage note that is due beyond one year or the operating cycle, whichever is longer.
d. Accumulated depreciation.

HELP ME!

2. Contingent liabilities should be recorded in the accounts when:

a. It is probable that the future event will occur.
b. The amount of the liability can be reasonably estimated.
c. Both (a) and (b).
d. Either (a) or (b).

HELP ME!

3. On June 1, Whit Corporation purchased a truck for $30,000. To pay for the truck, Whit issued and recorded a six-month note payable for $31,500. No other entry was recorded for the note until payment on December 1. The journal entry to record payment of the note would include:

a. A debit to Interest Expense for $1,500.
b. A debit to Discount on Notes Payable for $1,500.
c. A debit to Notes Payable for $30,000.
d. A debit to Cash for $31,500.

HELP ME!

4. The Discount on Notes Payable:

a. Is a contra liability account.
b. Is a contingent liability account.
c. Should be reported as an asset because of its debit balance.
d. Is amortized to reduce interest expense over the life of the note payable.

HELP ME!

5. If the journal entry to record an accrued liability were accidentally recorded twice, it would:

a. Understate income for the year.
b. Overstate income for the year.
c. Have no effect on income for the year.
d. Understate accrued liabilities at the end of the year.

HELP ME!

6. Landry paid $5,000 cash for warranty service work. If a Warranty Liability account had been previously established, the proper journal entry to record the service work would be:

a. Sales 5,000
Cash 5,000

b. Warranty Expense 5,000
Warranty Liability 5,000

c. Warranty Expense 5,000
Cash 5,000

d. Warranty Liability 5,000
Cash 5,000

HELP ME!

7. The employee's withholding allowance certificate is popularly referred to as a:

a. W-2.
b. W-4.
c. Form 1040.
d. Payroll register.

HELP ME!

8. The FICA tax is levied on:

a. Employees only.
b. Employers only.
c. Both employees and employers.
d. Earnings in excess of base amounts.

HELP ME!

9. Burgundy Drug Store paid $137,000 in salaries during 20X1. Salary expense for the year was $148,500 and salaries payable at the end of 20X1 amounted to $17,300. What was the amount of salaries payable as of January 1, 20X1?

a. $5,800
b. $11,500
c. $17,300
d. $28,800

HELP ME!

10. The gross payroll for Zurich Corporation was $100,000. Federal income tax withheld from employee paychecks amounted to $24,000, state income tax withheld amounted to $3,000, Social Security amounted to $8,500 (both the employee and employer portion), and Medicare amounted to $3,500 (both the employee and employer portion). Furthermore, employees elected to have $1,000 of insurance and charitable contributions withheld from their paychecks. How much was net pay?

a. $34,000
b. $60,000
c. $66,000
d. $72,000

HELP ME!

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 11

MULTIPLE CHOICE QUESTIONS

Select the appropriate response.

1. Cross Country Trucking Company recently replaced the oil filter on one of its cross country rigs. How should one account for this cost?

a. As a repair and maintenance expense.
b. As an increase in the cost of the truck.
c. As a reduction in accumulated depreciation associated with the truck.
d. As an intangible asset.

HELP ME!

2. On January 1, 20X2, Lynn Corporation purchased a machine for $100,000. Lynn paid shipping expenses of $1,000 as well as installation costs of $2,400. The machine was estimated to have a useful life of ten years and an estimated salvage value of $6,000. In January 20X3, additions costing $7,200 were made to the machine. These additions significantly improved the quality of output, but did not change the life or salvage value of the machine. If Lynn records depreciation under the straight-line method, depreciation expense for 20X3 is:

a. $9,740
b. $10,340
c. $10,540
d. $11,140

HELP ME!

3. If an asset is impaired, and future cash flows will not allow recovery of the recorded amount, then the firm should reduce the asset in the accounts. In addition,

a. a loss should be recognized.
b. an intangible asset should be recorded.
c. the asset should be discarded.
d. depreciation should cease.

HELP ME!

4. A machine that cost $18,000, with a book value of $4,000, is sold for $3,400. Which of the following is true concerning the journal entry to record the sale?

a. Accumulated Depreciation is debited for $4,000.
b. Machinery is credited for $4,000.
c. Loss on sale of machinery is credited for $600.
d. Accumulated Depreciation is debited for $14,000.

HELP ME!

5. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were:

a. Less than current market value.
b. Greater than cost.
c. Greater than book value.
d. Less than book value.

HELP ME!

6. Equipment costing $3,000 with accumulated depreciation of $2,125 is exchanged for another asset with a fair value of $625. The exchange has commercial substance. How much is the gain or loss on this transaction?

a. A gain of $250 should be recognized.
b. A loss of $250 should be recognized.
c. A loss of $500 should be recognized.
d. No gain or loss should be recognized.

HELP ME!

7. Deep Gold Mining Company recognizes $4 of depletion for each ton of ore mined. This year, 300,000 tons of ore were mined but only 180,000 were sold. The amount of depletion which should be deducted from revenue this year is:

a. $0
b. $480,000
c. $720,000
d. $1,200,000

HELP ME!

8. Which of the following terms best relates to natural resources?

a. Depreciation.
b. Depletion.
c. Amortization.
d. Accrual.

HELP ME!

9. On January 5, 20X1, a corporation was granted a patent on a product. On January 2, 20X9, to protect its patent, the corporation purchased a patent on a competing idea that was originally issued on January 10, 20X5. Because of its unique nature, the corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be:

a. Amortized over a maximum period of 20 years.
b. Amortized over a maximum period of 13 years.
c. Amortized over a maximum period of 12 years.
d. Expensed in 20X9.

HELP ME!

10. Which of the following statements regarding goodwill is false?

a. The difference between the price paid to purchase a particular company, and the fair value of the underlying identifiable assets received (less liabilities assumed) is goodwill.
b. Goodwill should not be amortized, but should be evaluated for impairment.
c. Goodwill is an intangible asset.
d. Goodwill may be recorded for a company whether it is internally generated or purchased.

HELP ME!m

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 9

MULTIPLE CHOICE QUESTIONS

1. Which of the following categories/methods would be used to account for an investment, where the intent of the investment was primarily for short-term profits?

a. Trading securities
b. Available for sale securities
c. Held to maturity securities
d. Equity method

HELP ME!

2. Ace Corporation has a long-term investment in the common stock of another entity. This investment is accounted for as an available-for-sale security. A journal entry to record a $10,000 decline in market value below cost would necessarily involve:

a. a debit to Unrealized Gain/Loss -- OCI
b. a credit to Unrealized Gain/Loss -- OCI
c. a debit to Available for Sale Securities.
d. a debit to Investment Revenue.

HELP ME!

3. Investment in Bonds should be disclosed on the balance sheet.

a. At their face value minus any unamortized premiums.
b. At their face value plus any unamortized premiums.
c. At their maturity value.
d. At their face value.

HELP ME!

4. When the contract interest rate for a bond exceeds the effective interest rate of the bond, then:

a. The price of the bond will be equal to the future cash flow associated with the bond.
b. The bond will be issued at a premium.
c. The bond will be issued at a discount.
d. The face value of the bond will fluctuate over its life.

HELP ME!

5. On June 1, Pennell Corporation purchased $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record the investment in bonds is:

a. Investment in Bonds 100,000
Cash 100,000

b. Investment in Bonds 96,000
Cash 96,000

c. Investment in Bonds 104,000
Cash 104,000

d. Investment in Bonds 96,000
Interest Income 4,000
Cash 100,000

HELP ME!

6. On April 1, 20X1, Collinge Corporation purchased $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. Assuming use of the straight-line amortization method, the proper amount of income to record on September 30, 20X1 is:

a. $7,000
b. $3,400
c. $3,500
d. $3,600

HELP ME!

7. On January 1, 20X2, Miller Corporation purchased $100,000 of 5%, 10-year bonds dated January 1, 20X2, at 98. Interest is paid on June 30 and December 31 of each year. Assuming use of the straight-line amortization method, the proper amount to report for Investment in Bonds at December 31, 20X3 is:

a. $98,000
b. $98,400
c. $100,000
d. $101,600

HELP ME!

8. Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor's Investment in Investee account contained a $70,000 balance at the beginning of the year. What would be the correct balance of this account at the end of the year?

a. $70,000
b. $91,000
c. $100,000
d. $140,000

HELP ME!

9. Investor Corporation owns 30% of Investee Corporation. Investee had net earnings of $100,000 during the year and paid dividends of $30,000. Investor's Investment in Investee account contained a $70,000 balance at the beginning of the year. How much dividend income will Investor record?

a. $0
b. $9,000
c. $30,000
d. $39,000

HELP ME!

10. Mega Corporation owns 100% of Wolf Corporation's stock. Mega paid $1,000,000 for its investment. At the time of the initial investment, Wolf had total stockholders' equity of $600,000. All of Wolf's assets and liabilities were carried at amounts that equaled their fair value, except for a building that was undervalued by $100,000. How much goodwill would you anticipate finding in the consolidated balance sheet?

a. $0
b. $100,000
c. $300,000
d. $400,000

HELP ME!

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 8

MULTIPLE CHOICE QUESTIONS

Select the appropriate response.

1. Inventory accounts should be classified in which section of a balance sheet?

a. Current assets
b. Investments
c. Property, plant, and equipment
d. Intangible assets

HELP ME!

2. Ritz Company agreed to purchase certain inventory items from Hostess Corporation. Hostess shipped the goods F.O.B. destination. On December 31, Ritz's accounting year-end, Ritz was aware that the goods had been shipped and would be received any day.

a. Ritz should include the goods in its inventory calculated on December 31.
b. Ritz should include the goods in its inventory calculated on December 31, but should not record the obligation to pay for them.
c. Ritz should not include the goods in its inventory calculated on December 31, but should include the related payable on its balance sheet at December 31.
d. Ritz should not include the goods in its inventory calculated on December 31, and should not include the related payable on its balance sheet at December 31.

HELP ME!

3. Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.

January 2	Beginning Inventory	500 units at $3.00
April 7	Purchased	1,100 units at $3.20
June 30	Purchased	400 units at $4.00
December 7	Purchased	1,600 units at $4.40

Sales during the year were 2,700 units at $5.00. If Hefty used the first-in, first-out method, ending inventory would be:

a. $2,780
b. $3,960
c. $9,700
d. $10,880

HELP ME!

4. Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.

January 2	Beginning Inventory	500 units at $3.00
April 7	Purchased	1,100 units at $3.20
June 30	Purchased	400 units at $4.00
December 7	Purchased	1,600 units at $4.40

Sales during the year were 2,700 units at $5.00. If Hefty used the periodic LIFO method, cost of goods sold would be:

a. $2,780
b. $3,960
c. $9,700
d. $10,880

HELP ME!

5. Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.

January 2	Beginning Inventory	500 units at $3.00
April 7	Purchased	1,100 units at $3.20
June 30	Purchased	400 units at $4.00
December 7	Purchased	1,600 units at $4.40

Sales during the year were 2,700 units at $5.00. If Hefty used the weighted-average method, gross profit would be:

a. $3,255
b. $3,415
c. $10,245
d. $13,500

HELP ME!

6. Which of the following inventory methods will always produce the same results under both a periodic and perpetual system?

a. FIFO
b. LIFO
c. Average
d. All of these

HELP ME!

7. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is:

a. FIFO
b. LIFO
c. Retail
d. Weighted-average

HELP ME!

8. Bernstein Corporation recently experienced a fire which destroyed all of its inventory. The following data have been reconstructed from partial accounting information, and pertain to the year up to the date of the fire.

Beginning inventory	$20,000
Net purchases	$45,000
Sales	$80,000
Gross profit rate	40%

Using the gross profit method, estimate the dollar amount of inventory which was destroyed in the fire.

a. $17,000
b. $33,000
c. $48,000
d. $65,000

HELP ME!

9. Gerber Department Store utilizes the retail inventory method. Gerber's beginning inventory cost $140,000 and retailed for $280,000. Purchases for the period amounted to $390,000 and were priced to sell at twice that amount. Sales for the period, all at normal retail, were $600,000. How much is the cost of Gerber's estimated ending inventory?

a. $115,000
b. $150,000
c. $230,000
d. $300,000

HELP ME!

10. Wonder Corporation failed to record the purchase of merchandise on account. The merchandise and related accounts payable should have been recorded but were not. What is the effect of these errors on assets, liabilities, retained earnings, and net income, respectively?

a. Understated, understated, no effect, no effect
b. Understated, understated, understated, understated
c. Understated, overstated, overstated, understated
d. Overstated, overstated, understated, overstated

HELP ME!

(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 2

MULTIPLE CHOICE QUESTIONS

Select the appropriate response:

1. Of the following account types, which would be increased by a debit?

a. Liabilities and expenses.
b. Assets and equity.
c. Assets and expenses.
d. Equity and revenues.

HELP ME!

2. The following comments all relate to the recording process. Which of these statements is correct?

a. The general ledger is a chronological record of transactions.
b. The general ledger is posted from transactions recorded in the general journal.
c. The trial balance provides the primary source document for recording transactions into the general journal.
d. Transposition is the transfer of information from the general journal to the general ledger.

HELP ME!

3. The following comments each relate to the recording of journal entries. Which statement is true?

a. For any given journal entry, debits must exceed credits.
b. It is customary to record credits on the left and debits on the right.
c. The chart of accounts reveals the amount to debit and credit to the affected accounts.
d. Journalization is the process of converting transactions and events into debit/credit format.

HELP ME!

4. Failure to record the receipt of a utility bill for services already received will result in:

a. An overstatement of assets.
b. An overstatement of liabilities.
c. An overstatement of equity.
d. An understatement of assets.

HELP ME!

5. The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered is:

a. Cash 500
Accounts Receivable 500

b. Accounts Receivable 500
Capital Stock 500

c. Accounts Receivable 500
Service Revenue 500

d. Cash 500
Service Revenue 500

HELP ME!

6. The proper journal entry to record $1,000 of Dividends paid by Myer's Corporation is:

a. Dividends 1,000
Cash 1,000

b. Accounts Payable 1,000
Cash 1,000

c. Dividends Expense 1,000
Cash 1,000

d. Dividends Expense 1,000
Service Revenue 1,000

HELP ME!

7. Lynn Lipincott invested land valued at $5,000 in her business. This transaction would be recorded by:

a. Cash 5,000
Capital Stock 5,000

b. Land 5,000
Capital Stock 5,000

c. Land 5,000
Service Revenue 5,000

d. Capital Stock 5,000
Land 5,000

HELP ME!

8. The trial balance:

a. Is a formal financial statement.
b. Is used to prove that there are no errors in the journal or ledger.
c. Provides a listing of every account in the chart of accounts.
d. Provides a listing of the balance of each account in active use.

HELP ME!

9. Which of the following errors will be disclosed in the preparation of a trial balance?

a. Recording transactions in the wrong account.
b. Duplication of a transaction in the accounting records.
c. Posting only the debit portion of a particular journal entry.
d. Recording the wrong amount for a transaction to both the account debited and the account credited.

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10. The basic sequence in the accounting process can best be described as:

a. Transaction, journal entry, source document, ledger account, trial balance.
b. Source document, transaction, ledger account, journal entry, trial balance.
c. Transaction, source document, journal entry, trial balance, ledger account.
d. Transaction, source document, journal entry, ledger account, trial balance.

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(ACCOUNTING ) MULTIPLE CHOICE QUESTION Chapter 1

MULTIPLE CHOICE QUESTIONS

Select the appropriate response:

1. The accounting profession can be divided into three major categories; specifically, the practice of public accounting, private accounting, and governmental accounting. A somewhat unique and important service of public accountants is:

a. Financial accounting.
b. Managerial accounting.
c. Auditing.
d. Cost accounting.

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2. The primary private sector agency that oversees external financial reporting standards is the:

a. Financial Accounting Standards Board.
b. Federal Bureau of Investigation.
c. General Accounting Office.
d. Internal Revenue Service.

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3. Which of the following equations properly represents a derivation of the fundamental accounting equation?

a. Assets + liabilities = owner's equity.
b. Assets = owner's equity.
c. Cash = assets.
d. Assets - liabilities = owner's equity.

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4. Wilson Company owns land which cost $100,000. If a "quick sale" of the land was necessary to generate cash, the company feels it would receive only $80,000. The company continues to report the asset on the balance sheet at $100,000. This is justified under which of the following concepts?

a. The historical-cost principle.
b. The objectivity principle.
c. Neither of the above.
d. Both "a" and "b".

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5. Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?

a. Net loss.
b. Net income.
c. Dividends.
d. Investments by stockholders.

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6. Which of these items would be accounted for as an expense?

a. Repayment of a bank loan.
b. Dividends to stockholders.
c. The purchase of land.
d. Payment of the current period's rent.

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7. Which of the following transactions would have no impact on stockholders' equity?

a. Purchase of land from the proceeds of a bank loan.
b. Dividends to stockholders.
c. Net loss.
d. Investments of cash by stockholders.

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8. Which of the following would not be included on a balance sheet?

a. Accounts receivable.
b. Accounts payable.
c. Sales.
d. Cash.

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9. Remington provided the following information about its balance sheet:

Cash $ 100
Accounts receivable 500
Stockholders' equity 700
Accounts payable 200
Bank loans 1,000

Based on the information provided, how much are Remington's liabilities?

a. $200.
b. $900.
c. $1,200.
d. $1,700.

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10. Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends?

a. $20,000.
b. $60,000.
c. $140,000.
d. $220,000.

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