Financial Accounting CLEP Test Questions with || || || || || ||
verified detailed answers || ||
"double entry accounting" means: - ✔✔record where the money came from and where it went
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expenses always make owner's equity - ✔✔decrease || || || || || ||
expenses don't always involve - ✔✔cash || || || || ||
expenses make net income - ✔✔decrease || || || || ||
borrowing money is not an - ✔✔expense || || || || || ||
____ is a non-operating expense shown on the income statement - ✔✔interest expense
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_____ represents interest payable on any borrowings - bonds, loans, convertible debt or lines of
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credit - ✔✔interest expense
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prepaid items appear in the _____ section - ✔✔current assets
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the right side of t-accounts - ✔✔credit
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the left side of t-accounts - ✔✔debit
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increase assets, withdrawal and expense accounts, but decrease liabilities and equity - ✔✔debit
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increase liabilities and equity and income accounts, but decrease assets - ✔✔credit
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, financial reports for any period less than one year - ✔✔interim financial statements
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when you debit cash, cash will - ✔✔increase
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when you debit liabilities, liabilities will - ✔✔decrease
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keeps track of merchandise costs in various purchase accounts then computes cost of goods sold
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on the income statement, adjusting inventory records at the end of the year - ✔✔periodic
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inventory method ||
increases the inventory account with every purchase and lowers the inventory account with every
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sale - ✔✔perpetual inventory method
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keeps track of the actual historic cost of each inventory item. when that item is sold, the cost flows
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into cost of goods sold. - ✔✔specific unit
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averages the cost of all items in inventory and assigns that averaged cost to the items sold. -
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✔✔weighted average ||
the company must report inventories at cost or the current market price, whichever is lower -
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✔✔lower of cost or market principle || || || || ||
sales - cost of goods sold = - ✔✔gross profit
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cost of goods sold / average inventory = - ✔✔inventory turnover
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gross profit / total sales = - ✔✔gross profit percent
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verified detailed answers || ||
"double entry accounting" means: - ✔✔record where the money came from and where it went
|| || || || || || || || || || || || || ||
expenses always make owner's equity - ✔✔decrease || || || || || ||
expenses don't always involve - ✔✔cash || || || || ||
expenses make net income - ✔✔decrease || || || || ||
borrowing money is not an - ✔✔expense || || || || || ||
____ is a non-operating expense shown on the income statement - ✔✔interest expense
|| || || || || || || || || || || ||
_____ represents interest payable on any borrowings - bonds, loans, convertible debt or lines of
|| || || || || || || || || || || || || || ||
credit - ✔✔interest expense
|| || ||
prepaid items appear in the _____ section - ✔✔current assets
|| || || || || || || || ||
the right side of t-accounts - ✔✔credit
|| || || || || ||
the left side of t-accounts - ✔✔debit
|| || || || || ||
increase assets, withdrawal and expense accounts, but decrease liabilities and equity - ✔✔debit
|| || || || || || || || || || || ||
increase liabilities and equity and income accounts, but decrease assets - ✔✔credit
|| || || || || || || || || || ||
, financial reports for any period less than one year - ✔✔interim financial statements
|| || || || || || || || || || || ||
when you debit cash, cash will - ✔✔increase
|| || || || || || ||
when you debit liabilities, liabilities will - ✔✔decrease
|| || || || || || ||
keeps track of merchandise costs in various purchase accounts then computes cost of goods sold
|| || || || || || || || || || || || || || ||
on the income statement, adjusting inventory records at the end of the year - ✔✔periodic
|| || || || || || || || || || || || || || ||
inventory method ||
increases the inventory account with every purchase and lowers the inventory account with every
|| || || || || || || || || || || || || ||
sale - ✔✔perpetual inventory method
|| || || ||
keeps track of the actual historic cost of each inventory item. when that item is sold, the cost flows
|| || || || || || || || || || || || || || || || || ||
into cost of goods sold. - ✔✔specific unit
|| || || || || || || ||
averages the cost of all items in inventory and assigns that averaged cost to the items sold. -
|| || || || || || || || || || || || || || || || || ||
✔✔weighted average ||
the company must report inventories at cost or the current market price, whichever is lower -
|| || || || || || || || || || || || || || || ||
✔✔lower of cost or market principle || || || || ||
sales - cost of goods sold = - ✔✔gross profit
|| || || || || || || || ||
cost of goods sold / average inventory = - ✔✔inventory turnover
|| || || || || || || || || ||
gross profit / total sales = - ✔✔gross profit percent
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