ACCOUNTING 101 UPDATED EXAM SCRIPT QUESTIONS
AND SOLUTIONS RATED A+
✔✔Where will dividends show up? - ✔✔RE statement
✔✔Where will accumulated depreciation show up? - ✔✔non-current assets
✔✔Where will patents show up? - ✔✔non-current assets
✔✔Where will bonds payable show up? - ✔✔current assets
✔✔Where will supplies show up? - ✔✔current assets
✔✔Where will supplies expense show up? - ✔✔income statement as expense
✔✔Where will salaries payable show up? - ✔✔current liabilities
✔✔Where will building show up? - ✔✔non-current assets
✔✔Where will long-term bank loan payable show up? - ✔✔long term liabs.
✔✔Periodicity assumption - ✔✔financial statements are prepared at regular intervals
✔✔Going concern assumption - ✔✔belief that company will continue to operate for the
forseeable future
✔✔Faithful representation - ✔✔desire to minimize errors and bias in financial
statements
✔✔Monetary unit assumption - ✔✔all items for US companies must be converted to US
dollars for reporting purposes
✔✔Comparability - ✔✔ability to easily evaluate one company's results relative to
another's
✔✔Cost constraint - ✔✔weighing the cost of providing the info against the benefit to the
users of the financial statements
✔✔Relevance - ✔✔the quality of info that indicated the info makes a difference in a
decision
✔✔Historical cost principle - ✔✔belief that items should be reported on the balance
sheet at the price that was paid to acquire item
, ✔✔Consistency - ✔✔a company's use of the same accounting principles and methods
from year to year
✔✔Economic entity assumption - ✔✔a transaction such as a mortgage payment
belongs to the owner not to their company
✔✔Materilaity - ✔✔the auditor discovered a very small dollar item that was recorded
incorrectly and decided not to fix it
✔✔Full disclosure principle - ✔✔the reporting of all info that would make a difference to
financial statement users
✔✔How do you increase an asset account? - ✔✔debit
✔✔How do you increase an owner's equity account? - ✔✔credit
✔✔How do you decrease an asset account? - ✔✔credit
✔✔How do you decrease a liability account? - ✔✔debit
✔✔How do you decrease an owner's equity account? - ✔✔debit
✔✔How do you increase a revenue account? - ✔✔credit
✔✔How do you increase an expense account? - ✔✔debit
✔✔How do you increase a dividend account? - ✔✔debit
✔✔The purchase of an asset on credit - ✔✔increases assets and liabs
✔✔The payment of a liab - ✔✔decreases assets and liabs
✔✔A credit is not the normal balance for? - ✔✔dividends account
✔✔The classification and normal balance of the dividend is - ✔✔stockholders' equity
with a debit balance
✔✔Describe the classification and normal balance of the RE account - ✔✔stockholders'
equity, credit
✔✔Describe the classification and normal balance of the unearned rev account -
✔✔liability, credit
AND SOLUTIONS RATED A+
✔✔Where will dividends show up? - ✔✔RE statement
✔✔Where will accumulated depreciation show up? - ✔✔non-current assets
✔✔Where will patents show up? - ✔✔non-current assets
✔✔Where will bonds payable show up? - ✔✔current assets
✔✔Where will supplies show up? - ✔✔current assets
✔✔Where will supplies expense show up? - ✔✔income statement as expense
✔✔Where will salaries payable show up? - ✔✔current liabilities
✔✔Where will building show up? - ✔✔non-current assets
✔✔Where will long-term bank loan payable show up? - ✔✔long term liabs.
✔✔Periodicity assumption - ✔✔financial statements are prepared at regular intervals
✔✔Going concern assumption - ✔✔belief that company will continue to operate for the
forseeable future
✔✔Faithful representation - ✔✔desire to minimize errors and bias in financial
statements
✔✔Monetary unit assumption - ✔✔all items for US companies must be converted to US
dollars for reporting purposes
✔✔Comparability - ✔✔ability to easily evaluate one company's results relative to
another's
✔✔Cost constraint - ✔✔weighing the cost of providing the info against the benefit to the
users of the financial statements
✔✔Relevance - ✔✔the quality of info that indicated the info makes a difference in a
decision
✔✔Historical cost principle - ✔✔belief that items should be reported on the balance
sheet at the price that was paid to acquire item
, ✔✔Consistency - ✔✔a company's use of the same accounting principles and methods
from year to year
✔✔Economic entity assumption - ✔✔a transaction such as a mortgage payment
belongs to the owner not to their company
✔✔Materilaity - ✔✔the auditor discovered a very small dollar item that was recorded
incorrectly and decided not to fix it
✔✔Full disclosure principle - ✔✔the reporting of all info that would make a difference to
financial statement users
✔✔How do you increase an asset account? - ✔✔debit
✔✔How do you increase an owner's equity account? - ✔✔credit
✔✔How do you decrease an asset account? - ✔✔credit
✔✔How do you decrease a liability account? - ✔✔debit
✔✔How do you decrease an owner's equity account? - ✔✔debit
✔✔How do you increase a revenue account? - ✔✔credit
✔✔How do you increase an expense account? - ✔✔debit
✔✔How do you increase a dividend account? - ✔✔debit
✔✔The purchase of an asset on credit - ✔✔increases assets and liabs
✔✔The payment of a liab - ✔✔decreases assets and liabs
✔✔A credit is not the normal balance for? - ✔✔dividends account
✔✔The classification and normal balance of the dividend is - ✔✔stockholders' equity
with a debit balance
✔✔Describe the classification and normal balance of the RE account - ✔✔stockholders'
equity, credit
✔✔Describe the classification and normal balance of the unearned rev account -
✔✔liability, credit
