1.     Which of the following is the mostappropriate and modern definition of accounting?
     A)    The informationsystem that identifies, records, and communicates the economicevents of an organization to interested users
     B)    A means of collectinginformation
     C)    The interconnectednetwork of subsystems necessary to operate a business
     D)    Electroniccollection, organization, and communication of vast amounts ofinformation
2.    Which of the following groups uses accountinginformation primarily to insure the entity is operating withinprescribed rules?
     A)    Taxingauthorities
     B)    Regulatoryagencies
     C)    Labor Unions
     D)    Management
3.    Which of the following would not be consideredan internal user of accounting data for a company?
     A)    The president of acompany
     B)    The controller of acompany
     C)    Creditor of acompany
     D)    Salesperson of acompany
4.    Stockholders’ equity is increased by
     A)    Dividends
     B)    Revenues
     C)    Expenses
     D)    Liabilities
5.    The left side of an account is
     A)    Blank
     B)    a description of theaccount
     C)    the debit side
     D)    The balance of theaccount
6.    Which one of the following is not a part of anaccount?
     A)    Credit side
     B)    Trial balance
     C)    Debit side
     D)    Title
7.    The right side of an account
     A)    is the correctside
     B)    reflects alltransactions for the accounting period
     C)    shows all thebalances of the accounts in the system
     D)    is the creditside
8.    The normal balance of any account is the
     A)    left side
     B)    right side
     C)    side which increasesthat account
     D)    side which decreasesthat account
9.    The double-entry system requires that eachtransaction must be recorded
     A)    in at least twodifferent accounts
     B)    in two sets ofbooks
     C)    in a journal and in aledger
     D)    first as a revenueand then as an expense
10.    A credit is not the normal balance for whichaccount listed below?
     A)    Common Stockaccount
     B)    Revenue account
     C)    Liability account
     D)    Dividends account
11.    Which accounts normally have debitbalances?
     A)    Assets, expenses, andrevenues
     B)    Assets, expense, andretained earnings.
     C)    Assets, liabilities,and dividends
     D)    Assets, expenses, anddividends
12.    Which accounts normally have creditbalances?
     A)    Revenues,liabilities, and dividends
     B)    Revenues,liabilities, and assets
     C)    Revenues,liabilities, and retained earnings
     D)    Revenues,liabilities, and expenses
13.    External users want answers to all of thefollowing questions except
     A)    Is the companyearning satisfactory income?
     B)    Will the company beable to pay its debts as they come due?
     C)    Will the company beable to afford employee pay raises this year?
     D)    How does the companycompare in profitability with competitors?
14.    Borrowing money is an example of a(n)
     A)    deliveringactivity
     B)    financingactivity
     C)    investingactivity
     D)    operatingactivity
15.    Debt securities sold to investors that mustbe repaid at a particular date some years in the future arecalled
     A)    accounts payable
     B)    notes receivable
     C)    taxes payable
     D)    bonds payable
16.    Debt and obligations of a business arereferred to as
     A)    Assets
     B)    Equities
     C)    Liabilities
     D)    Expenses
17.    The financial statement that summarizes thechanges in retained earnings for a specific period of time isthe
     A)    balance sheet
     B)    income statement
     C)    statement of cashflows
     D)    retained earningsstatement
18.    To show how successfully your businessperformed during a period of time, you would report its revenuesand expense in the
     A)    balance sheet
     B)    income statement
     C)    statement of cashflows
     D)    retained earningsstatement
19.    Net income results when
     A)    Assets >Liabilities
     B)    Revenues =Expenses
     C)    Revenues >Expenses
     D)    Revenues20.    Net income will result during a time periodwhen:
     A)    assets exceedliabilities
     B)    assets exceedrevenues
     C)    expenses exceedrevenues
     D)    revenues exceedexpenses
21.    Retained earnings at the end of the period isequal to
     A)    retained earnings atthe beginning of the period plus net income minus liabilities
     B)    retained earnings atthe beginning of the period plus net income minus dividends
     C)    net income
     D)    assets plusliabilities
22.    Which of the following financial statementsis concerned with the company at a point in time?
     A)    Balance sheet
     B)    Income statement
     C)    Retained Earningsstatement
     D)    Statement of cashflows
23.    The retained earnings statement would notshow
     A)    the retained earningsbeginning balance
     B)    revenues andexpenses
     C)    Dividends
     D)    the ending retainedearning balance
24.    A balance sheet shows
     A)    revenues,liabilities, and stockholders’ equity
     B)    expenses, dividends,and stockholders’ equity
     C)    revenues, expenses,and dividends
     D)    assets, liabilities,and stockholders’ equity
25.    The accounting equation may be expressedas:
     A)    Assets =Stockholders’ Equity ¿ Liabilities.
     B)    Assets = Liabilities+ Stockholders’ Equity.
     C)    Assets + Liabilities= Stockholders’ Equity.
     D)    Assets +Stockholders’ Equity = Liabilities.
26.    Under the accrual basis of accounting
     A)    cash must be receivedbefore revenue is recognized
     B)    net income iscalculated by matching cash outflows against cash inflows
     C)    events that change acompany’s financial statements are recognized in the period theyoccur rather than in the period in which cash is paid orreceived
     D)    the ledger accountsmust be adjusted to reflect a cash basis of accounting beforefinancial statements are prepared under generally acceptedaccounting principles
27.    Using accrual accounting, expenses arerecorded and reported only
     A)    when they areincurred whether or not cash is paid
     B)    when they areincurred and paid at the same time
     C)    if they are paidbefore they are incurred
     D)    if they are paidafter they are incurred
28.    Which statement is correct?
     A)    As long as a companyconsistently uses the cash basis of accounting, generally acceptedaccounting principles allow its use.
     B)    The use of the cashbasis of accounting violates both the revenue recognition andmatching principles.
     C)    The cash basis ofaccounting is objective because no one can be certain of the amountof revenue until the cash is received.
     D)    As long as managementis ethical, there are no problems with using the cash basis ofaccounting.
29.    Which one of the following is not a tool infinancial statement analysis?
     A)    Horizontalanalysis
     B)    Circular analysis
     C)    Vertical analysis
     D)    Ratio analysis
30.    If year one equals $800, year two equals$840, and year three equals $880, the percentage to be assigned foryear three in a trend analysis, assuming that year 1 is the baseyear, is
     A)    110%.
     B)    105%.
     C)    95%.
     D)    100%.
31.    Assume the following sales data for acompany:
    2008    $945,000
    2007    780,000
    2006    650,000
If 2006 is the base year, what is the percentage increase in salesfrom 2006 to 2007?
     A)    25%
     B)    20%
     C)    125%
     D)    143%
32.    Ratios are most useful in identifying
     A)    Trends
     B)    Differences
     C)    Causes
     D)    Relationships
33.    Return on assets ratio is most closelyrelated to
     A)    profit margin anddebt to total assets ratio
     B)    profit margin andasset turnover ratio
     C)    times interest earnedand debt to stockholders’ equity ratio
     D)    profit margin andfree cash flow
34.    Return on common stockholders’ equity ratiois most closely related to
     A)    gross profit rate andoperating expenses to sales ratio
     B)    profit margin andfree cash flow
     C)    times interest earnedand debt to stockholders’ equity ratio
     D)    return on asset ratioand leverage (debt to total assets ratio)
35.    Which one of the following would beconsidered a long-term solvency ratio?
     A)    Receivablesturnover
     B)    Return on totalassets
     C)    Current cash debtcoverage ratio
     D)    Debt to total assetsratio
36.    The current ratio is
     A)    calculated bydividing current liabilities by current assets
     B)    used to evaluate acompany’s liquidity and short-term debt paying ability
     C)    used to evaluate acompany’s solvency and long-term debt paying ability
     D)    calculated bysubtracting current liabilities from current assets
37.    The current ratio is a
     A)    liquidity ratio
     B)    profitabilityratio
     C)    long-term solvencyratio
     D)    cash flow ratio
38.    The receivables turnover and inventoryturnover ratios are used to analyze
     A)    long-termsolvency
     B)    Profitability
     C)    Liquidity
     D)    Leverage
39.    The asset turnover ratio is
     A)    net sales divided bynet income
     B)    average total assetsdivided by net income
     C)    net sales divided byaverage total assets
     D)    average total assetsdivided by net sales
40.    The assets turnover ratio measures
     A)    how often a companyreplaces its assets
     B)    how efficiently acompany uses its assets to generate sales
     C)    the portion of theassets that have been financed by creditors
     D)    the overall rate ofreturn on assets
41.    The profit margin ratio is calculated bydividing
     A)    sales by cost ofgoods sold
     B)    gross profit by netsales
     C)    net income bystockholders’ equity
     D)    net income by netsales
….

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