1．Generally accepted accounting principles (GAAP) are formulated by the ( )A. Securities and Exchange Commission (SEC)B. Financial Accounting Standards Board (FASB)C. Institute of Management Accountants (IMA)D. American Institute of Certified Public Accountants (AICPA)2．Which accounting concept or principle specifically states that we should record transactions at amounts that can be verified?A. Entity conceptB. Cost principleC. Reliability principleD. Going-concern concept3．Fossil is famous for fashion wristwatches and leather goods. At the end of a recent year, Fossil’s total assets added up to﹩381 million, and owner s’ equity was ﹩264 million. How much did Fossil owe creditors?A. Cannot determine from the data givenB. ﹩381 millionC. ﹩264 millionD. ﹩117 million 4．Assume that Fossil sold watches for ﹩50,000 to a department store on account. How would this transaction affect Fossil’s accounting equation?A. Increase both assets and owner s’ equity by ﹩50,000B. Increase both assets and liabilities by ﹩50,000C. Increase both liabilities and owners’ equity by ﹩50,000D. No effect on the accounting equation because the effects cancel out 5．The financial statement that reports assets, liabilities, and owner’s equity is the:A. Income statement.B. Owner’s equity statement.C. Balance sheet.D. Statement of cash flow.6．The left side of an account is used to record ( )A. DebitsB. CreditsC. Debit or credit, depending on the type of accountD. Increases 7．Accounts that normally have debit balance are: ( )A. Assets, expenses, and revenuesB. Assets, expenses, and owner’s capital.C. A ssets, liabilities, and owner’s drawings.D. Assets, owner’s drawings, and expenses.8．The time period assumption states that: ( )A. Revenue should be recognized in the accounting period in which it is earned.B. Expenses should be matched with revenues.C. The economic life of a business can be divided into artificial time periods.D. The fiscal year should be correspond with the calendar year. 9．In a work sheet, net income is entered in the following columns: ( )A. Income statement (Dr) and balance sheet (Dr).B. Income statement (Cr) and balance sheet (Dr).C. Income statement (Dr) and balance sheet (Cr).D. Income statement (Cr) and balance sheet (Cr).10．An account that will have a zero balance after closing entries have been journalized and posted is: ( )A. Service Revenue.B. Advertising Supplies.C. Prepaid Insurance.D. Accumulated Depreciation.11．Gross profit will result if: ( )A. Operating expenses are less than net income.B. Sales revenues are greater than operating expenses.C. Sales revenues are greater than cost of goods sold.D. Operating expenses are greater than cost of goods sold.12．A credit sale of ﹩750 is made on June 13, terms 2/10, net/30. A return of ﹩50 is granted on June 16. The amount received as payment in full on June 23 is:( )A. ﹩700.B. ﹩686.C. ﹩685.D. ﹩750.13．When special journals are used: ( )A. All purchase transactions are recorded in the purchases journal.B. All cash received, except from cash sales, is recorded in the cashreceipts journal.C. All cash disbursements are recorded in the cash payments journal.D. A general journal is not necessary.14．The statement of cash flows classifies cash receipts and cash payments by the following activities: ( )A. Operating and nonoperating.B. Investing, financing, and operating.C. Financing, operating, and nonoperating.D. Investing, financing, and nonoperating.15．Net income is ﹩132,000. During the year, accounts payable increased ﹩10,000, inventory decreased ﹩6,000, and accounts receivable increased ﹩12,000. Under the indirect method, net cash provided by operations is: ( )A. ﹩102,000.B. ﹩112,000.C. ﹩124,000.D. ﹩136,000.16．The cost principle states that ( )A. Assets should be initially recorded at cost and adjusted when the marketvalue changes.B. Activities of an entity are to be kept separate and distinct from its owner.C. Assets should be recorded at their cost.D. Only transaction data capable of being expressed in terms of money beincluded in the accounting records.17．Net income will result during a time period when:A. Assets exceed liabilities.B. Assets exceed revenues.C. Expenses exceed revenues.D. Revenues exceed expenses.18．Performing services on account will have the following effects on the components of the basic accounting equation:A. Increase assets and decrease owner’s equity.B. Increase assets and increase owner’s equity.C. Increase assets and increase liabilities.D. Increase liabilities and increase owner’s equity.19．As of December 31, 2007, Stoneland Company has assets of ﹩3,500 and owner’s equity of ﹩2,000. What are the liabilities for Stoneland Company as of December 31, 2007?A. ﹩1,500B. ﹩1,000.C. ﹩2,500.D. ﹩2,000. 20．On the last day of the period, Genesis Company buys a ﹩900 machine on credit. This transaction will affect the:A. Income statement only.B. Income statement and owner’s equity statement only.C. Balance sheet only.D. Income statement, owner’s equity statement, and balance sheet. 21．The right side of an account is used to record ( )A. DebitsB. CreditsC. Debit or credit, depending on the type of accountD. Increases. 22．Which of the following statements about a journal is false?A. It is not a book of original entry.B. It provides a chronological record of transac t ions.C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared.D. It discloses in one place the complete effect of a transaction.23．One of the following statements about the accrual basis of accounting is false. That statement is: ( )A. Events that change a company’s financial statements are recorded in the periods in which the events occur.B. Revenue is recognized in the period in which it is earned.C. This basis is in accord with generally accepted accounting principles.D. Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.24．When a net loss has occurred, Income Summary is: ( )A. Debited and Owner’s Capital is credited.B. Credited and Owner’s capital is debited.C. Debited and Owner’s Drawing is credited.D. Credited and Owner’s Drawing is debited.25．Current assets are listed: ( )A. By liquidity.B. By importance.C. By longevity.D. Alphabetically.26．If sales revenues are ﹩400,000, cost of goods sold is ﹩310,000, and operating expenses are ﹩60,000, the gross profit is: ( )A. ﹩30,000.B. ﹩90,000.C. ﹩340,000.D. ﹩400,000. 27．If beginning inventory is ﹩60,000, cost of goods purchased is ﹩380,000, and ending inventory is ﹩50,000, cost of goods sold is: ( )A. ﹩390,000.B. ﹩370,000.C. ﹩330,000.D. ﹩420,000. 28．Which of the following statements is correct?A. The sales discount column is included in the cash receipts journal.B. The purchases journal records all purchases of merchandise whether for cash or onaccount.C. The cash receipts journal records sales on account.D. Merchandise returned by the buyer is recorded by the seller in the purchases journal.29．An example of a cash flow from an operating activity is: ( )A. Payment of cash to lenders for interest.B. Receipt of cash from the sale of capital stock.C. Payment of cash dividends to the company’s stockholders.D. None of the above.30．The beginning balance in accounts receivable is ﹩44,000. The ending balance is ﹩42,000. Sales during the period are ﹩129,000. Cash receipts from customers are: ( )A. ﹩127,000.B. ﹩129,000.C. ﹩131,000.D. ﹩141,000.31.Generally，revenue is recorded by a business enterprise at a point when ：( )A、M anagement decides it is appropriate to do soB、T he product is available for sale to consumersC、A n exchange has taken place and the earning process is virtually completeD、A n order for merchandise has been received32.Why are certain costs capitalized when incurred and then depreciated or amortized over subsequent accounting periods？( )A、T o reduce the income tax liabilityB、T o aid management in making business decisionsC、T o match the costs of production with revenue as earnedD、T o adhere to the accounting concept of conservatism33.What accounting principle or concept justifies the use of accruals and deferrals？( )A、G oing concernB、M aterialityC、C onsistencyD、S table monetary unit34.An accrued expense can best be described as an amount ( )A、P aid and currently matched with revenueB、P aid and not currently matched with revenueC、N ot paid and not currently matched with revenueD、N ot paid and currently matched with revenue35.Continuation of a business enterprise in the absence of contrary evidence is an example of the principle or concept of ( )A、B usiness entityB、C onsistencyC、G oing concernD、S ubstance over form36.、In preparing a bank reconciliation，the amount of checks outstanding would be：( )A、a dded to the bank balance according to the bank statement.B、d educted from the bank balance according to the bank statement.C、a dded to the cash balance according to the deposi tor’s records.D、d educted from the cash balance according to the depositor’s records.37.Journal entries based on the bank reconciliation are required for：( )A、a dditions to the cash balance according to the depositor’s records.B、d eductions from the cash bala nce according to the depositor’s records.C、B oth A and BD、N either A nor B38.A petty cash fund is ：( )A、u sed to pay relatively small amounts。