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Accounting Frequently Asked Questions

Accounting There are 117 questions on this topic. Last updated Oct 31 2024.
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101 Suppose an account is debited for $50 and another account is credited for $40. What amount is needed for the transaction to balance?
Answer: credit of $10

For a transaction to balance, the debits must equal the credits. Currently, the credits are $10 less than debits; therefore a credit of $10 is needed, so that the debits of $50 equal the credits of $50.
Question Reference: Quiz: Accounting For Kids!.
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Copyrights, goodwill, and patents are part of what specific non-current asset?




102 What are the three main functions of an investment banker?
Answer: Underwriting, distributing, advising

The investment banker acts as an intermediary between the issuing firm and investors in return for advising fees, success fees etc. It is very significant in the smooth flow of transactions in the financial markets.
Question Reference: Quiz: Let's Take in to Account the Finance.
103 What does net income equal?
Answer: Revenues - Expenses

In North America, revenues minus expenses equals net income. Assets minus liabilities equals owner's equity. Liabilities plus owner's equity equals assets. Revenues plus expenses has no meaning.
Question Reference: Quiz: Bookkeeping Basics.
104 Finally, for the break-even ratio. What do you divide by Contribution per unit to get the final figure?
Answer: Fixed costs

Contribution per unit is defined by subtracting the variable cost for each unit from the selling price for each unit. It is considered a good method, but doesn't take into account discounted products, and it can only be used for one product.
Question Reference: Quiz: Ratios in Accounting.
105 Are assets debited or credited when they increase?
Answer: Debited

Assets, expenses and losses are debited while liabilities, incomes and gains are credited.
Question Reference: Quiz: Basic Accounting 2.
106 Julia Childs received $240,000 in January 2001 for a twenty-four month advertising sponsorship. What is the PROPER entry to make in January for this transaction?
Answer: Debit Cash for $240,000, Credit Revenue for $10,000, Credit Deferred Revenue for $230,000

The correct method for booking this sponsorship is to record the full $240,000 cash in January as received, book 1/24 as revenue in January, and place the other 23/24 on the balance sheet as deferred revenue to be recognized when the services are provided.
Question Reference: Quiz: Generally Accepted Accounting Principles.
107 A $100 petty cash fund has cash of $21 and valid receipts for $80. The journal entry upon replenishment would include a...?
Answer: Credit to Cash Over and Short for $1

The only two times the Petty Cash account would have a journalized transaction are: 1. when initially establishing the Petty Cash fund; and 2. when changing the stipulated amount of the fund (for example, increasing the fund from $100 to $150). (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 301-303).
Question Reference: Quiz: Accounting #1.
108 Which part of the G.A.A.P. is "the assumption that economic events can be identified with a particular unit of accountability"?
Answer: Economic entity assumption

Basically, the economic entity assumption states that a corporation exists as a separate entity from its owner(s) or shareholders.
Question Reference: Quiz: Accounting 101 - Bookkeeping.
109 A ____ lists each of the accounts in the general ledger with its balance as of a particular date. What is it?
Answer: Trial Balance

Question Reference: Quiz: Financial Accounting.
110 What do you call the process when the firm issues securities directly to investors or small group of institutions?
Answer: Private placement

In private placement, the company sometimes pay advising fees to an investment banker. The company may not need the investment banker's underwriting and distributing function.
Question Reference: Quiz: Let's Take in to Account the Finance.
111 Which form of accounting states that transactions are to be recorded in the period that they occur?
Answer: Accrual basis of accounting

The other form is the cash basis of accounting, where revenue is recorded only when cash is received, and expenses are recorded only when cash is paid.
Question Reference: Quiz: Accounting 101 - Bookkeeping.
112 Usually, what asset account in a company's ledger is the most liquid?
Answer: cash

An account increases in liquidity the easier it is to turn into cash. This is important to know, because on a Classified Balance Sheet, current assets and current liabilities must be recorded in order of decreasing liquidity.
Question Reference: Quiz: Accounting 101 - Bookkeeping.
113 Sales, cost of sales, utilities expense, and depreciation expense is recorded in what financial statement?
Answer: Income Statement only

Income Statement can also be referred as the Profit and Loss Statement. It helps the investors project the timing and risks of future cash flows. It can be reported as single-step or multiple-step income statement.
Question Reference: Quiz: Let's Take in to Account the Finance.
114 In Canada, which kind of accountant would you go to to have prepare your income tax documentation, public or private?
Answer: public

A public accountant opens his business to the public, whereas a private accountant works for a private company.
Question Reference: Quiz: Accounting 101 - Bookkeeping.
115 What type of security is determined by YTM or yield to maturity?
Answer: Bonds

YTM is a promised or redemption yield that the bondholders or creditors will receive if the bond matures. Bonds are fixed-income debt securities.
Question Reference: Quiz: Let's Take in to Account the Finance.
116 What does the certification CA stand for (in Canada)?
Answer: Chartered Accountant

Question Reference: Quiz: Accounting 101 - Bookkeeping.
117 When you have yet to bill a customer for services rendered and have not received the money in the same financial period that the service was performed, then the transaction is recorded as a(n) ________ (assume accrual basis of accounting)?
Answer: accrued revenue

In the cash basis of accounting, the transaction would not be recorded until the next period, when the cash is received.
Question Reference: Quiz: Accounting 101 - Bookkeeping.
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