Major Review: Fundamentals of Accounting chapters 3/4 Quiz

What is the difference between Accrual basis and Cash Basis accounting?

• Cash basis deals with only cash while Accrual basis deals with other forms of payment such a credit cards

• Accrual basis records cash once it is received or given while Cash basis records cash only after the transaction is fully complete

• Cash Basis records cash once it is received or given while Accrual basis records cash only after the transaction is fully complete

• There is no difference

What is the primary purpose of the balance sheet?

• To show the company's revenues and expenses over a period

• To provide a snapshot of the company's financial position at a specific point in time

• To summarize the company's cash inflows and outflows

• To detail the company's changes in equity

Under accrual basis accounting, if a company receives $1,000 dollars in advance for a service, they record the revenue...

• As soon as they receive the money

• Only after they provide the service

• At the end of the year

• Once they start providing the service

Which of the following is an example of an adjusting entry?

• Recording the purchase of inventory

• Recording depreciation expense

• Recording a cash sale

• Recording a loan payment

• $20,000

• $80,000

• $30,000

• $50,000

Closing Entries means...

• Resetting all accounts to zero

• Transferring all the balances from the temporary accounts to retained earnings.

• Dividing everything in the retained earnings account among all the other accounts.

• Transferring all balances, except for expenses, to the cash account.

What are the three elements of fraud

• Opportunity

• Motivation

• Greed

• Rationalization

What do 'Internal Controls' refer to?

• The hierarchy within a company

• The way a company keeps track of its employees to make sure they are doing their job well

• The company's plan to keep assets safe and avoid fraudulent accounting information

• The security system that the company invests in

A company has a beginning retained earnings of $10,000, Net Income of $5,000, and dividends of $2,000. What is the ending retained earnings?

• $13,000

• $15,000

• $17,000

• $12,000

What is the difference between preventative controls and detective controls?

• Preventative controls are there to prevent fraud from being able to happen while Detective controls are there to detect any ongoing fraud

• Detective controls are there to prevent fraud from being able to happen while Preventative controls are there to detect any ongoing fraud

• Preventative controls are carried about by the company while Detective controls are carried out by public authorities

• There is no difference. They're both terms for means of preventing fraud