Maintain an adequate system of internal control

Assignment Help Financial Accounting

Reference no: EM1313714

Multiple Choice questions on accounts basics.

1.The relationship between current assets and current liabilities is

a. useful in determining income.

b.useful in evaluating a company\'s liquidity.

c.called the matching principle.

d.useful in determining the amount of a company\'s long-term debt.

2. A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.

3.A major advantage of national credit cards to retailers is that there is no charge to the retailer by the credit card companies for their services.

4.When an account receivable that was previously written off is collected, it is first necessary to reverse the entry to reinstate the customer\'s account before recording the collection.

5. A dishonored note receivable

a. Is no longer negotiable.

b. Must be written off by the lender.

c. Creates a claim against the maker for the amount of principal only.

d. Is one that is not paid in full within 10 days of maturity.

6. Which one of the following is not an accounting problem (issue) associated with ac-counts receivable?

a. Depreciating accounts receivable

b. Recognizing accounts receivable

c. Valuing accounts receivable

d. Accelerating cash receipts from accounts receivable

7. An aging of a company\'s accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

a. debit to Bad Debts Expense for $4,000

b.debit to Allowance for Doubtful Accounts for $2,800

c. debit to Bad Debts Expense for $2,800

d. credit to Allowance for Doubtful Accounts for $4,000

8. The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

9. Companies that fail to maintain an adequate system of internal control

a. may be subject to charges of fraud

b. will be automatically dissolved

c. may be subject to fines and officer imprisonment

d. may be forced to sell their assets

10. An income statement would not include

a. other revenue and gains

b. extraordinary items

c. discontinued operations

d. dividends paid

Reference no: EM1313714

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