INTERMEDIATE ACCOUNTING QUESTIONS
AND ANSWERS STUDY GUIDE 2024/2025
ACADEMIC YEAR
1. What will happen if expenses are paid in cash?
Stockholders' equity will increase.
X Assets will decrease.
Assets will increase.
Liabilities will decrease.
2. has no effect on retained earnings.: X Hiring a new
employee revenue paying a dividend an expense
3. An investment by the stockholders in a business causes an
increase in which of the following? assets and stock holder
equity
4. Which of the following represents the characteristics of every
accounting information system? Select all that apply.: It
processes transaction data.
It communicates financial information to decision-makers.
It collects transaction data.
that require recording in the financial statements
are called accounting transactions.: economic events
5. that require recording in the financial statements are
called accounting transactions.: assets increase
6. What could happen when an individual asset is increased?
there could be an equal decrease in another asset
7. Assets and liabilities increase when a business: receives
cash in advance from a customer.
8. What happens when dividends are paid? stockholder equity
decreases 10. A book designer purchased a new computer
, INTERMEDIATE ACCOUNTING QUESTIONS
AND ANSWERS STUDY GUIDE 2024/2025
ACADEMIC YEAR
monitor for $1 ,200 cash. As a result of this purchase, total
assets remain unchanged
1 1. Receipts of cash in advance from customers are not treated
as revenue at the time of receipt because: revenue is not
recognized until the work is performed.
1 2. will increase when services are performed on
account.: stockholder equity
13. There must be a corresponding increase in liabilities or an
increase in stockholders' equity if total assets are:
increased
14. Which of the following occurs when a business makes a
purchase of inventory on account? both inventory and
accounts payable increase
15. Of the following transactions, which would lead to the largest
decrease in a firm's retained earnings? issuance of $18,000 of
common stock
receipt of $20,000 for services
performed X payment of $20,000 in
employee salaries payment of an
$18,000 dividend on common stock
16. Which of the following accounting entries would you MOST
expect to accompany a $9,000 decrease in cash, and why?
$9,000 increase in Equipment, because cash is an asset, so an
equal but opposite change to another asset account such as
Equipment will offset the decrease to the Cash account.
17. On February 2, Miles Inc. pays $800 to purchase a one-year
insurance policy that will expire next year on January 31.
Miles indicates this transaction in its books by recording an
AND ANSWERS STUDY GUIDE 2024/2025
ACADEMIC YEAR
1. What will happen if expenses are paid in cash?
Stockholders' equity will increase.
X Assets will decrease.
Assets will increase.
Liabilities will decrease.
2. has no effect on retained earnings.: X Hiring a new
employee revenue paying a dividend an expense
3. An investment by the stockholders in a business causes an
increase in which of the following? assets and stock holder
equity
4. Which of the following represents the characteristics of every
accounting information system? Select all that apply.: It
processes transaction data.
It communicates financial information to decision-makers.
It collects transaction data.
that require recording in the financial statements
are called accounting transactions.: economic events
5. that require recording in the financial statements are
called accounting transactions.: assets increase
6. What could happen when an individual asset is increased?
there could be an equal decrease in another asset
7. Assets and liabilities increase when a business: receives
cash in advance from a customer.
8. What happens when dividends are paid? stockholder equity
decreases 10. A book designer purchased a new computer
, INTERMEDIATE ACCOUNTING QUESTIONS
AND ANSWERS STUDY GUIDE 2024/2025
ACADEMIC YEAR
monitor for $1 ,200 cash. As a result of this purchase, total
assets remain unchanged
1 1. Receipts of cash in advance from customers are not treated
as revenue at the time of receipt because: revenue is not
recognized until the work is performed.
1 2. will increase when services are performed on
account.: stockholder equity
13. There must be a corresponding increase in liabilities or an
increase in stockholders' equity if total assets are:
increased
14. Which of the following occurs when a business makes a
purchase of inventory on account? both inventory and
accounts payable increase
15. Of the following transactions, which would lead to the largest
decrease in a firm's retained earnings? issuance of $18,000 of
common stock
receipt of $20,000 for services
performed X payment of $20,000 in
employee salaries payment of an
$18,000 dividend on common stock
16. Which of the following accounting entries would you MOST
expect to accompany a $9,000 decrease in cash, and why?
$9,000 increase in Equipment, because cash is an asset, so an
equal but opposite change to another asset account such as
Equipment will offset the decrease to the Cash account.
17. On February 2, Miles Inc. pays $800 to purchase a one-year
insurance policy that will expire next year on January 31.
Miles indicates this transaction in its books by recording an
