ACC 291T - Principles Of Accounting II Exam Questions with Correct Answers Latest Update
2025-2026
The accounting equation is: - Answers Assets = Liabilities + Owners' Equity
Balance Sheet
The expanded accounting equation: - Answers Assets = Liabilities + Paid-in Capital + (Revenues
- Expenses - Dividends)
Income Statement
Stockholders' Equity equation: - Answers Stockholders' Equity = Paid-In Capital + Net income -
Dividends - Treasury Stock
Net Income equation: - Answers Net Income = Revenues - Expenses
Revenues are most often recognized when: - Answers A sale takes place or a service is
performed
The accounting term for the recording of a sale through a journal entry is: - Answers Revenue
recognition
The two criteria that need to be met in order revenue to be recognized are: - Answers Work has
been substantially completed and cash collection is reasonably assured.
The Talmage Company owns several shopping malls. One of the shopping malls is undergoing
an underground renovation. Copeland Construction is the construction company that is
performing these renovations. According to GAAP, when is the most appropriate time to
recognize revenue from this construction project? - Answers At the end of each year, as a
percentage completed for that year at the end of an accounting period
Sally is a college student who decided that she spends entirely too much time inside of the
library studying. She decided to join a health club in order to become more active. After
researching several Health Clubs and Gyms, Sally decided to purchase a membership at Deseret
Health Club. Sally bought a contract for one year. Upon signing this contract, Sally agreed to pay
an upfront membership fee, which will ensure use of the health facilities during the full year. She
also agreed to pay a monthly fee that will be paid at the beginning of each month during the
length of the contract. According to GAAP and assuming that the up-front fee does not relate to
a specific activity and is nonrefundable, when is the best time for Deseret Health Club to
recognize the revenue for the up-front fee paid by Sally? - Answers Allocate it over the life of the
contract and recognize it as time passes
What is included in the journal entry necessary to record the sale of goods on account? -
,Answers A credit to Sales Revenue
The journal entry includes a DEBIT to Accounts Receivable (reflecting an increase in this asset)
and a CREDIT to Sales Revenue (reflecting an increase in equity because Sales Revenue is a
subcategory of the Retained Earnings equity account).
Why are receivables and revenue ripe areas for abuse or outright fraud? - Answers No real event,
such as the receipt of cash, is necessary to record a debit to Accounts Receivable and a credit
to Revenue.
What is included in the journal entry necessary to record the collection of the cash for a
previously recorded credit sale? - Answers CREDIT Accounts Receivable
The journal entry to record the collection of cash for a previously recorded credit sale is a DEBIT
to Cash (reflecting an increase in this asset) and a CREDIT to Accounts Receivable (reflecting a
decrease to this asset which was recorded when the credit sale was initially recorded).
Typically, what do companies want to do with their reported revenue in cases in which they are
trying to reach revenue or profit targets? - Answers Companies desire to report revenue as soon
as possible to make themselves look better.
What is it that complicates the revenue recognition process for Rent-A-Center, the rent-to-own
company? - Answers Only about 25% of customers pay the full amount stated in their sales
contracts.
Net Sales equation: - Answers Gross Sales − Sales Discounts − Sales Returns and Allowances
= Net Sales
Common cash controls include: - Answers Separation of duties in handling and accounting for
cash
Daily deposits of all cash receipts
Payment of all expenditures by prenumbered checks
Which of the following accounts would normally be found on the income statement? - Answers
Sales Returns and Allowances
Sales Discounts
Sales Discounts is which type of account? - Answers Contra-revenue
, Sales Returns and Allowances is which type of account? - Answers Contra-revenue
The difference between gross sales and net sales is: - Answers Sales discounts and sales
returns and allowances
Which of the following is not a cash control procedure? - Answers Invest excess cash in high-
yielding securities
A customer of Boulder Company returned goods previously purchased on credit. The customer
had not yet paid for the goods. What is included in the journal entry necessary in the books of
Boulder Company to record this sales return? - Answers DEBIT to Sales Returns and Allowances
CREDIT to Accounts Receivable
When a company has a generous credit policy, cash is tied up in receivables and the company
must finance its expansion or the payment of its bills through increased borrowing. What label
is given to this cost of selling on credit? - Answers Carrying cost
Why is it important to require that all cash receipts be deposited daily in bank accounts? -
Answers A large accumulation of cash can tempt even the most trusted employee.
What problem is caused for you if you have a credit policy of requiring cash payment in 30 days
and your competitor has a credit policy of requiring cash payment in 75 days? - Answers More
attractive credit terms can allow your competitor to steal customers from you.
Two ways of accounting for losses from uncollectible receivables include: - Answers Allowance
method (generally accepted)
Direct write-off method (NOT generally accepted)
Two ways of estimating losses from uncollectible receivables include: - Answers Percentage of
credit sales (existing balance is ignored)
Fraction of total outstanding receivables (often determined by aging the accounts receivable)
(existing balance is considered)
Customers who do not pay for the merchandise that they bought on credit are referred to as: -
Answers Bad debts
Bad Debt Expense is classified as a(n): - Answers Selling expense
The direct write-off method: - Answers Is only acceptable if bad debts are small, insignificant
amounts
When the direct write-off method of recognizing bad debt expense is used, which of the
2025-2026
The accounting equation is: - Answers Assets = Liabilities + Owners' Equity
Balance Sheet
The expanded accounting equation: - Answers Assets = Liabilities + Paid-in Capital + (Revenues
- Expenses - Dividends)
Income Statement
Stockholders' Equity equation: - Answers Stockholders' Equity = Paid-In Capital + Net income -
Dividends - Treasury Stock
Net Income equation: - Answers Net Income = Revenues - Expenses
Revenues are most often recognized when: - Answers A sale takes place or a service is
performed
The accounting term for the recording of a sale through a journal entry is: - Answers Revenue
recognition
The two criteria that need to be met in order revenue to be recognized are: - Answers Work has
been substantially completed and cash collection is reasonably assured.
The Talmage Company owns several shopping malls. One of the shopping malls is undergoing
an underground renovation. Copeland Construction is the construction company that is
performing these renovations. According to GAAP, when is the most appropriate time to
recognize revenue from this construction project? - Answers At the end of each year, as a
percentage completed for that year at the end of an accounting period
Sally is a college student who decided that she spends entirely too much time inside of the
library studying. She decided to join a health club in order to become more active. After
researching several Health Clubs and Gyms, Sally decided to purchase a membership at Deseret
Health Club. Sally bought a contract for one year. Upon signing this contract, Sally agreed to pay
an upfront membership fee, which will ensure use of the health facilities during the full year. She
also agreed to pay a monthly fee that will be paid at the beginning of each month during the
length of the contract. According to GAAP and assuming that the up-front fee does not relate to
a specific activity and is nonrefundable, when is the best time for Deseret Health Club to
recognize the revenue for the up-front fee paid by Sally? - Answers Allocate it over the life of the
contract and recognize it as time passes
What is included in the journal entry necessary to record the sale of goods on account? -
,Answers A credit to Sales Revenue
The journal entry includes a DEBIT to Accounts Receivable (reflecting an increase in this asset)
and a CREDIT to Sales Revenue (reflecting an increase in equity because Sales Revenue is a
subcategory of the Retained Earnings equity account).
Why are receivables and revenue ripe areas for abuse or outright fraud? - Answers No real event,
such as the receipt of cash, is necessary to record a debit to Accounts Receivable and a credit
to Revenue.
What is included in the journal entry necessary to record the collection of the cash for a
previously recorded credit sale? - Answers CREDIT Accounts Receivable
The journal entry to record the collection of cash for a previously recorded credit sale is a DEBIT
to Cash (reflecting an increase in this asset) and a CREDIT to Accounts Receivable (reflecting a
decrease to this asset which was recorded when the credit sale was initially recorded).
Typically, what do companies want to do with their reported revenue in cases in which they are
trying to reach revenue or profit targets? - Answers Companies desire to report revenue as soon
as possible to make themselves look better.
What is it that complicates the revenue recognition process for Rent-A-Center, the rent-to-own
company? - Answers Only about 25% of customers pay the full amount stated in their sales
contracts.
Net Sales equation: - Answers Gross Sales − Sales Discounts − Sales Returns and Allowances
= Net Sales
Common cash controls include: - Answers Separation of duties in handling and accounting for
cash
Daily deposits of all cash receipts
Payment of all expenditures by prenumbered checks
Which of the following accounts would normally be found on the income statement? - Answers
Sales Returns and Allowances
Sales Discounts
Sales Discounts is which type of account? - Answers Contra-revenue
, Sales Returns and Allowances is which type of account? - Answers Contra-revenue
The difference between gross sales and net sales is: - Answers Sales discounts and sales
returns and allowances
Which of the following is not a cash control procedure? - Answers Invest excess cash in high-
yielding securities
A customer of Boulder Company returned goods previously purchased on credit. The customer
had not yet paid for the goods. What is included in the journal entry necessary in the books of
Boulder Company to record this sales return? - Answers DEBIT to Sales Returns and Allowances
CREDIT to Accounts Receivable
When a company has a generous credit policy, cash is tied up in receivables and the company
must finance its expansion or the payment of its bills through increased borrowing. What label
is given to this cost of selling on credit? - Answers Carrying cost
Why is it important to require that all cash receipts be deposited daily in bank accounts? -
Answers A large accumulation of cash can tempt even the most trusted employee.
What problem is caused for you if you have a credit policy of requiring cash payment in 30 days
and your competitor has a credit policy of requiring cash payment in 75 days? - Answers More
attractive credit terms can allow your competitor to steal customers from you.
Two ways of accounting for losses from uncollectible receivables include: - Answers Allowance
method (generally accepted)
Direct write-off method (NOT generally accepted)
Two ways of estimating losses from uncollectible receivables include: - Answers Percentage of
credit sales (existing balance is ignored)
Fraction of total outstanding receivables (often determined by aging the accounts receivable)
(existing balance is considered)
Customers who do not pay for the merchandise that they bought on credit are referred to as: -
Answers Bad debts
Bad Debt Expense is classified as a(n): - Answers Selling expense
The direct write-off method: - Answers Is only acceptable if bad debts are small, insignificant
amounts
When the direct write-off method of recognizing bad debt expense is used, which of the
