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1 | |
The accounting cycle is the sequence of accounting procedures used to record, classify, and summarize accounting information. |
| | A) | True |
| | B) | False |
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2 | |
The condition of being held responsible for one's actions by the existence of an independent record of those actions is called accountability. |
| | A) | True |
| | B) | False |
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3 | |
A record used to summarize all increases and decreases in a particular asset, such as cash, or any other type of asset, liability, owners' equity, revenue, or expense is called a ledger. |
| | A) | True |
| | B) | False |
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4 | |
An accounting system includes a separate record for each item that appears in the financial statements. Collectively, these records are referred to as a company's journal. |
| | A) | True |
| | B) | False |
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5 | |
A credit is an amount entered on the right-hand side of a ledger account. |
| | A) | True |
| | B) | False |
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6 | |
An amount entered on the left-hand side of a ledger account is called a debit. |
| | A) | True |
| | B) | False |
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7 | |
If a T account has debit entries totaling $45,000 and credit entries totaling $34,000, it has a debit balance of $11,000. |
| | A) | True |
| | B) | False |
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8 | |
If a T account has a debit balance, it is an asset account. |
| | A) | True |
| | B) | False |
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9 | |
A system of recording every business transaction with equal dollar amounts of both debit and credit entries is called double-entry accounting. |
| | A) | True |
| | B) | False |
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10 | |
The general journal is the simplest type of journal, it has only two money columns--one for credits and one for debits. |
| | A) | True |
| | B) | False |
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11 | |
A chronological record of transactions, showing for each transaction the debits and credits to be entered in specific ledger accounts, is called a journal. |
| | A) | True |
| | B) | False |
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12 | |
The process of transferring information from the journal to individual accounts in the ledger is called articulation. |
| | A) | True |
| | B) | False |
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13 | |
An increase in owners' equity resulting from profitable operations is called net income. |
| | A) | True |
| | B) | False |
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14 | |
A corporation's distributions of resources to its stockholders are called dividends. |
| | A) | True |
| | B) | False |
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15 | |
The balance in the Retained Earnings account represents the total income and deductions for dividends for the accounting period. |
| | A) | True |
| | B) | False |
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16 | |
The costs of the goods and services used up in the process of obtaining revenue are called expenses. |
| | A) | True |
| | B) | False |
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17 | |
Any 12-month accounting period adopted by a business is called a calendar year. |
| | A) | True |
| | B) | False |
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18 | |
The accounting period is the span of time covered by an income statement. |
| | A) | True |
| | B) | False |
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19 | |
The matching principle requires that to provide the users of financial statements with timely information, net income is measured for relatively short accounting periods of equal length. |
| | A) | True |
| | B) | False |
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20 | |
The generally accepted accounting principle (GAAP) that determines when revenue should be recorded in the accounting records is called the realization principle. |
| | A) | True |
| | B) | False |
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21 | |
The generally accepted accounting principle (GAAP) that determines when expenses should be recorded in the accounting records is called the realization principle. |
| | A) | True |
| | B) | False |
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22 | |
An expense always causes a decrease in owners' equity. |
| | A) | True |
| | B) | False |
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23 | |
The conservatism concept is designed to avoid overstatement of financial strength or earnings. |
| | A) | True |
| | B) | False |
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24 | |
Accountants' preference for using dollar amounts that are relatively factual, as opposed to merely matters of personal opinion, is called objectivity. |
| | A) | True |
| | B) | False |
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25 | |
All expenditures benefiting more than one time period can be precisely divided by accounting periods. |
| | A) | True |
| | B) | False |
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26 | |
The accrual basis of accounting calls for recording revenue in the period in which it is earned and recording expenses in the period in which they are incurred. |
| | A) | True |
| | B) | False |
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27 | |
The cash basis of accounting provides a good measure of the profitability of activities undertaken during the period. |
| | A) | True |
| | B) | False |
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28 | |
A two-column schedule listing the names and the debit or credit balances of all accounts in the ledger is called a trial balance. |
| | A) | True |
| | B) | False |
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29 | |
An 'in balance' trial balance is proof that no errors occurred during recording or posting. |
| | A) | True |
| | B) | False |
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30 | |
The accounting cycle is but one accounting process. |
| | A) | True |
| | B) | False |
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31 | |
The accounting cycle consists of which of the following number of steps? |
| | A) | Three specific steps |
| | B) | Four specific steps |
| | C) | Five specific steps |
| | D) | Eight specific steps |
| | E) | Ten specific steps |
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32 | |
The collection of all of the accounts is kept together in which of the following? |
| | A) | Journal |
| | B) | Ledger |
| | C) | Trial balance |
| | D) | A and B |
| | E) | None of the above |
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33 | |
Which of the following is not true about the normal balance of the accounts or account categories shown below? |
| | A) | Assets normally have a debit balance |
| | B) | Liabilities normally have a credit balance |
| | C) | Owners' equity accounts normally have a credit balance |
| | D) | Cash normally has a debit balance |
| | E) | Accounts receivable normally has a credit balance |
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34 | |
Which of the following is a correct statement of the rules of debit and credit? |
| | A) | Debits increase assets and decrease liabilities |
| | B) | Debits increase assets and increase owners' equity |
| | C) | Credits decrease assets and decrease liabilities |
| | D) | Credits increase assets and increase owners' equity |
| | E) | None of the above |
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35 | |
Which of the following is not true? |
| | A) | Increases in assets are recorded as debits. |
| | B) | Increases in liabilities are recorded as debits. |
| | C) | Decreases in owners' equity are recorded as debits. |
| | D) | Increases in expenses are recorded as debits. |
| | E) | Increases in revenues are recorded as credits. |
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36 | |
Which of the following provides a system of recording every business transaction with equal dollar amounts of both debit and credit entries? |
| | A) | The matching principle |
| | B) | The realization principle |
| | C) | The time period principle |
| | D) | Accrual basis of accounting |
| | E) | Double-entry accounting |
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37 | |
If an asset is debited, which of the following might also have occurred? |
| | A) | A credit to owners' equity |
| | B) | A credit to another asset |
| | C) | A credit to a liability |
| | D) | All of the above |
| | E) | A and B only |
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38 | |
A collection of an account receivable will result in which of the following? |
| | A) | No increase in total assets, total liabilities, or total owners' equity |
| | B) | An increase in cash, only |
| | C) | A decrease in accounts receivable, only |
| | D) | Net income will increase |
| | E) | None of the above |
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39 | |
The process of transferring information from the journal to the ledger, in order to update the ledger, is called which of the following? |
| | A) | Posting |
| | B) | Recording |
| | C) | Journalizing |
| | D) | Accounting |
| | E) | Ledgering |
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40 | |
Which of the following is not true about net income? |
| | A) | The company can have a cash shortage and still have net income. |
| | B) | Net income is an asset. |
| | C) | Net income is the result of revenues exceeding expenses. |
| | D) | Net income represents an increase in owners' equity. |
| | E) | Net income has no direct relationship to assets. |
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41 | |
To provide the users of financial statements with timely information, net income is measured for relatively short accounting periods of equal length as called for by which of the following? |
| | A) | The matching principle |
| | B) | The realization principle |
| | C) | The time period principle |
| | D) | Accrual basis of accounting |
| | E) | Double-entry accounting |
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42 | |
The generally accepted accounting principle that determines when revenue should be recorded in the accounting records is called which of the following? |
| | A) | The matching principle |
| | B) | The realization principle |
| | C) | The time period principle |
| | D) | Accrual basis of accounting |
| | E) | Double-entry accounting |
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43 | |
The generally accepted accounting principle that determines when expenses should be recorded in the accounting records is called which of the following? |
| | A) | The matching principle |
| | B) | The realization principle |
| | C) | The time period principle |
| | D) | Accrual basis of accounting |
| | E) | Double-entry accounting |
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44 | |
The effect of events on the business is recognized as services are rendered or consumed rather than when cash is received or paid and is a result of using which of the following? |
| | A) | The matching principle |
| | B) | The realization principle |
| | C) | The time period principle |
| | D) | Accrual basis of accounting |
| | E) | Double-entry accounting |
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45 | |
Which the following debit and credit rules are correct? |
| | A) | Increases in owners' equity are recorded by credits. |
| | B) | Revenue is recorded by credits. |
| | C) | Decreases in owners' equity are recorded by debits. |
| | D) | Expenses are recorded by debits. |
| | E) | All of the above are correct. |
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46 | |
Which of the following is true about dividends? |
| | A) | Dividends are an expense to the company. |
| | B) | Dividends are deducted from revenue in the income statement. |
| | C) | Dividends are always equal to net income. |
| | D) | Dividends reduce both assets and owners' equity. |
| | E) | A and D |
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47 | |
Which of the following is true about expenses? |
| | A) | Expenses may result in a decrease of assets. |
| | B) | Expenses may result in an increase in liabilities. |
| | C) | Expenses reduce owners' equity. |
| | D) | A and C |
| | E) | A, B, and C |
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48 | |
The collection of an account receivable does which of the following? |
| | A) | Increases total assets |
| | B) | Increases owners' equity |
| | C) | Increases revenues |
| | D) | A and C |
| | E) | None of the above |
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49 | |
A trial balance with equal total credits and total debits is proof of which of the following? |
| | A) | No errors occurred when journalizing or posting. |
| | B) | No errors occurred when posting. |
| | C) | No errors occurred when journalizing (recording) transactions. |
| | D) | The account balances are accurate. |
| | E) | The equality of debits and credits. |
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50 | |
Knowing and understanding the accounting procedures, particularly the accounting cycle, has given you which of the following? |
| | A) | A knowledge of accounting |
| | B) | An understanding of an accounting process |
| | C) | The procedures to prepare some accounting information |
| | D) | The ability to use accounting information |
| | E) | B and C only |
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2002 McGraw-Hill Higher Education