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| 1 | |
Assets are resources acquired by the entity with the expectation that they will provide future benefits to the entity that are consistent with the entity's business objectives. |
| | A) | True |
| | B) | False |
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| 2 | |
All things considered, a bank loan officer would rather make a loan to a company that has a high debt ratio rather than a low debt ratio. |
| | A) | True |
| | B) | False |
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| 3 | |
When a company does issue its annual financial statements, the income statement, the statement of owner's equity, and the statement of cash flows will all cover the same time period. |
| | A) | True |
| | B) | False |
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| 4 | |
A new business is formed. Within the first month of operations, the entity signs a 60-day note payable for some office supplies it purchased and also signs a 10-year mortgage payable to finance a building that it purchased. The note payable and the mortgage payable are examples of liabilities. |
| | A) | True |
| | B) | False |
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| 5 | |
The three items included in a financial statement heading are the name of the company, the name of the financial statement being presented, and the time period being covered by the financial statement. |
| | A) | True |
| | B) | False |
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| 6 | |
Dollar signs ($) are used in journals and ledgers but are not commonly found on the financial statements that are made public. |
| | A) | True |
| | B) | False |
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| 7 | |
Each of the following three items will increase owner's equity: (1) additional investments of capital made by the owner, (2) net income for the time period, and (3) owner withdrawals. |
| | A) | True |
| | B) | False |
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| 8 | |
Increases in asset accounts and expense accounts are both recorded with debit entries. |
| | A) | True |
| | B) | False |
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| 9 | |
The trial balance is an informal document that lists, as of a given date, all the accounts in the general ledger that have a non-zero balance. Its purpose is to verify that the general ledger is in balance. |
| | A) | True |
| | B) | False |
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| 10 | |
The normal balance in an asset account would be a debit balance whereas the normal balance in an expense account would be a credit balance. |
| | A) | True |
| | B) | False |
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| 11 | |
When a firm collects money in advance of providing a service or delivering a product to a customer, the amount should be recorded as an earned revenue. |
| | A) | True |
| | B) | False |
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| 12 | |
Interest Payable, Accounts Payable, Notes Payable, Mortgages Payable, and Unearned Revenues are all classified as liability accounts. |
| | A) | True |
| | B) | False |
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| 13 | |
Receivables are classified as liability accounts and payables are classified as asset accounts. |
| | A) | True |
| | B) | False |
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| 14 | |
The owner's capital account will decrease with additional investment(s), increase with net loss (revenues smaller than expenses) and increase with withdrawals by the owner. |
| | A) | True |
| | B) | False |
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| 15 | |
Liabilities created when customers pay in advance for products or services are called unearned revenues. |
| | A) | True |
| | B) | False |
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| 16 | |
The term debit, as it is used when recording a journal entry, refers to the left side of the account. |
| | A) | True |
| | B) | False |
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| 17 | |
Credit entries increase asset and expense accounts and decrease liability, and revenue accounts. |
| | A) | True |
| | B) | False |
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| 18 | |
Accounts Payable, Taxes Payable, Unearned Revenue, and Rental Revenue are accounts that will decrease when credited. |
| | A) | True |
| | B) | False |
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| 19 | |
Assume the beginning balance in the Accounts Payable account is a $17,000 credit balance. During the month, $1,700 of debits and $1,800 of credits are posted. The ending balance in the accounts payable account is a $17,100 credit balance. |
| | A) | True |
| | B) | False |
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| 20 | |
A journal is known as a book of final entry. |
| | A) | True |
| | B) | False |
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| 21 | |
Exchanges between the entity and some other person or organization are called external transactions. |
| | A) | True |
| | B) | False |
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| 22 | |
Documents such as invoices, checks and promissory notes are known as source documents and are used as evidence to record transactions. |
| | A) | True |
| | B) | False |
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| 23 | |
Prepaid advertising is an example of an asset that will be consumed in the operation of the business; and, as it is consumed, it will become an expense for the time period in which it was consumed. |
| | A) | True |
| | B) | False |
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| 24 | |
An unconditional written promise to pay a supplier a definite sum of money on demand or on a defined future date(s) is called a note payable. |
| | A) | True |
| | B) | False |
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| 25 | |
A ledger is the book of final entry and contains all accounts used by a business. |
| | A) | True |
| | B) | False |
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| 26 | |
In the chart of accounts, expenses are usually numbered in the 400's followed by revenues numbered in the 500's. |
| | A) | True |
| | B) | False |
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| 27 | |
The T-account is a simple account form used as a helpful tool in showing the effects of transactions and events on specific accounts and is only used for asset accounts. |
| | A) | True |
| | B) | False |
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| 28 | |
All transactions, except the most complex, can be recorded in a general journal under the double-entry accounting system. |
| | A) | True |
| | B) | False |
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| 29 | |
Posting is the process of recording transactions in a journal. |
| | A) | True |
| | B) | False |
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| 30 | |
Transcribing the debit amounts and the credit amounts from the general journal to the accounts in the ledger for summarization is known as journalizing. |
| | A) | True |
| | B) | False |
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