Site MapHelpFeedbackTrue or False
True or False
(See related pages)

1
Companies may choose a natural business year end, rather than December 31, as the end of their fiscal year for accounting reporting.
A)True
B)False
2
The time period principle is a broad principle that assumes that an organization's activities can be divided into specific time periods such as months, quarters, or years.
A)True
B)False
3
The 12 consecutive month period (or 52 weeks) selected as an organization's annual accounting period is the organization's fiscal year.
A)True
B)False
4
When a company with a fiscal year that ends on December 31 prepares financial reports for the month of March, the reports are called interim financial reports or statements.
A)True
B)False
5
The Expense Recognition principle is a broad principle that requires expenses be reported in the same period as the revenues that were earned as a result of the expenses.
A)True
B)False
6
The matching principle says that the amounts of revenues must exactly match the amounts of expenses in any given period.
A)True
B)False
7
Adjustments are necessary for transactions and events that extend over more than one accounting period.
A)True
B)False
8
Prepaid expenses refer to amounts received in advance of when the product or service was received.
A)True
B)False
9
If a company pays $2,400 for a six-month insurance policy on 10/1, the amount of the adjustment necessary on 12/31, assuming the end of the fiscal year, would be for $400?
A)True
B)False
10
The recording of the prepaid adjustment is an example of an accrued expense.
A)True
B)False
11
The recording of the supplies used up in an accounting period is an example of a deferred expense.
A)True
B)False
12
ALL plant assets wear out and decline in usefulness.
A)True
B)False
13
Straight-line depreciation allocates a greater portion of expense to the early life of an asset and a smaller portion to the later years.
A)True
B)False
14
The accumulated depreciation account would be found on an income statement.
A)True
B)False
15
The depreciation schedule for a forklift shows accumulated depreciation to date of $6,000. The forklift was originally purchases for $15,000. This means that the net amount, or book value, of the forklift on the balance sheet would be $21,000.
A)True
B)False
16
Recognizing revenue when cash is received and recognizing expenses when they are paid in cash is adherence to the cash basis of accounting.
A)True
B)False
17
Revenue recognition and matching revenues against costs are two of the main features of cash basis accounting.
A)True
B)False
18
The approach to preparing financial statements that uses the adjusting process to recognize revenues when earned and expenses when incurred, rather than when cash is paid or received, is called accrual basis accounting.
A)True
B)False
19
The cash account is often affected by the adjusting process.
A)True
B)False
20
The purpose of an adjusting entry in which insurance expense is debited and prepaid insurance is credited, is to recognize the expired portion of the prepaid expense.
A)True
B)False
21
A journal entry at the end of an accounting period to bring asset and liability account balances to their proper amount, while also updating the related expense or revenue accounts is called an adjusting entry.
A)True
B)False
22
Items paid for in advance of receiving their benefits are called prepaid expenses.
A)True
B)False
23
Depreciation is recorded to reflect the decline in market value of plant assets.
A)True
B)False
24
Depreciation expense is an example of a contra account.
A)True
B)False
25
The Accumulated Depreciation- Equipment account is classified as an expense account.
A)True
B)False
26
A company that is depreciating an asset at $3,000 per year for five years is using the straight-line depreciation method.
A)True
B)False
27
Unearned revenues are also called deferred revenues.
A)True
B)False
28
If a company signed a 3-month, $10,000 note from a bank at 12% annual interest on March 1, the amount of accrued interest expense that should be included in an adjustment entry at March 31 is $300.
A)True
B)False
29
Accounts receivable represent accrued revenue.
A)True
B)False
30
Before the adjusting entries are recorded, prepaid expense accounts are overstated and expense accounts are understated.
A)True
B)False
31
Before the adjusting entries for accrued expenses are recorded, expenses are overstated and liabilities are overstated.
A)True
B)False
32
Each adjusting entry affects one or more income statement accounts and one or more balance sheet accounts.
A)True
B)False
33
An adjusted trial balance is prepared after adjustments are recorded and posted to the ledger.
A)True
B)False
34
The financial statements are prepared from the unadjusted trial balance.
A)True
B)False
35
A company with net sales of $65,000 and total expenses of $39,000 will have a profit margin of 60%.
A)True
B)False
36
Revenue, expense, dividend, and common stock accounts are all accounts which should be closed at the end of each accounting period.
A)True
B)False
37
Accounts that are used to report on activities related to one or more future accounting periods, and whose balances are carried into the next period, are called permanent (or real) accounts.
A)True
B)False
38
After the accounts are closed, there should be no unearned revenue accounts with balances.
A)True
B)False
39
The proper procedure for closing an expense account with a normal balance is to debit the expense account and credit the Income Summary account.
A)True
B)False
40
The Income Summary account is a real or permanent account and is closed to the Retained Earnings account of a Corporation.
A)True
B)False
41
Assets are initially recorded at the acquisition's cost. As depreciation is recorded the asset's book value goes up.
A)True
B)False
42
The accumulated depreciation account is a real or permanent account that does not need to be closed out.
A)True
B)False
43
After all closing entries have been recorded and posted, the balance of the Income Summary account will be equal to the net income of the business.
A)True
B)False
44
Working papers are analyses and other informal reports prepared by accountants when organizing the useful information presented in formal reports to internal and external decision makers.
A)True
B)False
45
Preparing the closing entries is the last step in the accounting process.
A)True
B)False
46
An accountant will prepare three types of trial balances during the accounting cycle.
A)True
B)False
47
The first step in preparing a work sheet is to enter the adjusted trial balance.
A)True
B)False
48
The Common Stock account balance shown on the work sheet does not reflect the increase or decrease from net income or net loss.
A)True
B)False
49
The work sheet includes a set of debit and credit columns for the income statement and for the balance sheet.
A)True
B)False
50
Preparation of the work sheet and completion of the Adjustments columns of the work sheet eliminates the need to journalize and post the adjusting entries.
A)True
B)False
51
On the income statement columns on the worksheet, if the debits are greater than the credits, then a net loss has occurred.
A)True
B)False
52
Statements that show the effects of the proposed transactions as if the transactions had already occurred are called pro forma statements.
A)True
B)False
53
The recurring steps performed each accounting period, starting with recording transactions in the journal and continuing through the post-closing trial balance, are called the accounting cycle.
A)True
B)False
54
An asset that may reasonably be expected to be realized in cash or be consumed within one year or one operating cycle of the business, whichever is longer, is classified as a current asset.
A)True
B)False
55
A debt or obligation that must be paid or liquidated within the longer of one year or one operating cycle of the business is classified as a current liability.
A)True
B)False
56
A classified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.
A)True
B)False
57
The reversing entry of an adjusting entry that debited Accounts Receivable and credited Fees Earned would be a debit to Fees Earned and a credit to Accounts Receivable.
A)True
B)False
58
Current assets include cash, short-term investments, prepaid expenses, and accounts payable.
A)True
B)False
59
A twenty-year mortgage note is an example of a long-term liability.
A)True
B)False
60
Plant and equipment is sometimes referred to as plant assets.
A)True
B)False
61
A $120,000 mortgage note that requires payments of $1,000 per month, excluding interest, would be shown on the balance as a long-term liability of $120,000.
A)True
B)False
62
Long-lived assets (resources used to produce or sell products or services) that lack physical form and have benefits that are uncertain are called intangible assets.
A)True
B)False
63
The current ratio is used to evaluate a company's ability to pay its long-term obligations.
A)True
B)False
64
A classified balance sheet reports assets and liabilities in a single category.
A)True
B)False
65
All accounts must be zeroed out at the end of an accounting period.
A)True
B)False
66
A current ratio of 3 to 1 means that for every 1 dollar in current assets, the company has 3 dollars in current liabilities.
A)True
B)False
67
If the current ratio is less that 1, current liabilities would exceed current assets and the company's ability to pay short-term obligations would be in doubt.
A)True
B)False
68
A useful measure of a company's operating results is called the current ratio.
A)True
B)False
69
If a company's net income increased while its sales remained constant, the result would be an increased profit margin.
A)True
B)False
70
All companies must prepare reversing entries.
A)True
B)False
71
Cash received in advance for services to be performed in the future are entered directly in the Fees Earned account at the Blair Company. Accrual accounting methods are used by the business. If any of these fees are unearned at the end of the accounting period, an adjusting entry is recorded that debits the Unearned Fees account and credits the Fees Earned account.
A)True
B)False
72
A total of $4,400 has been paid for advertising during the period and has been recorded directly into the Advertising Expense account. Accrual accounting methods are used by the business. A total of $1,000 worth of this advertising will be received during the next accounting period. No adjusting entry is required for this situation.
A)True
B)False





To learn more about the book this website supports, please visit its Information Center.
(c)2007 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Wild FAFOnline Learning Center

Home > Chapter 3 > True or False