ACC 303 WEEK 4 QUIZ 3
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ACC 303 WEEK 4 QUIZ 3
ACC 303 Week 4 Quiz 3
All Questions Included.
TRUE/FALSE
1. A ledger is where the company
initially records transactions and selected other events.
2. Nominal (temporary) accounts
are revenue, expense, and dividend accounts and are periodically closed.
3. Real (permanent) accounts are
revenue, expense, and dividend accounts and are periodically closed.
4. An example of an internal event
would be a flood that destroyed a portion of a company’s inventory.
5. All liability and stockholders’
equity accounts are increased on the credit side and decreased on the debit
side.
6. In general, debits refer to
increases in account balances, and credits refer to decreases.
7. The first step in the
accounting cycle is the journalizing of transactions and selected other events.
8. One purpose of a trial balance
is to prove that debits and credits of an equal amount are in the general
ledger.
9. A general journal
chronologically lists transactions and other events, expressed in terms of
debits and credits to accounts.
10. If a company fails to post one
of its journal entries to its general ledger, the trial balance will not show
an equal amount of debit and credit balance accounts.
11. Adjusting entries for
prepayments record the portion of the prepayment that represents the expense
incurred or the revenue earned in the current accounting period.
12. An adjustment for wages
expense, earned but unpaid at year end, is an example of an accrued expense.
13. The book value of any
depreciable asset is the difference between its cost and its salvage value.
14. The ending retained earnings
balance is reported on both the retained earnings statement and the balance
sheet.
15. The post-closing trial balance
consists of asset, liability, owners’ equity, revenue and expense accounts.
16. All revenues, expenses, and
the dividends account are closed through the Income Summary account.
17. It is not necessary to post
the closing entries to the ledger accounts because new revenue and expense
accounts will be opened in the subsequent accounting period.
*18. The accrual basis recognizes
revenue when earned and expenses in the period when cash is paid.
*19. Reversing entries are made at
the end of the accounting cycle to correct errors in the original recording of
transactions.
*20. An adjusted trial balance
that shows equal debit and credit columnar totals proves the accuracy of the
adjusting entries.
MULTIPLE CHOICE—Conceptual
21. Factors that shape an accounting
information system include the
a. nature of the business.
b. size of the firm.
c. volume of data to be handled.
d. all of these.
22. Maintaining a set of accounting
records is
a. optional.
b. required by the Internal Revenue Service.
c. required by the Foreign Corrupt Practices Act.
d. required by the Internal Revenue Service and the
Foreign Corrupt Practices Act.
23. Debit always means
a. right side of an account.
b. increase.
c. decrease.
d. none of these.
24. An accounting record into which the
essential facts and figures in connection with all transactions are initially
recorded is called the
a. ledger.
b. account.
c. trial balance.
d. none of these.
25. A trial balance
a. proves that debits and credits are equal in the
ledger.
b. supplies a listing of open accounts and their
balances that are used in preparing financial statements.
c. is normally prepared three times in the accounting
cycle.
d. all of these.
26. Which of the following is a real
(permanent) account?
a. Goodwill
b. Sales
c. Accounts Receivable
d. Both Goodwill and Accounts Receivable
27. Which of the following is a nominal
(temporary) account?
a. Unearned Revenue
b. Salary Expense
c. Inventory
d. Retained Earnings
28. Nominal accounts are also called
a. temporary accounts.
b. permanent accounts.
c. real accounts.
d. none of these.
29. The double-entry accounting system
means
a. Each transaction is recorded with two journal
entries.
b. Each item is recorded in a journal entry, then in
a general ledger account.
c. The dual effect of each transaction is recorded
with a debit and a credit.
d. More than one of the above.
30. When a corporation pays a note
payable and interest,
a. the account notes payable will be increased.
b. the account interest expense will be decreased.
c. they will debit notes payable and interest expense.
d. they will debit cash.
31. Stockholders’ equity is not affected
by all
a. cash receipts.
b. dividends.
c. revenues.
d. expenses.
32. The debit and credit analysis of a
transaction normally takes place
a. before an entry is recorded in a journal.
b. when the entry is posted to the ledger.
c. when the trial balance is prepared.
d. at some other point in the accounting cycle.
33. The accounting equation must remain
in balance
a. throughout each step in the accounting cycle.
b. only when journal entries are recorded.
c. only at the time the trial balance is prepared.
d. only when formal financial statements are
prepared.
34. The difference between the
accounting process and the accounting cycle is
a. the accounting process results in the preparation
of financial statements, whereas the accounting cycle is concerned with
recording business transactions.
b. the accounting cycle represents the steps taken
to accomplish the accounting process.
c. the accounting process represents the steps taken
to accomplish the accounting cycle.
d. merely semantic, because both concepts refer to
the same thing.
35. An optional step in the accounting
cycle is the preparation of
a. adjusting entries.
b. closing entries.
c. a statement of cash flows.
d. a post-closing trial balance.
36. Which of the following criteria must
be met before an event or item should be recorded for accounting purposes?
a. The event or item can be measured objectively in
financial terms.
b. The event or item is relevant and reliable.
c. The event or item is an element.
d. All of these must be met.
37. Which of the following is a
recordable event or item?
a. Changes in managerial policy
b. The value of human resources
c. Changes in personnel
d. None of these
38. Which of the following is not an internal event?
a. Depreciation
b. Using raw materials in the production process
c. Dividend declaration and subsequent payment
d. All of these are internal transactions.
39. External events do not include
a. interaction between an entity and its
environment.
b. a change in the price of a good or service that
an entity buys or sells, a flood or earthquake.
c. improvement in technology by a competitor.
d. using buildings and machinery in operations.
40. A trial balance may prove that
debits and credits are equal, but
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. all of these.
41. A general journal
a. chronologically lists transactions and other
events, expressed in terms of debits and credits.
b. contains one record for each of the asset,
liability, stockholders’ equity, revenue, and expense accounts.
c. lists all the increases and decreases in each
account in one place.
d. contains only adjusting entries.
42. A journal entry to record the sale
of inventory on account will include a
a. debit to inventory.
b. debit to accounts
receivable.
c. debit to sales.
d. credit to cost
of goods sold.
43. A journal entry to record a payment
on account will include a
a. debit to accounts
receivable.
b. credit to accounts
receivable.
c. debit to accounts
payable.
d. credit to accounts
payable.
44. A journal entry to record a receipt
of rent revenue in advance will include a
a. debit to rent
revenue.
b. credit to rent
revenue.
c. credit to cash.
d. credit to unearned
rent.
45. Which of the following errors will
cause an imbalance in the trial balance?
a. Omission of a transaction in the journal.
b. Posting an entire journal entry twice to the
ledger.
c. Posting a credit of $720 to Accounts Payable as a
credit of $720 to Accounts Receivable.
d. Listing the balance of an account with a debit
balance in the credit column of the trial balance.
S46. Which of the following is not a
principal purpose of an unadjusted trial balance?
a. It proves that debits and credits of equal
amounts are in the ledger.
b. It is the basis for any adjustments to the
account balances.
c. It supplies a listing of open accounts and their
balances.
d. It proves that debits and credits were properly
entered in the ledger accounts.
S47. An adjusting entry should never
include
a. a debit to an expense account and a credit to a
liability account.
b. a debit to an expense account and a credit to a
revenue account.
c. a debit to a liability account and a credit to
revenue account.
d. a debit to a revenue account and a credit to a
liability account.
48. Which of the following is an example
of an accrued expense?
a. Office supplies purchased at the beginning of the
year and debited to an expense account.
b. Property taxes incurred during the year, to be
paid in the first quarter of the subsequent year.
c. Depreciation expense
d. Rent earned during the period, to be received at
the end of the year
P49. Which of the following statements is
associated with the accrual basis of accounting?
a. The timing of cash receipts and disbursements is
emphasized.
b. A minimum amount of record keeping is required.
c. This method is used less frequently by businesses
than the cash method of accounting.
d. Revenues are recognized in the period they are
earned, regardless of the time period the cash is received.
P50. An adjusting entry to record an
accrued expense involves a debit to a(an):
a. expense account and a credit to a prepaid
account.
b. expense account and a credit to Cash.
c. expense account and a credit to a liability
account.
d. liability account and a credit to an expense
account.
P51. The failure to properly record an
adjusting entry to accrue an expense will result in an:
a. understatement of expenses and an understatement
of liabilities.
b. understatement of expenses and an overstatement
of liabilities.
c. understatement of expenses and an overstatement
of assets.
d. overstatement of expenses and an understatement
of assets.
P52. Which of the following
properly describes a deferral?
a. Cash is received after revenue is earned.
b. Cash is received before revenue is earned.
c. Cash is paid after expense is incurred.
d. Cash is paid in the same time period that an
expense is incurred.
P53. The failure to properly record an
adjusting entry to accrue a revenue item will result in an:
a. understatement of revenues and an understatement
of liabilities.
b. overstatement of revenues and an overstatement of
liabilities.
c. overstatement of revenues and an overstatement of
assets.
d. understatement of revenues and an understatement
of assets.
P54. The omission of the adjusting entry
to record depreciation expense will result in an:
a. overstatement of assets and an overstatement of
owners’ equity.
b. understatement of assets and an understatement of
owner’s equity.
c. overstatement of assets and an overstatement of
liabilities.
d. overstatement of liabilities and an
understatement of owners’ equity.
55. Adjustments are often prepared
a. after the balance sheet date, but dated as of the
balance sheet date.
b. after the balance sheet date, and dated after the
balance sheet date.
c. before the balance sheet date, but dated as of
the balance sheet date.
d. before the balance sheet date, and dated after
the balance sheet date.
56. At the time a company prepays a cost
a. it debits an asset account to show the service or
benefit it will receive in the future.
b. it debits an expense account to match the expense
against revenues earned.
c. its credits a liability account to show the
obligation to pay for the service in the future.
d. more than one of the above.
57. How do these prepaid expenses
expire?
Rent
Supplies
a. With the passage of
time
Through use and consumption
b. With the passage of
time
With the passage of time
c. Through use and
consumption
Through use and consumption
d. Through use and
consumption
With the passage of time
58. Recording the adjusting entry for
depreciation has the same effect as recording the adjusting entry for
a. an unearned revenue.
b. a prepaid expense.
c. an accrued revenue.
d. an accrued expense.
59. Unearned revenue on the books of one
company is likely to be
a. a prepaid expense on the books of the company
that made the advance payment.
b. an unearned revenue on the books of the company
that made the advance payment.
c. an accrued expense on the books of the company
that made the advance payment.
d. an accrued revenue on the books of the company
that made the advance payment.
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