FAR (midterms)

Question 1

Use to help transfer data from the unadjusted trial balance to the financial statements/ efficient way to summarize the data for financial statements.

Answer 1

worksheet

Question 2

profit or loss? Debit column of the income statement and credit column of the balance sheet.

Answer 2

profit

Question 3

presents a summary of the changes in capital such as investments, profit or loss, and withdrawals during a specific period.

Answer 3

The statement of changes in equity

Question 4

Reports the amount of cash received and disbursed during the period.

Answer 4

The statement of cash flows

Question 5

refers to the availability of cash in the near future after taking account of the financial commitments over this period

Answer 5

Liquidity

Question 6

The ability to take effective actions to alter the amounts and timings of cash flows so that it can respond to unexpected needs and opportunities/ability to raise new capital or tap into unused lines of credit.

Answer 6

Financial flexibility

Question 7

refers to the availability of cash over the longer term to meet financial commitments as they fall due

Answer 7

solvency

Question 8

provides information about the cash receipts (inflows) and cash payments (outflows) of an entity during a period into operating, investing and financing activities.

Answer 8

Statement of cash flows

Question 9

Statement that shows the net increase or decrease in cash during the period and the cash balance at the end of the period. also project the future net cash flows of the entity.

Answer 9

Statement of cash flows

Question 10

The cash effects of transactions and other events that enter into the determination of profit and loss. Generally involve providing services, and producing and delivering goods.

Answer 10

Cash flows from operating activities

Question 11

recognize revenue when EARNED and expenses when INCURRED.

Answer 11

Accrual basis

Question 12

expenses ALREADY PAID but not yet INCURRED (asset to expense)

Answer 12

Prepaid expenses

Question 13

revenues ALREADY COLLECTED but not yet EARNED (Liability to income)

Answer 13

Unearned revenues

Question 14

revenues already EARNED but not yet COLLECTED (assets to income)

Answer 14

Accrued revenues

Question 15

expenses already INCURRED but not yet PAID (expenses to liabilites)

Answer 15

Accrued expenses

Question 16

True or false? When the reduction in prepaid expenses is not properly recorded this causes the asset accounts and expense accounts to be understated.

Answer 16

False

Question 17

True or false? The owner’s personal withdrawals for the year cause a decrease in profit

Answer 17

False

Question 18

True or false? The account Wages Payable appear on the income statement?

Answer 18

False

Question 19

True or false? The balance sheet may be prepared by referring solely to the balance sheet columns of the worksheet?

Answer 19

False

Question 20

True or false? The Income summary account will appear on the post closing trial balance

Answer 20

False

Question 21

True or false? The balances of all the accounts that appear on a balance sheet are the same on the adjusted trial balance as they are on a post-trial balance.

Answer 21

False

Question 22

True or false? Closing entries result in the transfer of profit or loss into the owner’s Capital account.

Answer 22

True

Question 23

True or false? The adjusting entry to recognize earned revenues which was received in advance will cause total liabilities to decrease.

Answer 23

True

Question 24

True or false? When the reduction in prepaid expenses is not properly recorded this causes the asset accounts and expenses accounts to be understated.

Answer 24

False

Question 25

True or false?

In recording the adjusting entries for depreciation, both accounts involved are increased.

Answer 25

True

Question 26

True or false?
The amount placed opposite the owner’s Capital account in the Balance Sheet columns of the worksheets is the amount to be reflected for the owner’s Capital on the balance sheet.

Answer 26

False

Question 27

True or false?
Total assets, total liabilities and owner’s equity on the balance sheet are the same as the totals of the Balance Sheet columns on the worksheet.

Answer 27

False

Question 28

When an entity has suffered a loss, the loss amount is entered on the worksheet on the

Answer 28

Credit side of the Income statement columns and the debit side of the Balance sheet columns

Question 29

Adjusting entries are required

Answer 29

every time financial statements are prepared