Final T/F (1-8) Flashcards
1
Q
The accounting equation is most often stated as Assets+Liabilities=Owner’s Equity
A
False
2
Q
After each transaction, the accounting equation must remain in balance
A
True
3
Q
A negative amount for net worth would reflect more debt than assets, something a creditor would favor
A
False
4
Q
When two asset accounts are changed in a transaction, there must be an increase and a decrease
A
True
5
Q
Detailed information about changes in owner’s equity is needed by owners and managers to make sound business decisions
A
True
6
Q
When items are bought and paid for at a future date, another way to state this is to say these items are bought in account
A
True
7
Q
A transaction for the sale of goods or services results in a decrease in owner’s equity
A
False
8
Q
Keeping separate the financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept
A
True
9
Q
An expense is a decrease in owner’s equity resulting from the operation of a business
A
True
10
Q
Business ethics are the principles of right and wrong that guide an individual in making decisions
A
False
11
Q
Payments for advertising, equipment repairs, utilities, and rent are liabilities
A
False
12
Q
Withdrawals are assets taken out of a business for the owner’s personal use
A
True
13
Q
The most common type of withdrawal by an owner from a business is the withdrawal of cash
A
True
14
Q
When an owner withdrawals cash from the business, the transaction affects both assets and owner’s equity
A
True
15
Q
A withdrawal is an expense
A
False
16
Q
An accounting device used to analyze transactions is a T account
A
True
17
Q
An amount recorded on the right side of a T account is a debit
A
False
18
Q
Each asset account has a normal credit balance
A
False
19
Q
Each liability account has a normal debit balance
A
False
20
Q
The balance of an account increases on the same side as the normal balance side
A
True
21
Q
Asset accounts decrease on the credit side
A
True
22
Q
Each transaction changes the balances in at least two accounts
A
True
23
Q
A list of accounts used by a business is a chart of accounts
A
True
24
Q
When cash is paid for supplies, the supplies account is increased by a credit
A
False
25
Common accounting practice is to record withdrawals as debits directly in the owner's capital account
False
26
The left side of an asset account is the credit side because asset accounts are on the left side of the accounting equation
False
27
A drawing account is increased by debits and decreased by credits
True
28
Increases in expense accounts are recorded as debits because they decrease the owner's capital account
True
29
The normal balance side of an Accounts Receivable account is a debit
True
30
Accounts Payable accounts are increased with a debit
False
31
Utilities Expense is increased with a debit
True
32
Cash is increased with a debit
True
33
Prepaid Insurance is decreased with a credit
True
34
To summarize withdrawal information separately from the other records, owner withdrawal transactions are recorded in the owner's capital account
False
35
Decreases to liability accounts are recorded on the credit side
False
36
The source document for all cash payments is a check
True
37
A receipt is the source document for cash received from transactions other than sales
True
38
The accounting concept Unit of Measurement is being applied when a source document is prepared for each transaction
False
39
The source document used when supplies are bought on account is a memorandum
True
40
A general journal page is complete when there is insufficient space to record any more entries
True
41
To correct an error in a journal, one can simply erase the incorrect item and write the correct item
False
42
A transaction recorded in a journal is not considered a permanent record
False
43
Transactions are recorded in a journal in chronological order
True
44
A complete journal entry consists of the date, the debit amount, the credit amount, and a source document
True
45
When an entry in an amount column is an even dollar amount, either "00" or "--" can be entered in the cents column
False
46
The Objective Evidence concept requires proof that a transaction did occur
True
47
A calculator tape is the source document for daily cash sales
True
48
Every business uses the same journal to record transactions
False
49
In double-entry accounting, each transaction affects at least two accounts
True
50
All corrections for posting errors should be made in a way that leaves no question as to the correct amount
True
51
A journal shows in one place all the changes in a single account
False
52
The account number is placed in the Post. Ref. column of the journal as the last step in the posting procedure
True
53
The posting reference should always be recorded in the journal's Post. Rf. column before amounts are recorded in the ledger
False
54
The two steps for opening an account are writing the account title and recording the balance
False
55
The procedure of arranging accounts in a general ledger, assigning account numbers, and keeping records current is known as file maintenance
True
56
The Cash account is the first asset account and is numbered 110
True
57
The steps for posting are to write the date, the journal page number, the amount, and the balance
False
58
If the payment of cash for rent was journalized and posted in error as a debit to Miscellaneous Expense instead of Rent Expense, the correcting entry will include a credit to Cash
False
59
If the previous account balance and the current entry posted to an account are both debits, the new account balance is a debit
True
60
A group of accounts is called a ledger
True
61
The only use for the Post. Ref. column of a journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interrupted
False
62
When posting is complete, the Post. Ref. column in the General Journal is completely filled in with account numbers
True
63
When adding a new expense account between accounts numbered 510 and 520, the new account is assigned the account number 515
True
64
Errors discovered after an entry is posted may be corrected by ruling through the item
False
65
An outstanding check is one that has been issued but not yet reported on a bank statement
True
66
When petty cash is replenished, Petty Cash us debited and Cash is credited
False
67
Voided checks should be recorded in the journal
True
68
The source document for an electronic funds transfer is a memorandum
True
69
The petty cash fund is a liability with a normal debit balance
False
70
Only accounts with a balance are listed in the Trial Balance columns of a work sheet
False
71
Adjusting entries must be posted to the general ledger accounts
True
72
Many businesses choose a one-year fiscal period that ends during a period of high business activity
False
73
Two financial statements are prepared from the information on the work sheet
True
74
If the Trial Balance columns are not equal and the difference can be evenly divided by 9, then the error most likely is a transposed number
True
75
When the Income Statement Debit column total is greater than the Income Statement Credit column total on a work sheet, the business has a net income
False
76
Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total
True
77
If an amount is written in an incorrect column of a work sheet, the error should be erased and the amount should be written in the correct column
True
78
The accounting concept Consistent Reporting is being applied when a word processing service business reports revenue per page one year and revenue per hour the next year
False
79
The amount of the supplies used during a fiscal period is an expense
True
80
For a service business, the revenue reported in an income statement is often compared to two items: total expenses and net income
True
81
The net income calculated for the income statement and the net income on the work sheet can be different because of adjusting entries
False
82
An amount written in parentheses on a financial statement indicates an estimate
False
83
The formula for calculating the net income ratio is net income divided by total sales
True
84
The area of accounting that focuses on reporting information to internal users is called managerial accounting
True
85
When a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue
False
86
The Owner's Equity section of a balance sheet may report different kinds of details about owner's equity, depending on the need of the business
True
87
If a business has a net loss for the period, expenses should be reported before revenues on the income statement
False
88
The owner's capital amount reported on a balance sheet is calculated as capital account balance less drawing account balance plus net income
True
89
The area of accounting that focuses on reporting info to external users is called managerial accounting
False
90
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity
True
91
The formula for calculating the total expenses ratio is total expenses divided by net income
False
92
A financial ration is a comparison between two components of financial information
True
93
The calculation and interpretation of a financial ratio is called ratio analysis
True
94
A balance sheet reports financial information for a specific date
True
95
An income statement reports information for a specific date indicating the financial progress of a business in earning a net income or a net loss
False
96
The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition
True
97
Vertical analysis is reporting an amount on a financial statement as a percentage of another item on the same financial statement
True
98
The Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period
True
99
Return on sales (ROS) is the ratio of net income to total sales
True
100
Temporary accounts include assets, expenses, and the owner's drawing account
False
101
Temporary accounts are also called nominal accounts
True
102
Journal entries used to prepare temporary accounts for a new fiscal period are closing entries
True
103
The balances of the liability accounts must be reduced to zero to prepare the accounts for the next period
False
104
Permanent accounts are used to accumulate information until it is transferred to the owner's capital account
False
105
The capital account's new balance after all closing entries are posted is verified by checking it with the amount of capital shown on the balance sheet at the end of the fiscal period
True
106
The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period
True
107
The Income Summary account has a normal debit balance
False
108
A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted
True
109
To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to its balance
True
110
The series of accounting activities included in recording financial information for a fiscal period is called an accounting cycle
True
111
The drawing account is a permanent account
False
112
Temporary accounts must start each fiscal period with a zero balance
True
113
At the end of a fiscal period, the balances of permanent accounts are summarized and transferred to the owner's capital account
False
