All liability accounts normally have a credit balance

Assignment Help Financial Accounting

Reference no: EM131285020

True / False Questions

1. Managerial accounting information is designed primarily to assist investors and creditors in deciding how to allocate scarce resources.

True False

2. The IRS tax return is one of the primary financial statements.

True False

3. Investors are individuals and other enterprises that have provided equity to the reporting enterprise.

True False

4. The sale of additional shares of capital stock will cause treasury stock to increase.

True False

5. Notes payable and accounts payable both require a company to pay an amount owed by a certain date. Notes payable generally have interest, while accounts payable generally do not.

True False

6. The accounting equation may be stated as "assets minus liabilities equals owners' equity."

True False

7. The credit side of an account is the right side, while the debit side is the left side.

True False

8. All liability accounts normally have a credit balance.

True False

9. The left-hand side of an account is used for recording debits and the right-hand side for recording credits.

True False

10. Adjusting entries are needed whenever transactions affect the revenue or expenses of more than one accounting period.

True False

11. Every adjusting entry involves the recognition of either revenue or an expense.

True False

12. Avalon Company paid $4,400 cash for an insurance policy providing three years protection against fire loss. This transaction could properly be recorded by a $4,400 debit to Unexpired Insurance and a $4,400 credit to Cash.

True False

13. A company's annual report includes comparative statements for several years.

True False

14. The balance sheet is prepared first because if it balances, all the accounting information is correct and can be used to prepare the other financial statements.

True False

15. IFRS 1 requires that management and auditors should depart from compliance with GAAP if it is necessary to achieve a fair presentation when reporting financial results.

True False

Multiple Choice Questions

1. Financial accounting information is:

A. Designed to assist investors and creditors.

B. Not used by managers and in income tax returns.

C. Called "special-purpose" accounting information.

D. Not applicable to individuals.

2. Which of the following is not characteristic of financial accounting?

A. Information used in financial statements is prepared in conformity with generally accepted accounting principles.

B. The information is confidential and is intended for use only by company management.

C. The information is used in a wide variety of business decisions.

D. The information is developed primarily by "private accountants" that is, accountants employed by business organizations.

3. Which of the following events is not a transaction that would be recorded in a company's accounting records?

A. The purchase of equipment for cash.

B. The purchase of equipment on account.

C. The investment of additional cash in the business by the owner.

D. The death of a key executive.

4. Which of the following is the primary objective of an income statement?

A. Providing managers with detailed information about where the enterprise stands at a specific date.

B. Providing users outside the business organization with information about the company's financial position and operating results.

C. Reporting to the Internal Revenue Service the company's taxable income.

D. Indicating to investors in a particular company the current market values of their investments.

5. Which of the following best defines an asset?

A. Something with physical form that is valued at cost in the accounting records.

B. An economic resource owned by a business and expected to benefit future operations.

C. An economic resource representing cash or the right to receive cash in the near future.

D. Something owned by a business that has a ready market value.

6. Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates:

A. The accounting equation.

B. The stable-dollar assumption.

C. The business entity concept.

D. The cost principle.

7. The sequence of accounting procedures used to record, classify, and summarize accounting information is called the:

A. Accounting cycle.

B. Accounting period.

C. Accrual accounting.

D. Double-entry bookkeeping.

8. In the general ledger, a separate "account" is maintained for each:

A. Type of asset and liability and for each element of owners' equity.

B. Business transaction.

C. Business day.

D. Journal entry.

9. In accounting, the terms debit and credit indicate, respectively:

A. Increase and decrease.

B. Left and right.

C. Decrease and increase.

D. Right and left.

10. Adjusting entries are prepared:

A. Before financial statements and after a trial balance has been prepared.

B. After a trial balance has been prepared and after financial statements are prepared.

C. After posting but before a trial balance is prepared.

D. Anytime an accountant sees fit to prepare the entries.

11. Which of the following is not a purpose of adjusting entries?

A. To prepare the revenue and expense accounts for recording transactions of the following period.

B. To apportion the proper amounts of revenue and expense to the current accounting period.

C. To establish the proper amounts of assets and liabilities in the balance sheet.

D. To accomplish the objective of offsetting the revenue of the period with all the expenses incurred in generating that revenue.

12. Which of the following is not an example of an adjusting entry?

A. The entry to record unpaid expenses.

B. The entry to record uncollected revenues.

C. The entry to convert liabilities to revenue.

D. The entry to pay outstanding bills.

13. An annual report

A. Must be audited by the IRS.

B. Is delivered to stockholders and the public on the last day of the fiscal year.

C. Includes comparative financial statements for several years.

D. Must be filed with the SEC by all companies in the United States.

14. Retained Earnings at the end of a period:

A. Is equal to the balance in the Retained Earnings account in the adjusted trial balance at the end of a period.

B. Is determined in the Statement of Retained Earnings.

C. Is equal to Retained Earnings at the beginning of the period, minus net income (or plus net loss) for the period.

D. Appears in the Income Statement for the period.

Reference no: EM131285020

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