1、5) In the partnership form of business, the owners are called stockholders.6) The business entity principle means that a business will continue operating for an indefinite period of time.7) As a general rule, revenues should not be recognized in the accounting records until it is received in cash.8)
2、 Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.9) The idea that a business will continue to operate until it can sell its assets to pay its creditors underlies the going-concern assumption.10) The monetary unit assumption means that a
3、ll international transactions must be expressed in dollars.11) The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.12) Expenses decrease equity and are the costs of assets or services used to
4、 earn revenues.13) A company might provide a service or product on credit. On credit implies that the cash payment will occur on a later date.14) Each adjusting entry affects only one or more income statement account and never cash.15) The legitimate claims of a businesss creditors take precedence o
5、ver the claims of the business owner.16) Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.17) From an accounting perspective, an event is a happening that affects an entitys accounting equation, but cannot be measured.18) The income statement is a
6、financial statement that shows revenues earned and expenses incurred during a specified period of time.19) Chuck Taylor withdrew $6,000 in cash from FastForward. This amount should be included as an expense on the income statement. 20) Source documents provide evidence of business transactions and a
7、re the basis for accounting entries.21) Items such as sales tickets, bank statements, checks, and purchase orders are source documents.22) It is not necessary to keep separate accounts for all items of importance for business decisions.23) Closing entries are necessary so that owners capital will be
8、gin each period with a zero balance.24) Cash withdrawn by the owner of a proprietorship should be treated as an expense of the business.25) When a company provides services for which cash will not be received until some future date, the company should record the amount received as unearned revenue f
9、or the amount charged to the customer.26) Double entry accounting requires that each transaction affect, and be recorded in, at least two accounts.27) Asset accounts normally have credit balances and revenue accounts normally have debit balances.28) A transaction that decreases an asset account and
10、increases a liability account must also affect one or more other accounts.29) Adjusting entries are used to bring asset or liability accounts to their proper amount and update the related expense or revenue account.30) When a company bills a customer for $600 for services rendered, the journal entry
11、 to record this transaction will include a $600 debit to Services Revenue.31) The journal is known as the book of final entry because financial statements are prepared from it.32) The closing process takes place after financial statements have been prepared.33) A trial balance that balances is not p
12、roof of complete accuracy in recording transactions.34) Closing entries are designed to transfer the end-of-period balances in the revenue accounts, the expense accounts, and the withdrawals account to owners capital.35) If cash was incorrectly debited for $100 instead of correctly credited for $100
13、, the cash account is out of balance by $100.36) Adjusting entries result in a better matching of revenues and expenses for the period.37) The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when ca
14、sh is paid.38) On October 15, a company received $15,000 cash as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this
15、 contract for October.39) Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.40) Accrued expenses reflect transactions where cash is paid before a related expense is recognized.41) Before an adjust
16、ing entry is made to recognize the cost of expired insurance for the period, Prepaid Insurance and Insurance Expense are both overstated.42) A company purchased $6,000 worth of supplies in August and recorded the purchase in the Supplies account. On August 31, the fiscal year-end, the supplies count
17、 equaled $3,200. The adjusting entry would include a $2,800 debit to Supplies.43) In preparing statements from the adjusted trial balance, the balance sheet must be prepared first.44) A company performs 20 days work on a 30-day contract before the end of the year. The total contract is valued at $6,
18、000 and payment is not due until the contract is fully completed. The adjusting entry includes a $4,000 credit to unearned revenue.45) An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded and posted.46) Financial statements can be prepared directly
19、from the information in the adjusted trial balance.47) Income Summary is a temporary account only used for the closing process.48) Revenue accounts should begin each accounting period with zero balances.49) The last four steps in the accounting cycle include preparing the adjusted trial balance, pre
20、paring financial statements and recording closing and adjusting entries.50) When expenses exceed revenues, there is a net loss and the Income Summary account would have a credit balance.51) A post-closing trial balance is a list of permanent accounts and their balances from the ledger after all clos
21、ing entries are journalized and posted.PART II MULTIPLE-CHOICE1. The primary objective of financial accounting is:A.To serve the decision-making needs of internal users.B.To provide financial statements to help external users analyze an organizations activities.C.To monitor and control company activ
22、ities.D.To provide information on both the costs and benefits of looking after products and services.E.To know what, when, and how much to produce.2. Internal users of accounting information include:Shareholders. B.Managers. C.Lenders. D.Suppliers. E.Customers.3. A corporation:Is a business legally
23、separate from its owners. B.Is controlled by the FASB.Has shareholders who have unlimited liability for the acts of the corporation.Is the same as a limited liability partnership. E.All of these.4. The accounting assumption that requires every business to be accounted for separately from other busin
24、ess entities, including its owner or owners is known as the:Objectivity principle. B.Business entity assumption. C.Going-concern assumption.Revenue recognition principle. E.Cost principle.5. The rule that requires financial statements to reflect the assumption that the business will continue operati
25、ng instead of being closed or sold, unless evidence shows that it will not continue, is the:Going-concern principle. B.Business entity principle. C.Objectivity principle.Cost Principle. E.Monetary unit principle.6. If a parcel of land that was originally acquired for $85,000 is offered for sale at $
26、150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchasers books at:$95,000. B.$137,000. C.$138,500. D.$140,000. E.$150,000.7. To include the personal assets and transaction
27、s of a businesss owner in the records and reports of the business would be in conflict with the:Realization principle. C.Business entity principle.Going-concern principle. E.Revenue recognition principle.8. The question of when revenue should be recognized on the income statement (according to GAAP)
28、 is addressed by the:Revenue recognition principle. B.Going-concern principle. C.Business entity principle. E.9. On December 15, 2007, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2008. Which accounting principle would require Myers Legal Se
29、rvices to record the legal fees revenue in 2008 and not 2007?Monetary unit principle B.Going-concern principle C.Cost principleBusiness entity principle E.Revenue recognition principle10. A partnership:Is also called a sole proprietorship. B.Has unlimited liability. C.Has owners called shareholders.Has to have a written agreement in order to be legal. E.Is a legal organization separate from its owners.11. According to generally accepted accounting principles, a companys balance sheet should show the companys assets at:The cash
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