Question 1

Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position?

Accepted Answer

A)  A company uses $400 worth of supplies during the year. 
B)  A company records $400 worth of depreciation on equipment. 
C)  A company has earned $400 of revenue collected at the beginning of the year. 
D)  A company records $400 of wages earned by employees that will be paid next year. 
A)  A company uses $400 worth of supplies during the year. 
B)  A company records $400 worth of depreciation on equipment. 
C)  A company has earned $400 of revenue collected at the beginning of the year. 
D)  A company records $400 of wages earned by employees that will be paid next year.

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

Under International Financial Reporting Standards (IFRS) the cash-basis method of accounting is accepted.

Accepted Answer

A) True 
 B)False

Question 4

The failure to properly record an adjusting entry to accrue a revenue item will result in an:

Accepted Answer

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. 
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.

Question 5

When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses?

Accepted Answer

A)  Add beginning accrued liabilities. 
B)  Subtract beginning prepaid expense. 
C)  Subtract ending prepaid expense. 
D)  Subtract interest expense. 
A)  Add beginning accrued liabilities. 
B)  Subtract beginning prepaid expense. 
C)  Subtract ending prepaid expense. 
D)  Subtract interest expense.

Question 6

Factors that shape an accounting information system include the

Accepted Answer

A)  nature of the business. 
B)  size of the firm. 
C)  volume of data to be handled. 
D)  All of these answers are correct. 
A)  nature of the business. 
B)  size of the firm. 
C)  volume of data to be handled. 
D)  All of these answers are correct.

Question 7

At the time a company prepays a cost

Accepted Answer

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 these answers are correct. 
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 these answers are correct.

Question 8

All liability and equity accounts are increased on the credit side and decreased on the debit side.

Accepted Answer

A) True 
 B)False

Question 9

The omission of the adjusting entry to record depreciation expense will result in an:

Accepted Answer

A)  overstatement of assets and an overstatement of equity. 
B)  understatement of assets and an understatement of equity. 
C)  overstatement of assets and an overstatement of liabilities. 
D)  overstatement of liabilities and an understatement of equity. 
A)  overstatement of assets and an overstatement of equity. 
B)  understatement of assets and an understatement of equity. 
C)  overstatement of assets and an overstatement of liabilities. 
D)  overstatement of liabilities and an understatement of equity.

Question 10

Which of the following is not a principal purpose of an unadjusted trial balance?

Accepted Answer

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. 
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.

Question 11

A journal entry to record the sale of inventory on account will include a

Accepted Answer

A)  debit to Inventory. 
B)  debit to Accounts Receivable. 
C)  debit to Sales Revenue. 
D)  credit to Cost of Goods Sold. 
A)  debit to Inventory. 
B)  debit to Accounts Receivable. 
C)  debit to Sales Revenue. 
D)  credit to Cost of Goods Sold.

Question 12

The trial balance uncovers any errors in journalizing and posting prior to preparation of the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 13

The post-closing trial balance

Accepted Answer

A)  Consists of statement of financial position accounts only. 
B)  Will balance if a transaction is not journalized and posted, or if a transaction is journalized and posted twice. 
C)  Shows that the accounting equation is in balance at the end of the accounting period. 
D)  All of these choices are correct. 
A)  Consists of statement of financial position accounts only. 
B)  Will balance if a transaction is not journalized and posted, or if a transaction is journalized and posted twice. 
C)  Shows that the accounting equation is in balance at the end of the accounting period. 
D)  All of these choices are correct.

Question 14

The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for liabilities.

Accepted Answer

A) True 
 B)False

Question 15

An adjusting entry to record an accrued expense involves a debit to a(an):

Accepted Answer

A)  expense account and a credit to a prepaid expense 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. 
A)  expense account and a credit to a prepaid expense 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.

Question 16

Companies can prepare the income statement and the statement of financial position directly from the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 17

On the income statement, debits are used to increase account balances, whereas on the statement of financial position, credits are used to increase account balances.

Accepted Answer

A) True 
 B)False

Question 18

An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

Accepted Answer

A) True 
 B)False

Question 19

Basic steps in the recording process include transferring the journal information to the appropriate account in the statement of financial position. .

Accepted Answer

A) True 
 B)False

Question 20

Adjustments are often prepared

Accepted Answer

A)  after the statement of financial position date, but dated as of that date. 
B)  after the statement of financial position date, and dated after that date. 
C)  before the statement of financial position date, but dated as of that date. 
D)  before the statement of financial position date, and dated after that date. 
A)  after the statement of financial position date, but dated as of that date. 
B)  after the statement of financial position date, and dated after that date. 
C)  before the statement of financial position date, but dated as of that date. 
D)  before the statement of financial position date, and dated after that date.

Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position?

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.

Under International Financial Reporting Standards (IFRS) the cash-basis method of accounting is accepted.

The failure to properly record an adjusting entry to accrue a revenue item will result in an:

When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses?

Factors that shape an accounting information system include the

At the time a company prepays a cost

All liability and equity accounts are increased on the credit side and decreased on the debit side.

The omission of the adjusting entry to record depreciation expense will result in an:

Which of the following is not a principal purpose of an unadjusted trial balance?

A journal entry to record the sale of inventory on account will include a

The trial balance uncovers any errors in journalizing and posting prior to preparation of the statement of financial position.

The post-closing trial balance

The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for liabilities.

An adjusting entry to record an accrued expense involves a debit to a(an):

Companies can prepare the income statement and the statement of financial position directly from the adjusted trial balance.

On the income statement, debits are used to increase account balances, whereas on the statement of financial position, credits are used to increase account balances.

An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

Basic steps in the recording process include transferring the journal information to the appropriate account in the statement of financial position. .

Adjustments are often prepared

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Filters

Exam 3: The Accounting Information System

Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position?

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.

Under International Financial Reporting Standards (IFRS) the cash-basis method of accounting is accepted.

The failure to properly record an adjusting entry to accrue a revenue item will result in an:

When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses?

Factors that shape an accounting information system include the

At the time a company prepays a cost

All liability and equity accounts are increased on the credit side and decreased on the debit side.

The omission of the adjusting entry to record depreciation expense will result in an:

Which of the following is not a principal purpose of an unadjusted trial balance?

A journal entry to record the sale of inventory on account will include a

The trial balance uncovers any errors in journalizing and posting prior to preparation of the statement of financial position.

The post-closing trial balance

The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for liabilities.

An adjusting entry to record an accrued expense involves a debit to a(an):

Companies can prepare the income statement and the statement of financial position directly from the adjusted trial balance.

On the income statement, debits are used to increase account balances, whereas on the statement of financial position, credits are used to increase account balances.

An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

Basic steps in the recording process include transferring the journal information to the appropriate account in the statement of financial position. .

Adjustments are often prepared

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

Income Statement and Related Information

Statement of Financial Position and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Filters