Question 1

The purpose of accounting is to provide financial information about an economic or social entity.

Accepted Answer

True

Question 2

In a sole proprietorship, the owner is responsible for the debts of the business if the firm is unable to pay.

Accepted Answer

True

Question 3

The separate entity assumption applies only to the corporate form of business.

Accepted Answer

True

Question 4

The form of a business organization that is not affected by the withdrawal or death of an owner and can continue forever is

Accepted Answer

the corporation

Question 5

The financial affairs of a business and the financial affairs of the owners should be

Accepted Answer

kept totally separate.

Question 6

Owners are not personally responsible for the debts of the business if the form of business organization is

Accepted Answer

the corporation.

Question 7

Anyone can invest in a closely held corporation.

Accepted Answer

False

Question 8

The death or withdrawal of one partner ends the partnership.

Accepted Answer

True

Question 9

Most owners and managers rely heavily on the accountant\'s judgment and knowledge when making financial decisions

Accepted Answer

True

Question 10

The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as

Accepted Answer

publicly owned corporations

Question 11

The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.

Accepted Answer

True

Question 12

Assets always equal debts of the business plus the financial interest of the owner.

Accepted Answer

True

Question 13

When cash is paid to a creditor, the firm\'s liabilities decrease

Accepted Answer

True

Question 14

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.

Accepted Answer

False

Question 15

When cash is collected from accounts receivable, the total amount of assets increases.

Accepted Answer

True

Question 16

The expenses for a period are reported on the balance sheet.

Accepted Answer

False

Question 17

A double line drawn under the figures in a money column shows that the computation is complete.

Accepted Answer

True

Question 18

A business transaction is a financial event that affects the resources of a business.

Accepted Answer

True

Question 19

A withdrawal of funds by the owner for personal use is considered a business expense.

Accepted Answer

False

Question 20

The income statement is also known as the profit and loss statement.

Accepted Answer

True

Question 21

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,200; Prepaid Insurance, $500; Equipment, $36,200 and Cash, $40,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $12,000; Allen Office Equipment, $9,500.

Accepted Answer

$78,550, $21,500

Question 22

When the owner invests cash in a business,

Accepted Answer

assets and owner\'s equity increase.

Question 23

The statement of financial position is another term for which financial statement?

Accepted Answer

Balance Sheet

Question 24

An expense by definition is not

Accepted Answer

an amount a business must pay in the future.

Question 25

The separate entity assumption applies only to the corporate form of business.

Accepted Answer

False

Question 26

A business partnership can have only two partners.

Accepted Answer

True

Question 27

If during the year total assets increase by $68,000 and total liabilities decrease by $12,500, by how much did owner\'s equity increase/decrease?

Accepted Answer

$80,500 increase

Question 28

Debit entries increase asset, drawing, expense and liability accounts

Accepted Answer

False

Question 29

A business transaction affects at least two accounts.

Accepted Answer

True

Question 30

Financial statements are prepared after the trial balance is prepared

Accepted Answer

Ture

Question 31

An account with a balance that carries over from one accounting period to another is a nominal account.

Accepted Answer

False

Question 32

Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business?

Accepted Answer

Debit Ty Knott, Drawing, and credit Cash

Question 33

A business purchases supplies on account. The journal entry to record this transaction is:

Accepted Answer

Debit Supplies; Credit Accounts Payable

Question 34

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements

Accepted Answer

Trial Balance

Question 35

A business pays a creditor on account. The journal entry to record this transaction is:

Accepted Answer

Debit Accounts Payable; Credit Cash

Question 36

A firm paid cash to apply against a debt. To record this transaction, the accountant would

Accepted Answer

debit Accounts Payable and credit Cash.

Question 37

When revenue is earned from charge-account sales, the accountant

Accepted Answer

debits Accounts Receivable and credits a revenue account.

Question 38

When transactions are entered in a general journal, the asset accounts are listed first, followed by the liability and owner\'s equity accounts.

Accepted Answer

False

Question 39

A journal entry can consist of no more than one account to be debited and one account to be credited

Accepted Answer

True

Question 40

A ledger is sometimes referred to as a record of original entry.

Accepted Answer

True

Question 41

Transactions are recorded in either a journal or a ledger, but not in both.

Accepted Answer

False

Question 42

An amount debited to Cash in a journal entry should be posted as a credit to the Cash account in the ledger.

Accepted Answer

False

Question 43

The number of the journal page is recorded in the Posting Reference column of the ledger account to indicate that the total debits equal total credits.

Accepted Answer

Fasle

Question 44

The revenue accounts come before the expense accounts in the general ledger.

Accepted Answer

True

Question 45

Posting references provide a useful cross-reference when entries must be traced and verified

Accepted Answer

True

Question 46

If an error is discovered before the entry is posted, the incorrect amount can be erased and the correct amount recorded.

Accepted Answer

Fasle

Question 47

The journal entry to record the sale of services on credit should include

Accepted Answer

a debit to Accounts Receivable and a credit to Fees Income.

Question 48

The journal entry to record the receipt of cash from credit clients on account would include

Accepted Answer

a debit to Cash and a credit to Accounts Receivable

Question 49

On July 3, the ABC Company received $865 in cash on account from customers. The correct journal entry is

Accepted Answer

debit Cash, $865; credit Accounts Receivable, $865

Question 50

Anna Conda Landscaping service received a bill for the utilities used during September. The bill will be paid in October. The journal entry to record the utility bill received is:

Accepted Answer

Debit Utilities Expense; Credit Accounts Payable

Question 51

The general ledger accounts are usually arranged in the following order:

Accepted Answer

first the balance sheet accounts, then the income statement accounts.

Question 52

The account numbers are recorded in the Posting Reference column of the general journal

Accepted Answer

after each amount is posted.

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