Midterms

Question 1

The Adjusting Entry to allocate part of the cost of a one-year fire insurance policy to expense will cause total asset to increase.

Answer 1

False

Question 2

A Fiscal Period must begin on January 1.

Answer 2

False

Question 3

A company’s fiscal year must correspond to the calendar year.

Answer 3

False

Question 4

The Adjusting Entry to recognize an expense which is unrecorded and unpaid will cause total asset to increase.

Answer 4

False

Question 5

Revenue cannot be recognized unless delivery of goods has occurred of services been rendered.

Answer 5

True

Question 6

Every Adjusting Entry must change both Income Statement account and a Balance Sheet account.

Answer 6

True

Question 7

Revenue is equal to the cash received by a company during an accounting period

Answer 7

False - Revenue is not always involving cash

Question 8

Failure to record Adjusting Entry for Depreciation results in Assets and Owner’s Equity being overstated on the Balance Sheet

Answer 8

True

Question 9

Recording Incurred but unpaid expenses is an example of an accrual

Answer 9

True

Question 10

Adjusting Entries are useful in apportioning cost among two or more accounting periods

Answer 10

True

Question 11

The Adjustment to record Depreciation of property and equipment consist of a debit to Depreciation Expense and a credit to Accumulated Depreciation

Answer 11

True

Question 12

The amount of Accrued Revenues is recorded by debiting an Asset Account and crediting an Income Account

Answer 12

True

Question 13

If all transactions were originally recorded in conformity with GAAP, there would be no need for adjusting entries at the end of the period.

Answer 13

False

Question 14

In recording the Adjusting Entries for Depreciation, both accounts involved are increased.

Answer 14

True

Question 15

When services are not paid for until after they have been performed, the accrued expense is recorded by an Adjusting Entry at the end of the accounting period.

Answer 15

True

Question 16

Book value is the original cost of a building less depreciation for the year.

Answer 16

False - the question is vague regarding “for the year” so it could be the following year or the “1st year.” If it is the 1st year then it would be true

Question 17

The Adjusting Entry to recognize earned revenues which was received in advance will cause total liabilities to decrease.

Answer 17

True

Question 18

When the reduction in prepaid expenses is not properly recorded this causes the asset accounts and expense accounts to be understated.

Answer 18

False - Expenses Understated and Asset Overstated

Question 19

The Adjusting Entry to recognize earned commission revenues not previously recorded or billed will cause total assets to increase.

Answer 19

False

Question 20

Accrued Revenue is a term used to describe revenue that has been received but not yet earned.

Answer 20

False

Question 21

And Adjusting Entry includes at least one balance sheet account and at least one income statement account.

Answer 21

True

Question 22

Failure to record the Adjusting Entry for Depreciation will overstate assets on the balance sheet.

Answer 22

True

Question 23

As equipment is depreciated, its book value increases and it’s accumulated depreciation increases

Answer 23

False

Question 24

Failure to record the Adjusting Entry for Accrued Salaries results in the current year’s profit being overstated.

Answer 24

True

Question 25

In reading the Adjusting Entry for Accrued Salaries, all the accounts involved are decreased

Answer 25

False

Question 26

Accounting Periods should be equal length to facilitate comparisons between periods.

Answer 26

True

Question 27

Acquiring a computer for cash is just exchanging one asset for another and will not result in an expense even in future periods.

Answer 27

False

Question 28

All decreases in Owner's Equity are a result of expenses.

Answer 28

False - Withdrawals

Question 29

The Owner's Personal Withdrawals for the year cause a decrease in profit.

Answer 29

False

Question 30

The expiration of usefulness of equipment during an accounting period is called depcreciation.

Answer 30

True

Question 31

Working papers provide a written record of the work performed by the accountant or auditor

Answer 31

True

Question 32

The Account Commissions Earned would appear on the Balance Sheet.

Answer 32

False - Income Statement

Question 33

The amount for Owner's Withdrawals will appear in the Income Statement columns of a worksheet.

Answer 33

False - Balance Sheet

Question 34

The worksheet shall be prepared after the formal financial statements have been prepared.

Answer 34

False - Worksheet is prepared before the Financial Statement

Question 35

The Accounts Wages Payable would appear on the income statement

Answer 35

False

Question 36

Buying and producing goods and services are examples of Operating Activities

Answer 36

True

Question 37

The worksheet is a type of Accountant's working paper

Answer 37

True

Question 38

The balances of the Accumulated Depreciation Accounts will appear on the credit side of the worksheet's Balance Sheet columns

Answer 38

True

Question 39

The amount paid opposite the owner's Capital account in the Balance Sheet columns of the worksheet is the amount to be reflected for Owner's Capital on the Balance Sheet

Answer 39

False - reflected Owner's Capital Balance

Question 40

On the worksheet, the balance of the Owner's Capital account is its ending amount for the period.

Answer 40

False - It is on the Statement of Changes in Equity

Question 41

Financial Position may be assessed by referring to a Balance Sheet

Answer 41

True

Question 42

When the Balance Sheet of the worksheet are Initially Footed, they should be in Balance.

Answer 42

False - After the Adjusted Entry, The Balance Sheet and Income Statement are not balanced

Question 43

The purchase of equipment is an example of a Financing Activity

Answer 43

False - It is in the Investing Activities

Question 44

Financial Statements cannot be prepared correctly until all accounts have been adjusted

Answer 44

True

Question 45

The Balance Sheet is also known as the statement of Financial Position

Answer 45

True

Question 46

A worksheet is more useful for a small entity than for a large one.

Answer 46

False - it is used by everyone

Question 47

Total Assets, Total Liabilities and Owner's Equity on the Balance Sheet are the same as the Totals of the Balance Sheet columns on the worksheet

Answer 47

False - They are not the same

Question 48

The Heading for an Income Statement might include the line "As at December 31, 2021."

Answer 48

False - For the month ending in December 31, 2021

Question 49

The worksheet is prepared after the formal Adjusting and Closing Entries

Answer 49

False - The worksheet is prepared before the Adjusting Entry and Closing Entry

Question 50

Paying taxes to the Government is an example of a Financing Activity.

Answer 50

False - It is an Operating Activity

Question 51

The amount of withdrawals can be found on the worksheet

Answer 51

True

Question 52

The purchase of land is an example of an Investing Activity

Answer 52

True

Question 53

The Statement of Changes in Equity relates the income statement to the balance sheet by showing how the owner's Capital account changed during the Accounting Period.

Answer 53

True

Question 54

When the Income Statement columns of the worksheet are initially footed, they should be out of balance by the amount of profit or loss.

Answer 54

True

Question 55

The Statement of Cash Flows discloses significant events related to the Operating, Investing, and Financing of the Business.

Answer 55

True

Question 56

The Balance Sheet may be prepared by referring solely to the Balance Sheet columns of the worksheet.

Answer 56

False - it prepared on the Financial Statements

Question 57

When Adjusting Entries are entered onto a worksheet, it is not necessary to record them in the General Journal.

Answer 57

False - it is necessary to record them in the General Journal

Question 58

An important use of the worksheet is an aid in the preparation of Financial Statements

Answer 58

True

Question 59

The Adjusted Trial Balance Columns of the worksheet are prepared by Combining the Unadjusted Trial Balance and Adjustments columns of the worksheet.

Answer 59

True

Question 60

The Statement of Changes in Equity discloses withdrawals during period.

Answer 60

True

Question 61

In the Accounting Cycle, Closing Entries are prepared before Adjusting Entries

Answer 61

False - Adjusting Entries are prepared first before Closing Entries

Question 62

Trial Balance are prepared primarily to ensure that no entries have been omitted.

Answer 62

False - Trial Balance cannot detect those that are omitted.

Question 63

The Income Summary account will appear on the Post Closing Trial Balance.

Answer 63

False - it will appear on the Closing Entries

Question 64

The Post Closing Trial Balance will contain only Real Accounts

Answer 64

True

Question 65

The final Trial Balance is called Post Closing Trial Balance

Answer 65

True

Question 66

A Reversing Entry is a Journal Entry, which is the exact opposite of a related Adjusting Entry made at the end of the period.

Answer 66

True

Question 67

The Post Closing Trial Balance contains Asset, Liability, Withdrawal, and Capital Account.

Answer 67

False - it does not include Withdrawals

Question 68

Closing Entries clear Income and Expense Accounts at the end of the period

Answer 68

True

Question 69

Nominal Account Balances are reduced to Zero Balances by Closing Entries

Answer 69

True

Question 70

In the Accounting Cycle, Information from Source Documents is Initially Recorded in the Journal

Answer 70

True

Question 71

Depreciation Expense - Building is a permanent account

Answer 71

False - Expenses are Nominal Accounts

Question 72

The Adjusting Entries involving Rent Receivable and Salaries Payable could be reversed

Answer 72

True

Question 73

The balance of all the accounts that appear on a Balance Sheet are the same on the Adjusted Trial Balance as they are on a Post Closing - Trial Balance

Answer 73

False - They are different

Question 74

The Adjusting Entries involving Depreciation Expense - Building and Supplies Expense could be Reverse

Answer 74

False - Depreciation Expense and Supplies Expense can not be reversed

Question 75

All Nominal Accounts must be closed before the Income Summary Account can be closed

Answer 75

False - Withdrawal Account is closed after the Income Summary Account is closed

Question 76

After all Closing Entries have been entered and posted, the Balance of the Income Summary account will be zero

Answer 76

True

Question 77

Closing Entries result in the transfer of profit or loss into the Owner's Capital Account

Answer 77

True

Question 78

The Post Closing Balance will have fewer accounts than the Adjusted Trial Balance

Answer 78

True

Question 79

Closing Entries deal primarily with the Balances of Real Accounts

Answer 79

False - it deals with Nominal's Account

Question 80

The only accounts that are closed are Income Statement Accounts

Answer 80

False - also Withdrawal's