Accounting Quiz - Financial Accounting Fundamentals

Question 1

Owners of business firms are the only people who need accounting information.

Answer

true

Question 2

Transactions that can be measured in dollars and cents are recorded in the financial information system.

Answer

true

Question 3

The hiring of a new company president is an economic event recorded by the financial information system.

Answer

true

Question 4

Management of a business enterprise is the major external user of information.

Answer

true

Question 5

Accounting communicates financial information about a business enterprise to both internal and external users.

Answer

true

Question 6

Accounting information is used only by external users with a financial interest in a business enterprise.

Answer

true

Question 7

Financial statements are the major means of communicating accounting information to interested parties.

Answer

true

Question 8

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.

Answer

true

Question 9

The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

Answer

true

Question 10

The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm.

Answer

true

Question 11

A new account is opened for each transaction entered into by a business firm.

Answer

true

Question 12

The recording process becomes more efficient and informative if all transactions are recorded in one account.

Answer

true

Question 13

When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.

Answer

true

Question 14

An account is often referred to as a T-Account because of the way it is constructed.

Answer

true

Question 15

A debit to an account indicates an increase in that account.

Answer

true

Question 16

If a revenue account is credited, the revenue account is increased.

Answer

true

Question 17

The normal balance of all accounts is a debit.

Answer

true

Question 18

Debit and credit can be interpreted to mean increase and decrease, respectively.

Answer

true

Question 19

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

Answer

true

Question 20

A credit balance in a liability account indicates that an error in recording has occurred.

Answer

true

Question 21

The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

Answer

true

Question 22

Revenues are a subdivision of retained earnings.

Answer

true

Question 23

Under the double-entry system, revenues must always equal expenses.

Answer

true

Question 24

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

Answer

true

Question 25

Business documents can provide evidence that a transaction has occurred.

Answer

true

Question 26

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

Answer

true

Question 27

Transactions are entered in the ledger accounts and then transferred to journals.

Answer

true

Question 28

All business transactions must be entered first in the general ledger.

Answer

true

Question 29

A simple journal entry requires only one debit to an account and one credit to an account.

Answer

true

Question 30

A compound journal entry requires several debits to one account and several credits to one account.

Answer

true

Question 31

Many business transactions affect more than one time period.

Answer

true

Question 32

The time period assumption states that the economic life of a business entity can be divided into artificial time periods.

Answer

true

Question 33

The time period assumption is often referred to as the expense recognition principle.

Answer

true

Question 34

A company's calendar year and fiscal year are always the same.

Answer

true

Question 35

Accounting time periods that are one year in length are referred to as interim periods.

Answer

true

Question 36

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Answer

true

Question 37

The cash basis of accounting is not in accordance with generally accepted accounting principles.

Answer

true

Question 38

The expense recognition principle requires that efforts be matched with accomplishments.

Answer

true

Question 39

Expense recognition is tied to revenue recognition.

Answer

true

Question 40

The revenue recognition principle dictates that revenue can be recognized in the accounting period in which cash is received.

Answer

true

Question 41

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.

Answer

true

Question 42

Adjusting entries are often made because some business events are not recorded as they occur.

Answer

true

Question 43

Adjusting entries are recorded in the general journal but not posted to the accounts in the general ledger.

Answer

true

Question 44

Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities.

Answer

true

Question 45

Accrued revenues are revenues which have been received but not yet earned.

Answer

true

Question 46

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

Answer

true

Question 47

Accumulated Depreciation is a liability account and has a credit normal account balance.

Answer

true

Question 48

A liability - revenue account relationship exists with an unearned rent revenue adjusting entry.

Answer

true

Question 49

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

Answer

true

Question 50

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Answer

true

Question 51

Asset prepayments become expenses when they expire.

Answer

true

Question 52

A contra asset account is subtracted from a related account in the balance sheet.

Answer

true

Question 53

If prepaid costs are initially recorded as an asset, no adjusting entires will be required in the future.

Answer

true

Question 54

The cost of a depreciable asset less accumulated depreciation reflects the look value of the asset.

Answer

true

Question 55

Accrued revenues are revenues that have been earned and received before financial statements have been prepared.

Answer

true

Question 56

An adjusting entry for accrued expenses results in an increase to an expense account and an increase to a liability account.

Answer

true

Question 57

Accrued expenses are expenses incurred but not yet paid or recorded at the statement date.

Answer

true

Question 58

Financial statements can be prepared from the information provided by an adjusted trial balance.

Answer

true

Question 59

The adjusted trial balance is the primary basis for the preparation of financial statement.

Answer

true

Question 60

The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or an expense.

Answer

true

Question 61

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting  entry crediting a liability account for the amount still unearned.

Answer

true

Question 62

An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was charged to an asset account.

Answer

true

Question 63

A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.

Answer

true

Question 64

If a worksheet is used, financial statements can be prepared before adjusting entries are journalized.

Answer

true

Accounting Quiz - Financial Accounting Fundamentals

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