FABM WEEK 11-20
Q1. The accounting cycle begins by recording _____________ in the form of journal entries:
Answer: Business Transactions
Q2. A chart of accounts is limited to 50 accounts:
Answer: True
Q3. When rent is prepaid for an office, the entry to the prepaid rent account is a:
Answer: Debit
Q4. When supplies are purchased for cash, the double-entry posting to the supplies on hand account is a:
Answer: Debit
Q5. When the business is paid in cash for work, the entry to the revenue account is a:
Answer: Credit
Q6. When cash is paid to a supplier for goods on credit, the entry to accounts payable is a:
Answer: Debit
Q7. When work is completed and invoiced to a customer for payment within 30 days, the posting to accounts receivable is a:
Answer: Debit
Q8. Every transaction affects two or more accounts and is recorded by equal amounts of debits and credits:
Answer: True
Q9. All entries must be supported by a source document:
Answer: True
Q10. A business transaction can affect two or more accounts on the same side of the accounting equation and still leave the equation in balance:
Answer: True
Q11. Which is NOT a type of adjusting entry?
Answer: Unearned expenses
Q12. Which of the following is never debited when making closing entries?
Answer: Expenses
Q13. Temporary accounts would include:
Answer: Drawing, income and expenses
Q14. Debit and credit rules for accounts on one side of the accounting equation are mirror images of those on the other side:
Answer: True
Q15. The payment of a liability is recorded by a debit to the liability account and a credit to the owner's capital account:
Answer: False
Q16. A credit to an account always increases it; a debit to an account always decreases it:
Answer: False
Q17. On a T-account, credits are entered on the left side and debits on the right:
Answer: False
Q18. An asset account appears on the right side of the accounting equation and is increased on the right side of its T-account:
Answer: False
Q19. Equity is shown in which financial statement?
Answer: Balance Sheet
Q20. The income statement shows which of the following?
Answer: Income and expenses
Q21. Which financial statement is used to show what the firm owns?
Answer: Balance Sheet
Q22. Which financial statement displays the revenues and expenses of a company for a period of time?
Answer: Income Statement
Q23. Which of the following will not be reported in the statement of changes in equity?
Answer: Proceeds from the sale of the building
Q24. Which account title will not appear in the balance sheet of a single proprietorship?
Answer: Share capital
Q25. The last step of accounting as a process of information:
Answer: Preparation of financial statement
Q26. Financial statements are prepared primarily for the benefit of persons outside of the business organization:
Answer: True
Q27. Which of the following is an asset account?
Answer: Prepaid Insurance
Q28. Which of the following accounts is not an asset?
Answer: Unearned commission
Q29. Inventory and accounts receivable are classified in the balance sheet as:
Answer: Current assets
Q30. Probable future sacrifices of economic benefits arising from past transactions are known as:
Answer: Liabilities
Q31. Debts to be repaid within a short period (one year or less) are known as:
Answer: Current liabilities
Q32. Liabilities that are payable in more than a year and are not to be liquidated from current assets:
Answer: Fixed liabilities
Q33. A loan can be described as a short-term loan if the period is:
Answer: Less than 1 year
Q34. Which of the following is a current asset?
Answer: Inventory
Q35. Which of the following statements is false?
Answer: Owner's equity can be bigger than the total assets
Q36. Not a characteristic of an economic resource for it to be classified as an asset:
Answer: The economic resource has physical existence
Q37. Which of the following is NOT considered revenue?
Answer: Deferred Revenue
Q38. Which expense is recognized under the direct association with revenue criterion?
Answer: Salesmen's commission
Q39. The amount generated from sales in a business is called:
Answer: Income
Q40. It is usually used in connection with activities that result in the inflow of assets and/or outflow of liabilities:
Answer: Income
Q41. A discount granted by a retailer to encourage a customer to buy goods is called a:
Answer: Sales discount
Q42. A supporting document from a seller used as evidence of a downward adjustment in the amount due from a customer:
Answer: Credit Memorandum
Q43. Which of the following is NOT part of the cost of inventory purchased?
Answer: Freight out
Q44. Which account will normally appear in the ledger of a merchandising company using a perpetual inventory system?
Answer: Cost of goods sold
Q45. Which of the following is not an acceptable basis for recognizing expenses?
Answer: Critical measurement
Q46. Information is cost-effective when:
Answer: The value of the information exceeds the cost of producing it
Q47. Information is material if:
Answer: Its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements
Q48. The four principal qualitative characteristics of useful financial statements are:
Answer: Understandability, relevance, reliability, comparability
Q49. The accounting standards issued by the IASB are called:
Answer: International Financial Reporting Standards
Q50. Accounting deals with quantifiable information:
Answer: True
Q51. Accounting involves communication:
Answer: True
Q52. Accounting is the language of business:
Answer: True
Q53. The terms bookkeeping and accountancy can be used interchangeably:
Answer: True
Q54. Accounting aims to communicate financial information to investors only:
Answer: False
Q55. All of the following are characteristics of managerial accounting, except:
Answer: Information must be developed in conformity with generally accepted accounting principles or with income tax regulations
Q56. The person who manages all of a firm's accounting activities:
Answer: Controller
Q57. The government agency that gives a CPA certificate to an accountant:
Answer: PRC
Q58. The type of accounting which reports on the performance of the firm to essential external users:
Answer: Financial accounting
Q59. Which of the following is a more appropriate definition for Accountancy?
Answer: Accountancy refers to the art of classifying the recorded transactions under their respective accounts
Q60. The basic function of financial accounting is to:
Answer: Interpret financial data
Q61. The basic purpose of accounting is to:
Answer: Meet an organization's need for accounting information as efficiently as possible
Q62. Which of the following groups use financial accounting?
Answer: All of the answers correct
Q63. The purchase of a new delivery truck for the business is what type of cash flow activity?
Answer: Investing
Q64. An increase in the balance in Accounts Payable is what type of cash flow activity?
Answer: Operating
Q65. The terms operating, financing, and investing are used to categorize what type of item?
Answer: Cash flow
Q66. Which of these is not a Financial Statement?
Answer: Cash book
Q67. A one-year reporting period that begins on January 1 and ends on December 31 is a:
Answer: Calendar year reporting period
Q68. Financially, shareholders are rewarded by:
Answer: Dividends
Q69. Financial reporting is primarily directed toward the information needs of:
Answer: Investors and creditors
Q70. Accounting provides information on:
Answer: All of the answers correct
