Question 1

Which of the following properly describes a deferral?

Accepted Answer

A)  Cash is received after revenue is earned.
B)  Cash is received before revenue is earned.
C)  Cash is paid after expense is incurred.
D)  Cash is paid in the same time period that an expense is incurred.E) B) and C)
F) A) and C)

Question 2

The ending retained earnings balance is reported on both the retained earnings statement and the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 3

Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period.

Accepted Answer

A) True 
 B)False

Question 4

The accrual basis recognizes revenue when earned and expenses in the period when cash is paid.

Accepted Answer

A) True 
 B)False

Question 5

Basic steps in the recording process include all of the following except

Accepted Answer

A)  Transfer the journal information to the appropriate account in the statement of financial postion.
B)  Analyze each transaction for its effect on the accounts.
C)  Enter the transaction information in a journal.
D)  All of these choices are corrrect.E) A) and D)
F) A) and C)

Question 6

The trial balance is a listing of all the accounts and their balances in the order the accounts appear on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 7

When an item of revenue is collected and recorded in advance, it is normally called a(n)  ___________ revenue.

Accepted Answer

A)  accrued
B)  prepaid
C)  unearned
D)  cashE) All of the above
F) A) and B)

Question 8

The book value of any depreciable asset is the difference between its cost and its salvage value.

Accepted Answer

A) True 
 B)False

Question 9

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.E) None of the above
F) B) and C)

Question 10

In general, debits refer to increases in account balances, and credits refer to decreases.

Accepted Answer

A) True 
 B)False

Question 11

An optional step in the accounting cycle is the preparation of

Accepted Answer

A)  adjusting entries.
B)  closing entries.
C)  a statement of cash flows.
D)  a post-closing trial balance.E) A) and B)
F) B) and D)

Question 12

Numerous errors may exist even though the trial balance columns agree.Which of the following is not one of these types of errors?

Accepted Answer

A)  A transaction is not journalized.
B)  Transposition error in the amount posted as a debit.
C)  A journal entry is posted twice.
D)  A journal entry to purchase $100 worth of equipment is posted as a $1,000 purchase.E) All of the above
F) A) and D)

Question 13

Which of the following is a real (permanent)  account?

Accepted Answer

A)  Goodwill
B)  Sales Revenue
C)  Accounts Receivable
D)  Both Goodwill and Accounts ReceivableE) A) and B)
F) B) and C)

Question 14

Posting

Accepted Answer

A)  Accumulates the effects of ledger entries and transfers them to the general journal.
B)  Is done only for income statement activity; activity related to the statement of financial position does not require posting.
C)  Is done once per year.
D)  Transfers journal entries to the ledger accounts.E) A) and B)
F) A) and C)

Question 15

The closing process transfers all income statement items to their related statement of financial position accounts (for example, salaries expense transfers to salaries payable).

Accepted Answer

A) True 
 B)False

Question 16

When an item of expense is paid and recorded in advance, it is normally called a(n)

Accepted Answer

A)  prepaid expense.
B)  accrued expense.
C)  estimated expense.
D)  cash expense.E) None of the above
F) A) and B)

Question 17

Under International Financial Reporting Standards (IFRS)  real accounts include all of the following except

Accepted Answer

A)  Dividends
B)  Assets
C)  Liabilities
D)  EquityE) B) and C)
F) A) and D)

Question 18

Revenues are

Accepted Answer

A)  Impacted by debits and credits in the same way that expenses are impacted by debits and credits.
B)  A subdivision of equity, providing information about why equity increased.
C)  Reported on the statement of financial position as a current item.
D)  All of these answers are correct.E) B) and C)
F) A) and C)

Question 19

An adjusting entry should never include

Accepted Answer

A)  a debit to an expense account and a credit to a liability account.
B)  a debit to an expense account and a credit to a revenue account.
C)  a debit to a liability account and a credit to revenue account.
D)  a debit to a revenue account and a credit to a liability account.E) None of the above
F) B) and C)

Question 20

A document prepared to prove the equality of debits and credits after all adjustments have been prepared is the

Accepted Answer

A)  Adjusted statement of fianancial position.
B)  Adjusted trial balance.
C)  Adjusted financial statements.
D)  Post-closing trial balance.E) B) and C)
F) All of the above

Exam 3: The Accounting Information System

Adjustments are often prepared

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Posting

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Basic steps in the recording process include all of the following except

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Numerous errors may exist even though the trial balance columns agree.Which of the following is not one of these types of errors?

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Which of the following properly describes a deferral?

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Revenues are

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An optional step in the accounting cycle is the preparation of

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The book value of any depreciable asset is the difference between its cost and its salvage value.

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Under International Financial Reporting Standards (IFRS) real accounts include all of the following except

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The trial balance is a listing of all the accounts and their balances in the order the accounts appear on the statement of financial position.

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When an item of expense is paid and recorded in advance, it is normally called a(n)

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The accrual basis recognizes revenue when earned and expenses in the period when cash is paid.

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The ending retained earnings balance is reported on both the retained earnings statement and the statement of financial position.

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When an item of revenue is collected and recorded in advance, it is normally called a(n) ___________ revenue.

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An adjusting entry should never include

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In general, debits refer to increases in account balances, and credits refer to decreases.

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A document prepared to prove the equality of debits and credits after all adjustments have been prepared is the

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Which of the following is a real (permanent) account?

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The closing process transfers all income statement items to their related statement of financial position accounts (for example, salaries expense transfers to salaries payable).

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Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period.

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