( S. O. 2) The accounting equation ( A = L + OE) must remain in balance:
A. throughout each step in the accounting cycle.
B. only when journal entries are recorded.
C. only at the time the trial balance is prepared.
D. only when formal financial statements are prepared.
A
( S. O. 2) The difference between the accounting process and the accounting cycle is:
A. the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.
B. the accounting cycle represents the steps taken to accomplish the accounting process.
C. the accounting process represents the steps taken to accomplish the accounting cycle.
D. merely semantic, because both concepts refer to the same thing.
C
( S. O. 2) A trial balance prepared at year end showed Puccineli Co.' s debit total exceeding the credit total by $ 6,300. This discrepancy could have been caused by:
A. the balance of $ 47,000 in accounts receivable being entered in the trial balance as $ 40,700.
B. an error in adding the Sales Journal.
C. the balance of $ 700 in the Office Equipment account being entered as a debit of $ 7,000.
D. a net loss of $ 6,300.
C
( S. O. 4) Which of the following is not a principal purpose of an unadjusted trial balance?
A. It proves that debits and credits of equal amounts are in the ledger.
B. It is the basis for any adjustments to the account balances. C. It supplies a listing of open accounts and their balances.
D. It proves that debits and credits were properly entered in the ledger accounts.
D
( S. O. 5) Which of the following journal entries is appropriate when a company receives payment in advance for goods or services?
A. Debit cash and credit a liability account or a revenue account. D. Credit cash and debit a liability or revenue account.
B. Debit cash and credit an expense account.
C. Credit cash and debit a revenue account.
A.
( S. O. 5) During the first year of Wisnewski Co.' s operations, all purchases were recorded as assets. Store supplies in the amount of $ 6,540 were purchased. Actual year- end store supplies inventory amounted to $ 2,150. The adjusting entry for store supplies will:
A. increase net income $ 4,390.
B. increase expenses by $ 4,390.
C. decrease store supplies by $ 6,540. D. debit accounts payable for $ 2,150.
B
( S. O. 5) An adjusting entry should never include:
A. a debit to expense and a credit to a liability.
B. a debit to expense and a credit to revenue.
C. a debit to a liability and a credit to revenue.
D. a debit to revenue and a credit to a liability.
B
( S. O. 5) Which of the following is an example of an accrued liability?
A. Office supplies purchased at the beginning of the year and debited to an expense account.
B. Property taxes incurred during the year, to be paid in the first quarter of the subsequent year.
C. Depreciation expense.
D. Rent earned during the period, to be received at the end of the year.
B
( S. O. 5) A prepaid expense can best be described as an amount:
A. Paid and currently matched with earnings.
B. Paid and not currently matched with earnings.
C. Not paid and not currently matched with earnings.
D. Not paid and currently matched with earnings.
B
( S. O. 5) Rent collected in advance by a landlord is a ( an):
A. Accrued liability.
B. Deferred asset.
C. Accrued revenue.
D. Unearned revenue.
D
( S. O. 5) An accrued expense can best be described as an amount:
A. Paid and not currently matched with earnings.
B. Not paid and currently matched with earnings.
C. Not paid and not currently matched with earnings.
D. Paid and currently matched with earnings.
B
( S. O. 5) The Murphy Company sublet a portion of its warehouse for five years at an annual rental of $ 24,000, beginning on May 1, 2010. The tenant, Sheri Charter, paid one year's rent in advance, which Murphy recorded as a credit to unearned rental income. Murphy reports on a calendar- year basis. The adjustment on December 31, 2010 for Murphy should be: Dr. Cr. _ A. No entry
B. Unearned rental income 8,000 Rental income 8,000
C. Rental income 8,000 Unearned rental income 8,000
D. Unearned rental income 16,000 Rental income 16,000
D
( S. O. 7) Which of the following statements best describes the purpose of closing entries?
A. To facilitate posting and preparing a trial balance.
B. To determine the amount of net income or net loss for the period.
C. To reduce the balances of revenue and expense accounts to zero so that they may be used to accumulate the revenues and expenses of the next period.
D. To complete the record of various transactions that were started in a prior period.
C
( S. O. 7) If expenses are greater than revenues, the Income Summary account will be closed by a debit to:
A. Income Summary and a credit to Cash.
B. Income Summary and a credit to Retained Earnings.
C. Cash and a credit to Income Summary.
D. Retained Earnings and a credit to Income Summary.
D
Which of the following statements is not true as it pertains to the accounting process?
A. The established system for recording transactions and other events as they occur is referred to as double entry accounting.
B. Events are of two types: ( 1) external and ( 2) internal. Accountants record events that affect the financial position of the enterprise.
C. Adjustments are necessary to achieve a proper matching of revenues and expenses to determine net income for the current period and to achieve an accurate statement of the assets and equities existing at the end of the period.
D. Posting is the initial recording of all transactions in chronological order.
D