Test Bank: Financial Accounting Information for Decisions 7th Edition by Wild Test Bank

For This And Any Other test Bnaks, slotion Manuals, Quizess, Exams And Assignments Contact us At whiperhills@gmail.com

Chapter 02

Accounting System and Financial Statements

True / False Questions

[Question]

1. Accounting records are also referred to as the books.
Answer: TRUE

Blooms Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 02-C1
Topic: Accounting Records

[Question]

2. The first step in the analyzing and recording process is to analyze each transaction and event from source documents.
Answer: TRUE

[Question]

3. Preparation of a trial balance is the first step in the analyzing and recording process.
Answer: FALSE

[Question]

4. Items such as sales slips, invoices, checks, and purchase orders are source documents.
Answer: TRUE

Blooms Taxonomy: Understand
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 02-C1
Topic: Source Documents

[Question}

5. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.
Answer: TRUE

[Question]

6. According to the seller, a customer's promise to pay is called an account payable.
Answer: FALSE

[Question]

7. Dividends are a type of business expense.
Answer: FALSE

[Question]

8. As prepaid expenses are used up, the costs of these assets become expenses.
Answer: TRUE

[Question]

9. Land and buildings are generally recorded in the same ledger account.
Answer: FALSE

[Question]

10. It is not necessary to keep separate accounts for all items of importance for business decisions.
Answer: FALSE

[Question]

11. Unearned revenues are classified as liabilities.
Answer: TRUE

[Question]

12. Cash dividends should be treated as an expense to the business.
Answer: FALSE

[Question]

13. When a company provides services for which cash will not be received until some future date, the company should record unearned revenue for the amount charged to the customer.
Answer: FALSE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 3 Hard
Learning Objective: 02-C2
Topic: Account
Topic: Unearned Revenue
Topic: Revenue Recognition

[Question]

14. The chart of accounts is a list of all the accounts used by a company and a corresponding identification number.
Answer: TRUE

[Question]

15. An account balance is the difference between the debits and credits for an account including any beginning balance.
Answer: TRUE

[Question]

16. Debit means the right-hand side of any account.
Answer: FALSE

[Question]

17. In a double-entry accounting system, the total amount debited must always equal the-total amount credited.
Answer: TRUE

[Question]

18. Increases in liability accounts are recorded as debits.
Answer: FALSE

[Question]

19. Debits increase both asset and expense accounts.
Answer: TRUE

[Question]

20. Double-entry accounting requires that the impact of each transaction be recorded in at least two accounts.
Answer: TRUE

[Question]

21. A revenue account normally has a debit balance.
Answer: FALSE

[Question]

22. Accounts are normally decreased by debits.
Answer: FALSE

[Question]

23. The dividends account normally has a credit balance since it is an equity account.
Answer: FALSE

[Question]

24. Asset accounts normally have credit balances and expense accounts normally have debit balances.
Answer: FALSE

[Question]

25. Common Stock normally has a debit balance.
Answer: FALSE

[Question]

26. A debit entry is always favorable.
Answer: FALSE

[Question]

27. A transaction that decreases an asset account and increases a liability account must also affect one or more other accounts.
Answer: TRUE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 3 Hard
Learning Objective: 02-C4
Topic: Assets
Topic: Liabilities
Topic: Accounting Equation

[Question]

28. A transaction that increases an asset and decreases a liability must also affect one or more other accounts.
Answer: TRUE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 3 Hard
Learning Objective: 02-C4
Topic: Assets
Topic: Liabilities
Topic: Accounting Equation

[Question]

29. If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.
Answer: TRUE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 3 Hard
Learning Objective: 02-A1
Topic: Assets
Topic: Prepaid Expenses
Topic: Transaction Analysis

[Question]

30. The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.
Answer: TRUE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 02-A1
Topic: Assets
Topic: Liabilities
Topic: Transaction Analysis
Topic: Debit
Topic: Credit

[Question]

31. If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash.
Answer: FALSE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 02-A1
Topic: Transaction Analysis
Topic: Debit
Topic: Credit
Topic: Assets

[Question]

32. If a company provides services to a customer on credit, the service provider company should credit Accounts Receivable.
Answer: FALSE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 3 Hard
Learning Objective: 02-A1
Topic: Transaction Analysis
Topic: Debit
Topic: Credit
Topic: Assets

[Question]

33. When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue.
Answer: FALSE

Blooms Taxonomy: Apply
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 02-A1
Topic: Transaction Analysis
Topic: Unearned Revenue
Topic: Debit
Topic: Credit

[Question]

34. The debt ratio reflects the risk of a company to both its owners and creditors.
Answer: TRUE

[Question]

35. The higher the debt ratio, the higher risk of a company not being able to meet its obligations.
Answer: TRUE

[Question]

36. The debt ratio is calculated by dividing total assets by total liabilities.
Answer: FALSE

[Question]

37. A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.
Answer: TRUE

[Question]

38. If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt.
Answer: FALSE

[Question]

39. Hamilton Industries has total liabilities of $105 million and total assets of $350 million. Its debt ratio is 333.3%.
Answer: FALSE

Feedback: $105 million/$350 million = 30%

[Question]

40. High financial leverage is always bad for a company's owners.
Answer: FALSE

[Question]

41. A compound journal entry affects no more than two accounts.
Answer: FALSE

[Question]

42. Posting is the transfer of the information from each journal entry to the ledger.
Answer: TRUE

[Question]

43. Transactions are first recorded in the ledger.
Answer: FALSE

[Question]

44. The journal is known as a book of original entry.
Answer: TRUE

[Question]

45. A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction.
Answer: TRUE

[Question]

46. The journal is known as the book of final entry because financial statements are prepared from it.
Answer: FALSE

[Question]

47. A trial balance that balances is not proof of complete accuracy in recording transactions.
Answer: TRUE

[Question]

48. IFRS requires that companies report four financial statements with explanatory notes: balance sheet; income statement; statement of changes in equity, and statement of cash flows.
Answer: TRUE

Blooms Taxonomy: Remember
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Global
AICPA BB: Industry
AICPA BB: Legal
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 1 Easy
Learning Objective: 02-P3
Topic: International Financial Reporting Standards
Topic: Financial Statements

[Question]

49. Generally, the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets, liabilities, equity, revenues, and expenses.
Answer: TRUE

[Question]

50. The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits.
Answer: FALSE

[Question]

51. A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger, and preparing the trial balance.
Answer: FALSE

[Question]

52. If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash account is out of balance by $100.
Answer: FALSE

Feedback: Cash is increased with the debit. It takes $100 credit to reverse the debit and
another $100 credit to reduce the account as should have been done in the first place. Therefore, cash is out of balance by $200 (rather than $100).

Blooms Taxonomy: Analyze
AACSB: Analytic
AACSB: Communication
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: 2 Medium
Learning Objective: 02-P2
Topic: Errors
Topic: Trial Balance
Topic: Debit
Topic: Credit
Topic: Cash

[Question]

53. The balance sheet provides a link between beginning and ending income statements.
Answer: FALSE

[Question]

54. The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement), and Where (the organization's address)
Answer: FALSE

[Question]

55. Other names for the income statement are earnings statement, statement of operations, or profit and loss statement.
Answer: TRUE

[Question]

56. Another name for the balance sheet is the statement of financial position.
Answer: TRUE

Multiple Choice Questions

Test Bank

Tuesday, 1 November 2016

Financial Accounting Information for Decisions 7th Edition by Wild Test Bank

For This And Any Other test Bnaks, slotion Manuals, Quizess, Exams And Assignments Contact us At whiperhills@gmail.com

Chapter 02

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