Multiple Choice Questions

The Income Summary account is used:
  • B. All temporary accounts are closed but not the permanent accounts.
  • To close the revenue and expense accounts.
  • current liabilities and long-term liabilities.
  • all balance sheet accounts have zero balances
A post-closing trial balance reports:
  • All ledger accounts with balances, none of which can be temporary accounts.
  • if the temporary accounts are to reflect correct amounts for each accounting period.
  • ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
  • B. All temporary accounts are closed but not the permanent accounts.
The usual order for the asset section of a classified balance sheet is:
  • Current assets, long-term investments, plant assets, intangible assets.
  • current liabilities and long-term liabilities.
  • Current assets, long-term investments, plant assets, and intangible assets.
  • ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
Two common subgroups for liabilities on a classified balance sheet are:
  • Current assets, long-term investments, plant assets, and intangible assets.
  • current liabilities and long-term liabilities.
  • Depreciation Expense-Office Equipment.
  • Preparing a post-closing trial balance.
Dina Kader withdrew a total of $35,000 from her business during the current year. The entry needed to close the withdrawals account is:
  • Depreciation Expense-Office Equipment.
  • a debit of $33,000 to owner capital.
  • Current assets, long-term investments, plant assets, and intangible assets.
  • Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $35,000.
After preparing and posting the closing entries to close revenues (and gains) and expenses (and losses) into the income summary, the income summary account has a debit balance of $33,The entry to close the income summary account will include:
  • Depreciation Expense-Office Equipment.
  • a debit of $33,000 to owner capital.
  • Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $35,000.
  • Accounting cycle.
A trial balance prepared after the closing entries have been journalized and posted is the:
  • A post-closing trial balance should include only permanent accounts.
  • all balance sheet accounts have zero balances
  • Post-closing trial balance.
  • Depreciation Expense-Office Equipment.
. It is obvious that an error occurred in the preparation and/or posting of closing entries if:
  • Depreciation Expense-Office Equipment.
  • all balance sheet accounts have zero balances
  • Preparing a post-closing trial balance.
  • To close the revenue and expense accounts.
An error is indicated if the following account has a balance appearing on the post-closing trial balance:
  • Preparing a post-closing trial balance.
  • a debit of $33,000 to owner capital.
  • Post-closing trial balance.
  • Depreciation Expense-Office Equipment.
At the beginning of 2009, a company's balance sheet reported the following balances: Total Assets = $125,000; Total Liabilities = $75,000; and Owner's Capital = $50,During 2009, the company reported revenues of $46,000 and expenses of $30,In addition, owner's withdrawals for the year totaled $20,Assuming no other changes to owner's capital, the balance in the owner's capital account at the end of 2009 would be:
  • Accounting cycle.
  • 23,400.
  • 46,000
  • $123,000.
The assets section of a classified balance sheet usually includes:
  • Current assets, long-term investments, plant assets, and intangible assets.
  • current liabilities and long-term liabilities.
  • Organizes assets and liabilities into important subgroups.
  • ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming period and to update the owner's capital account for the events of the period just finished are referred to as:
  • Post-closing trial balance.
  • a debit of $33,000 to owner capital.
  • Closing Entries
  • Accounting cycle.
Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period are:
  • Temporary Accounts
  • Depreciation Expense-Office Equipment.
  • Accounting cycle.
  • Pemanent Accounts
The J. Godfrey, Capital account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries are made?
  • Accounting cycle.
  • 46,000
  • 23,400.
  • $123,000.
The closing process is necessary in order to:
  • Current assets, long-term investments, plant assets, and intangible assets.
  • if the temporary accounts are to reflect correct amounts for each accounting period.
  • B. All temporary accounts are closed but not the permanent accounts.
  • ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
The recurring steps performed each reporting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the:
  • Closing Entries
  • a debit of $33,000 to owner capital.
  • Income Summary account.
  • Accounting cycle.
The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:
  • Post-closing trial balance.
  • Accounting cycle.
  • Income Summary account.
  • a debit of $33,000 to owner capital.
When closing entries are made:
  • All ledger accounts with balances, none of which can be temporary accounts.
  • ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.
  • B. All temporary accounts are closed but not the permanent accounts.
  • if the temporary accounts are to reflect correct amounts for each accounting period.
A partnership is a business owned by two or more persons called partners
  • 6 Steps in An Accounting Cycle
  • Accrued Expenses
  • Time Period Principle
  • Define - Partnership
1) Relevant 2) Reliable3) Understandable4) Comparable
  • In simple terms, what are assets and liabilities?
  • Describe timeliness. Which characteristic is timeliness a component of?
  • According to GAAP, what are the four characteristics of effective and useful information?
  • What is the equation for calculating closing net worth for a period?
The going concern principle assumes that a business will continue to operate into the foreseeable future.
  • Monetary Unit Principle
  • Define - Sole Proprietorship
  • Consistency Principle
  • Going Concern Principle
Understandability means that the financial information can be reasonably understood by it's users if the users have a reasonable knowledge of the business and a basic knowledge of accounting.
  • Describe the characteristic of reliability.
  • Describe the characteristic of understandability.
  • Describe the characteristic of comparability.
  • Describe the characteristic of relevance.
Applying the concept of materiality means that we can record an asset as an expense if it does not make a big difference to the balance sheet and income statement.
  • Describe the characteristic of reliability.
  • Materiality Principle
  • Materiality Concept of Assets & Expenses
  • What is the purpose of a contra account?
Net worth = Assets - Liabilities. If all assets are cashed out to pay off outstanding liabilities the remaining cash will represent net worth.
  • Monetary Unit Principle
  • Net Worth
  • What is the purpose of a contra account?
  • Going Concern Principle
Examples of adjustments include recognition of unearned revenue, recognition of prepaid, expenses, accrual of interest expense and depreciation.
  • 3 Example of Adjustments
  • 9 Example of Adjustments
  • 4 Example of Adjustments
  • 6 Example of Adjustments
Adjustments ensure that the assets and liabilities of a company are properly reported and they update the revenue and expense accounts to their correct balance.
  • Three ways to recognize revenue
  • Business Entity Principle
  • Purpose of Adjustments
  • 4 Example of Adjustments
Net Worth = Owners Equity
  • Consistency Principle
  • What is the accounting equation?
  • Personal Vs. Business
  • Define - Corporation
An expense is incurred by a company if the activity to the expense have been used or consumed
  • Three Ways to Recognize an Expense.
  • What does it mean to incur an expense?
  • What is the purpose of internal controls?
  • What is the purpose of a contra account?
The monetary unit principle requires that the accounting records are expressed in terms of money. Accounting reports should all be prepared using a single currency.
  • Objectivity Principle
  • Purpose of Adjustments
  • The Matching Principle
  • Monetary Unit Principle
1) Practitioners shall act with trustworthiness, integrity and objectivity2) Practitioners shall adhere to acknowledged principles and standard of professional practice.
  • Three Ways to Recognize an Expense.
  • Materiality Concept of Assets & Expenses
  • Two Ethical Standards For Accountants.
  • Three ways to recognize revenue
Accounting is the process of recording, analyzing, interpreting and communicating the financial activity of an individual or organization. The purpose of accounting is to allow interested users to make informed judgements based on accurately recorded information.
  • Three Types of Partnerships
  • Define accounting and state the purpose of accounting.
  • What does accrual accounting state regarding revenue and expenses?
  • Define - Partnership
Journal - General Ledger - Trial Balance - Income Statement - Balance Sheet - Post Closing Trial Balance
  • 6 Steps in An Accounting Cycle
  • What does accrual accounting state regarding revenue and expenses?
  • What is an accounting period?
  • Define accounting and state the purpose of accounting.
The business entity principle states that accounting for a business must be kept separate from the personal affairs of it's owner or any other business.
  • Matching Principle
  • Monetary Unit Principle
  • The Matching Principle
  • Business Entity Principle
A sole proprietorship is a business that is owned and generally operated by a single owner.
  • Three MAIN Types of Business
  • Going Concern Principle
  • Define Surplus (And deficit)
  • Define - Sole Proprietorship
The disadvantages of IFRS include that IFRS can be costly to implement in the short term if a company must switch from GAAP to IFRS. Countries also lose control over domestic accounting standards.
  • Explain the role of the income statement.
  • What is the purpose of internal controls?
  • Identify two disadvantages of IFRS.
  • Three Ways to Recognize an Expense.
Under the cash-based method of accounting, revenue and expenses are recorded only when the cash is received or paid.
  • Describe timeliness. Which characteristic is timeliness a component of?
  • FORMULA FOR CALCULATING (Owners equity balance) OR (Ending Capital Account Balance)
  • Briefly describe the cash-based method of accounting.
  • What does it mean to incur an expense?
The net book value is $6000 ($9000-$3000)
  • What is the entry to record revenue if a customer pays when the service is delivered?
  • According to GAAP, what are the four characteristics of effective and useful information?
  • If the original cost of a long-term asset is $9,000 and accumulated depreciation is $3,000,what is the net book value?
  • What are some advantages of using monthly accounting periods in your personal balancesheet?
Used to record accounting for individual terms. This form allows you to record the double entries for each transaction on opposite sides (increase or decrease) of each account.
  • What is "Trade off"?
  • What is the purpose of internal controls?
  • Monetary Unit Principle
  • What is a T-Account?
Ending Owner's Equity = Beginning Owner's Equity + Owners Contributions + Net income (loss) - Owner's Withdrawls
  • What is the equation for calculating closing net worth for a period?
  • FORMULA FOR CALCULATING (Owners equity balance) OR (Ending Capital Account Balance)
  • Briefly describe the cash-based method of accounting.
  • What is verifiability? Which characteristic is verifiability a component of?
The balance sheet is a permanent document that is used to record what you own (assets) and what you owe (liabilities) on a specific date. The balance sheet provides a snapshot of your financial position. The difference between the value of what you own and what you owe represents your net work.
  • Describe the concept of depreciation.
  • What is the purpose of internal controls?
  • Define Internal & External Stakeholders
  • Explain the role of the balance sheet.
An accounting period is the period of time covered by the financial statements.
  • What is an accounting period?
  • Order of Liabilities in a Business
  • Personal Vs. Business
  • 3 Types of Non-Profits
A corporation is a business that is registered with the provincial or federal government and is a separate legal entity from it's owners, the shareholders. As a separate legal entity, the corporation has all the rights of a person and is responsible for it's own activities. It is responsible for it's own debts.
  • Define - Sole Proprietorship
  • Define Surplus (And deficit)
  • Define - Corporation
  • Describe the concept of depreciation.
The matching principle requires expenses to be reported in the same period as the revenues to which they are related. The matching principle is closely linked to accrual accounting.
  • Matching Principle
  • What is the purpose of internal controls?
  • The Matching Principle
  • Three ways to recognize revenue
IFRS is based on the same four characteristics of information as stated in GAAP (relevance, reliability, understanding, and comparability) Also, the basic principles and assumptions of GAAP are aligned with those of IFRS.
  • Explain the role of the income statement.
  • What is the purpose of internal controls?
  • Similarities between GAAP & IFRS
  • What are revenues and expenses?
Capital is an increase in net worth other than revenue (such as winning the lottery or receiving a gift)
  • Define Capital
  • Cost Principle
  • Define Revenue
  • Define Controls
A c00perative is an enterprise or organization that is organized, owned and democratically controlled by the people who use it's products and services, and whose earning are distributed on the basis of use rather than an investment.
  • Define - Cooperative
  • Define - Not-For-Profit organization
  • Personal Vs. Business
  • Define - Corporation
Controls are procedures and methods used to protect assets, monitor cash payments, ensure transactions are authorized and generally make sure the accounting records are accurate.
  • What is a T-Account?
  • Explain Cash Flow
  • Define Internal & External Stakeholders
  • Define Controls
The advantages include tracking regular monthly living expenses (eg rent, cell phone) frequently assessing realistic expectations, and controlling errors.
  • What are some advantages of using monthly accounting periods in your personal balancesheet?
  • Identify two disadvantages of IFRS.
  • What is the purpose of a contra account?
  • What are revenues and expenses?
1) Religious Organizations2) Community Care Centers3) Charitable Organizations & Hospitals
  • Time Period Principle
  • Three Types of Partnerships
  • Define - Partnership
  • 3 Types of Non-Profits
International Financial Reporting Standards (IFRS) is a new, uniform set of international accounting standards for reporting a company's financial position and performance. The purpose of IFRS is to establish a universal accounting standard that can be applied by all accountants no matter where in the world they practice.
  • What is the purpose of a contra account?
  • What is IFRS? What is it's purpose?
  • Describe the characteristic of relevance.
  • Explain the role of the balance sheet.
The matching principle states that an expense must be recorded in the same accounting period in which it was used to produce revenue.
  • Cost Principle
  • Revenue Recognition Principle
  • Matching Principle
  • Accrual Accounting
Recognizing revenue simply means to record the revenue in the accounting records (ie. on the income statement)
  • Define Controls
  • Cost Principle
  • Matching Principle
  • Recognize Revenue
Revenues are increases in net worth caused by providing goods or services. In your personal life, one way revenue is earned is by working and earning a salary. Expenses are a decrease in net worth from the costs of day-to-day activities. In your personal life, expenses can include items such as rent or food.
  • What is the purpose of internal controls?
  • What are revenues and expenses?
  • What is the purpose of a contra account?
  • Define Revenue
Expenses incurred in one accounting period but not paid until a later accounting period are called accrued expenses.
  • Three Types of Partnerships
  • What does accrual accounting state regarding revenue and expenses?
  • Define - Partnership
  • Accrued Expenses
Financial accounting is concerned with the record keeping of the business and preparing the financial statements for external users.
  • What is a T-Account?
  • Managerial Accounting
  • Materiality Principle
  • Financial Accounting
1) Pay cash when the expense is incurred2) Pay cash after the expense has been incurred3) Pay cash before the expense has been incurred
  • Business Entity Principle
  • 4 Example of Adjustments
  • 3 Ways to pay for an expense
  • Three Ways to Recognize an Expense.
Comparability means the financial statements of a company must be prepared in a similar way year after year. This allows for a comparison of this year's performance to past years.
  • Identify two disadvantages of IFRS.
  • Describe the characteristic of relevance.
  • Describe the characteristic of comparability.
  • Describe the characteristic of reliability.
The liabilities that are payable within the shortest amount of time are listed first and the liabilities that are due more than one year in the future are listed last.
  • Order of Liabilities in a Business
  • Define - Cooperative
  • Personal Vs. Business
  • Order of Assets in a Business
The objectivity principal states that transactions will be recorded on the basis of objective evidence. It means that different people looking at the evidence will arrive at the same values for the transaction (Similar to Reliability Characteristic.)
  • Consistency Principle
  • Objectivity Principle
  • Materiality Principle
  • The Matching Principle
Assets = Liabilities + Net worth
  • What is the equation for calculating closing net worth for a period?
  • What is IFRS? What is it's purpose?
  • What is the purpose of internal controls?
  • What is the accounting equation?
Closing Net Worth = Opening Net Worth + Surplus (or) deficit
  • What is the purpose of a contra account?
  • What is the residual value of an asset?
  • What is the equation for calculating closing net worth for a period?
  • What is the accounting equation?
1) Customer Pays cash when service or product is delivered2) Customer pays after service or product is delivered3) Customer pays before service or product is delivered
  • Purpose of Adjustments
  • Three ways to recognize revenue
  • Identify two disadvantages of IFRS.
  • What is the purpose of a contra account?
Information is verifiable if it is based on objective evidence. (ie there are documents to back up the reported information). Verifiability is a component of reliability.
  • What is the residual value of an asset?
  • What is the purpose of a contra account?
  • What is verifiability? Which characteristic is verifiability a component of?
  • Briefly describe the cash-based method of accounting.
The materiality principle requires accountants to use GAAP except when doing so would be more expensive or complicated relative to the value of the transactions.
  • Materiality Principle
  • Revenue Recognition Principle
  • Full Disclosure Principle
  • Cost Principle
The residual value of an asset is the value the asset can be sold for at the end of it's useful life.
  • Explain the role of the balance sheet.
  • What is the purpose of a contra account?
  • What is the residual value of an asset?
  • Example of a commonly known "Trade Off"
The purpose of internal controls is to provide reasonable assurance regarding the effectiveness and efficiency of operations, reliability of financial reports and compliance with applicable laws and regulations.
  • What is the purpose of internal controls?
  • Explain the role of the balance sheet.
  • Explain the role of the income statement.
  • What is the residual value of an asset?
The conservatism principle states that whenever an accountant needs to exercise judgement in applying an accounting standard and has several options, the least optimistic option should be selected. This means choosing the option that would result in a lower balance of assets lower net income or a higher balance of debt.
  • Conservatism Principle
  • The Matching Principle
  • Identify two disadvantages of IFRS.
  • Going Concern Principle
Cash flow is the record of the amount of cash the business is expected to collect and to pay out.
  • Define Controls
  • Explain Cash Flow
  • Define - Sole Proprietorship
  • Recognize Revenue
Revenue (which causes an increase in net worth) and expenses (which causes a decrease in net worth) should be recognized in the time period in which they occur, regardless of when the cash payment is received or made.
  • Accrual Accounting
  • What is a T-Account?
  • The Matching Principle
  • Financial Accounting
Managerial accounting serves the internal users of the business by preparing specialized reports to assist in the management decisions making.
  • Monetary Unit Principle
  • Accrual Accounting
  • Managerial Accounting
  • Materiality Concept of Assets & Expenses
Owners Equity = Assets - Liabilities. If the owner sell all the assets of the business for the values reflected in the balance sheet and uses the cash receivable to pay all the debts, the remaining cash would represent owner's equity.
  • Define - Unlimited Liability
  • Define - Corporation
  • Define Internal & External Stakeholders
  • Definition of Owners Equity
1) Pay as the expense occurs (cash)2) Pay before the event and recognize the expense when the even occurs (prepaid expense)3) Pay after the event has occurred (unpaid account)
  • Identify two disadvantages of IFRS.
  • Three MAIN Types of Business
  • 3 Ways to pay for an expense
  • Three Ways to Recognize an Expense.
The income statement is primarily used as a temporary record of transactions relating torevenue and expenses. The purpose of this statement is to determine the change in net worthover a specific period of time.
  • What is the purpose of internal controls?
  • What is the purpose of a contra account?
  • Explain the role of the income statement.
  • Describe the characteristic of reliability.
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Multiple Choice Questions
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