The first required step in the accounting cycle is

1. Which Of The Following Is Not A Step In The Accounting Process? Verification Recording

1. Which of the following is not a step in the accounting process?

Verification

Recording

Communication

Identification

2. Which of the following statements about users of accounting information is incorrect?

Regulatory authorities are internal users.

Present creditors are external users.

Management is an internal user.

Taxing authorities are external users.

3. The first step in solving an ethical dilemma is to

identify and analyze the principal elements in the situation.

recognize an ethical situation and the ethical issues involved.

weigh the impact of each alternative on various stakeholders.

Identify the alternatives.

4. The historical cost principle states that

assets should be initially recorded at cost and adjusted when the fair value changes.

only transaction data capable of being expressed in terms of money be included in the accounting records.

activities of an entity are to be kept separate and distinct from its owner.

assets should be recorded at their cost.

5. Which of the following statements about basic assumptions is correct?

The economic entity assumption states that there should be a particular unit of accountability.

The monetary unit assumption enables accounting to measure employee morale.

Partnerships are not economic entities.

Basic assumptions are the same as accounting principles.

6. Liabilities of a company would not include

accounts payable.

accounts receivable.

salaries and wages payable.

notes payable.

7. Performing services on account will

increase assets and decrease owner’s equity.

increase assets and increase liabilities.

increase liabilities and increase owner’s equity.

increase assets and increase owner’s equity.

8. All of the following descriptions about an account are true except

An account may be part of a manual or a computerized accounting system.

An account is a source document.

An account has a title.

An account has a debit and credit side.

9. When a company earns revenues, owner's equity increases.

True

False

10. The first step in the recording process is to

enter in a journal.

prepare a trial balance.

prepare the financial statements.

analyze each transaction for its effect on the accounts.

11. An entry that requires more than two accounts is a compound entry.

True

False

12. Management could determine the amounts due from customers by examining which ledger account?

Supplies

Accounts Payable

Service Revenue

Accounts Receivable

13. Posting

is accomplished by examining ledger accounts and seeing which ones need updating.

involves transferring all debits and credits on a journal page to the trial balance.

accumulates the effects of journalized transactions in the individual accounts.

14. A trial balance would only help in detecting which one of the following errors?

A transaction that is not journalized.

Offsetting errors made in recording the transaction.

A transposition error when transferring the debit side of the journal entry to the ledger.

A journal entry that is posted twice.

15. Which of the following time periods would not be referred to as an interim period?

quarterly

monthly

annually

semi-annually

16. The revenue recognition principle dictates that revenue should be recognized in the accounting records

when services are performed.

when cash is received.

at the end of the month.

in the period that income taxes are paid.

17. An adjusting entry always affects

an expense account and a revenue account.

an asset account and a revenue account.

an asset account and a liability account.

an income statement account and a balance sheet account.

18. Accumulated Depreciation is an asset account.

True

False

19. Clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 12%. The amount of interest to be accrued at the end of September is

$960.

$80.

$107.

$320.

20. The adjusted trial balance is prepared

after the financial statements are prepared.

after the balance sheet is prepared.

after the adjusting entries are prepared and posted to the ledger.

to prove no errors have been made during the accounting period.

21. If a company initially records the purchase of supplies to the Supplies Expense account, the amount of the adjusting entry made at the end of an accounting period will be equal to

the supplies on hand at the end of the period.

the supplies used during the period.

the supplies purchased during the period.

the supplies not paid for by the end of the period.

22. Companies journalize the adjustments after they complete the worksheet but before preparing the financial statements.

True

False

23. The Owner’s Drawings account is closed through the Income Summary account.

True

False

24. The purpose of the post-closing trial balance is to

prove that no mistakes were made.

prove the equality of the balance sheet account balances that are carried forward into the next accounting period.

list all the balance sheet accounts in alphabetical order for easy reference.

prove the equality of the income statement account balances that are carried forward into the next accounting period.

25. Which of the following steps in the accounting cycle may be performed more frequently than annually?

journalize closing entries

post closing entries

prepare a trial balance

prepare a post-closing trial balance

26. Correcting entries

affect income statement accounts only.

affect balance sheet accounts only.

may involve any combination of accounts in need of correction.

always affect at least one balance sheet account and one income statement account.

27. Current liabilities are obligations that are reasonably expected to be paid from existing current assets or through the creation of other current liabilities.

True

False

28. Use of reversing entries

simplifies the recording of subsequent transactions.

is a required step in the accounting cycle.

is required for all adjusting entries.

changes the amount reported in the financial statements.

29. In a perpetual inventory system, a company determines the cost of goods sold each time a sale occurs.

True

False

30. Stine Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 365 day year, what is the implied annual interest rate inherent in the credit terms?

10%

36%

12%

18.25%

31. In a perpetual inventory system, the Cost of Goods Sold account is used

only when a cash sale of merchandise occurs.

only when a credit sale of merchandise occurs.

only when a sale of merchandise occurs.

whenever there is a sale of merchandise or a return of merchandise sold.

32. In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of

Sales Discounts.

Freight-Out.

Sales Revenue.

Inventory.

33. Indicate which one of the following would appear on the income statement of both a merchandiser and a service company.

Sales revenue

Operating expenses

Cost of goods sold

Gross profit

34. Which of the following accounts will appear in the trial balance of a merchandising company but not a service company?

Salaries and Wages Expense.

Inventory.

Accumulated Depreciation - Equipment.

Owner's Drawings.

35. Which one of the following transactions is recorded with the same entry in a perpetual and a periodic inventory system?

Payment of freight costs on a purchase

Sale of merchandise on credit

Cash received on account with a discount

Return of merchandise sold

36. When the terms of sale are FOB shipping point, ownership of the goods remains with the seller until the goods reach the buyer.

True

False

37. The FIFO method assumes that the earliest goods purchased are the first to be sold.

True

False

38. In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

LIFO method.

average cost method.

FIFO method.

tax method.

39. The lower-of-cost–or-market basis of valuing inventories is an example of

the historical cost principle.

comparability.

conservatism.

consistency.

40. Understating beginning inventory will understate

net income.

assets.

cost of goods sold.

owner’s equity.

41. Inventory turnover is calculated by dividing cost of goods sold by

average inventory.

365 days.

beginning inventory.

ending inventory.

42. A new average cost is computed each time a purchase is made in the

average cost method.

all of these methods.

moving-average cost method.

weighted-average cost method.

43. The consistent application of an inventory costing method is essential for

conservatism.

accuracy.

efficiency.

comparability.

44. Understating beginning inventory will understate

owner's equity.

cost of goods sold.

assets.

net income.

45. Disclosures about inventory should include each of the following except the

basis of accounting.

costing method.

quantity of inventory.

major inventory classifications.