Quiz about Financial Accounting TFQ

Question 1

Management accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers outside the business organization.

Accepted Answer

False

Answer

True

Question 2

External users of accounting information have a financial interest in an entity but are not involved with the day-to-day operations of the enterprise.

Accepted Answer

True

Answer

False

Question 3

The statement of financial position and the income statement are one and the same.

Accepted Answer

False

Answer

True

Question 4

The tax return is one of the primary financial statements.

Accepted Answer

False

Answer

True

Question 5

The going concern principle assumes that the business is a continuing enterprise.

Accepted Answer

True

Answer

False

Question 6

A profit results from having more revenues than liabilities.

Accepted Answer

False

Answer

True

Question 7

Total assets plus total liabilities equals total equity.

Accepted Answer

False

Answer

True

Question 8

The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated.

Accepted Answer

True

Answer

False

Question 9

A credit to a ledger account refers to the entry of an amount on the right side of an account.

Accepted Answer

True

Answer

False

Question 10

An increase in a liability is recorded by a credit; an increase in equity by a debit.

Accepted Answer

False

Answer

True

Question 11

Liability accounts should only be debited and never credited.

Accepted Answer

False

Answer

True

Question 12

Earning revenue increases equity and paying expenses reduce equity, therefore revenues are recorded with debit entries and expenses are recorded with credit entries.

Accepted Answer

False

Answer

True

Question 13

Dividends are an expense of a corporation and appear on the income statement.

Accepted Answer

False

Answer

True

Question 14

Each debit entry in the Cash account represents a cash receipt.

Accepted Answer

True

Answer

False

Question 15

When making a general journal entry, there can only be one debit and one credit.

Accepted Answer

False

Answer

True

Question 16

Each business transaction is initially recorded in a journal and later posted to the appropriate accounts in a general ledger.

Accepted Answer

True

Answer

False

Question 17

If the number of debit entries in an account is greater than the number of credit entries, the account will have a debit balance.

Accepted Answer

False

Answer

True

Question 18

A trial balance proves that equal amounts of debits and credits were posted to the ledger.

Accepted Answer

True

Answer

False

Question 19

Adjusting entries are needed whenever transactions affect the revenue or expenses of more than one accounting period.

Accepted Answer

True

Answer

False

Question 20

Adjusting entries are prepared before financial statements and after a trial balance has been prepared.

Accepted Answer

True

Answer

False

Question 21

Depreciation is only an estimate of the decline in value of an asset.

Accepted Answer

True

Answer

False

Question 22

Accumulated Depreciation is an asset account that will be shown on the Statement of Financial Position as an increase in the associated asset account.

Accepted Answer

False

Answer

True

Question 23

The book value of an asset may also be called the market value of the asset.

Accepted Answer

False

Answer

True

Question 24

Unearned revenue is a liability and should be reported on the income statement.

Accepted Answer

False

Answer

True

Question 25

Prepaid expense may be included as an expense on the income statement.

Accepted Answer

False

Answer

True

Question 26

An adjusting entry to recognise that a fee received in advance has now been earned will cause an increase in total liabilities.

Accepted Answer

False

Answer

True

Question 27

Omission of the adjusting entry needed to accrue an expense at the end of the period would cause liabilities to be understated.

Accepted Answer

True

Answer

False

Question 28

The failure to record an adjusting entry for depreciation would cause assets to be overstated and profit to be understated.

Accepted Answer

False

Answer

True

Question 29

Financial statements are usually prepared before the closing entries are made.

Accepted Answer

True

Answer

False

Question 30

Income summary does not appear on any financial statement.

Accepted Answer

True

Answer

False

Question 31

Dividends declared are expense and reduce profit.

Accepted Answer

False

Answer

True

Question 32

The account, Depreciation, is considered a permanent account and appears on the Statement of Financial Position.

Accepted Answer

False

Answer

True

Question 33

The account, Accumulated Depreciation, is considered a permanent account and appears on the Statement of Financial Position.

Accepted Answer

True

Answer

False

Question 34

The balance of retained earnings shown in the Statement of Financial Position is always the profit of the current year.

Accepted Answer

False

Answer

True

Question 35

Retained Earnings is updated by adding profit to Retained Earnings and subtracting Dividends from Retained Earnings.

Accepted Answer

True

Answer

False

Question 36

At year-end, all equity accounts must be closed.

Accepted Answer

False

Answer

True

Question 37

If sales are $270,000, expenses are $220,000 and dividends are $30,000, Income Summary will have a credit balance of $50,000 that is a profit of the current year.

Accepted Answer

True

Answer

False

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