Acct Test Bank #2 The Accounting Cycle

A check written to a supplier is an example of a source document.

• True

• False

What CANNOT be a source document for a business?

• A check from a customer

• An invoice sent to a customer

• A balance sheet

• A bank statement

Which statement regarding a sales order is inaccurate?

• It’s an internal document that’s never provided to the purchasing company.

• It’s prepared by the seller.

• It’s used by the billing department.

• It’s used to complete shipment of the goods sold.

How is a recurring entry recorded?

• Multiple times, in a different manner each time

• Only once

• Multiple times in the same manner

• None of these options

What is the first step in the accounting cycle?

• Post journal entries.

• Prepare financial statements.

• Analyze business transactions.

• Prepare the unadjusted trial balance.

The cost principle states that a business may record the current market price if it’s greater than the amount listed on an invoice.

• True

• False

The matching principle states that expenses must be matched in the same time period they were incurred

• True

• False

Identify the item that is NOT a generally accepted accounting principle?

• Revenue principle

• Expense spending principle

• Matching principle

• Time-period principle

Match each GAAP principle to its best description.

• Accounting activity must be reported over specific periods.

• Matching principle

• The amount recorded in the financial records reflects the cost paid.

• Time-period principle

• Revenue is recorded when earned, regardless of when cash exchanges hands.

• Cost principle

• Expenses match period they were incurred

• Revenue principle

After all postings are completed and prior to the recording of adjusting entries, an unadjusted trial balance is prepared.

• True

• False