Accounting is the information system that identifies records and com.pdf
- 1. Accounting is the information system that identifies records and communicates the economic events of an organization to interested users. True False Bookkeeping deals with the record-keeping process and is only one aspect of accounting. True False Internal users are those who manage the business. True False The Financial Accounting Standards Board is a private organization that establishes broad reporting guidelines of general applicability as well as specific accounting rules. True False Certified Public Accountants are only permitted to prepare audit reports and tax returns. True False The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities. True False Collection of account receivable will increase both cash and accounts receivable. True False An expense paid with cash would result in an equal decrease in liabilities and owner’s equity. True False Liabilities represent the owner ship claim on total assets. True False Net Income is the excess of revenues over expenses for the accounting period. True False Assets are increased by debits and liabilities are decreased by credits. True False The owner’s capital account is increased by credits True False An account will have a credit balance if the total debit amounts exceed the total credit amounts. True False The ledger is the entire group of accounts and is referred to as the book of original entry. True False The basic steps in the recording process are (1) to analyze each transaction, (2) to enter the transaction in a journal, and (3) to transfer the journal entry to the appropriate ledger accounts. True False The procedure of transferring journal entries to the ledger accounts is called posting and should be performed in chronological order. True False Assets = Liabilities + owner’s capital - owner’s drawing + revenues – expenses is a correct form of the expanded basic accounting equation. True False In posting, one should enter “J2” in the post ref. column on page two of the journal. True False When the columns of the trial balance equal each other, it proves no errors occurred in recording
- 2. and posting. True False The double entry system is possible because all business transactions may be expressed in equal debit and credit entries. True False All of the following are external users of accounting information except labor unions taxing authorities regulatory agencies company officers Recording consists of: identifying and measuring economic events preparing and disturbing accounting reports Keeping a systematic, chronological diary of events measured in dollars and cents. Identifying measuring, receiving, and communicating economic events to interested users. Accounting for government, foundations, hospitals, labor unions, colleges/universities, and charities is part of which broad category within the accounting profession? Not-for-profit accounting Management accounting Public accounting Cost accounting Which of the following is not an acceptable statement of basic accounting equation? Assets - Liabilities = Owner’s equity Assets = Liabilities – Owner’s equity Assets = Liabilities + Owner’s equity Assets- Owner’s equity = Liabilities The financial statement that summarizes information about the cash inflows and outflows during a period is the income statement statement of retained earnings balance sheet statement of cash flows Transactions are initially recorded in the general ledger general journal trial balance balance sheet The rights side of an account is referred to as the
- 3. footing chart side debit side credit side A purchase of office equipment for cash requires a credit to office equipment cash accounts payable owner’s equity The equality of the accounting equation can be proven by preparing a trial balance journal general ledger T-account Which of the following accounts would be increased with a debit? rent payable owner’s capital service revenue owner’s drawing Solution Accounting is the information system that identifies records and communicates the economic events of an organization to interested users. TRUE Bookkeeping deals with the record- keeping process and is only one aspect of accounting. TRUE Internal users are those who manage the business. FALSE. Internal useres includes Employees, owners etc The Financial Accounting Standards Board is a private organization that establishes broad reporting guidelines of general applicability as well as specific accounting rules. TRUE Certified Public Accountants are only permitted to prepare audit reports and tax returns. FALSE . They provide wide range of financial services The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities. TRUE Collection of account receivable will increase both cash and accounts receivable. FALSE. Increase cash reduce accounts receivable An expense paid with cash would result in an equal decrease in liabilities and owner’s equity. FALSE. Decrease in cash and increase in expense that finally reduce owners equity Liabilities represent the owner ship claim on total assets. FALSE. It represents amount payable to outsiders Net Income is the excess of revenues over expenses for the accounting period.
- 4. TRUE Assets are increased by debits and liabilities are decreased by credits. FALSE. Asssets incresed by debit and liablities increased by credit The owner’s capital account is increased by credits TRUE An account will have a credit balance if the total debit amounts exceed the total credit amounts. FALSE. Will debit balance if debit exceeds credit The ledger is the entire group of accounts and is referred to as the book of original entry. FALSE. Journal is books of original entry The basic steps in the recording process are (1) to analyze each transaction, (2) to enter the transaction in a journal, and (3) to transfer the journal entry to the appropriate ledger accounts. TRUE The procedure of transferring journal entries to the ledger accounts is called posting and should be performed in chronological order. TRUE Assets = Liabilities + owner’s capital - owner’s drawing + revenues – expenses is a correct form of the expanded basic accounting equation. TRUE In posting, one should enter “J2” in the post ref. column on page two of the journal. FALSE. Posting one shuold enter ledger folio number in journal reference When the columns of the trial balance equal each other, it proves no errors occurred in recording and posting. FALSE. It only shows arithametical accuracy The double entry system is possible because all business transactions may be expressed in equal debit and credit entries. TRUE All of the following are external users of accounting information except labor unions taxing authorities regulatory agencies company officers ANS. Company officers. They are internal users Recording consists of: identifying and measuring economic events preparing and disturbing accounting reports Keeping a systematic, chronological diary of events measured in dollars and cents. Identifying measuring, receiving, and communicating economic events to interested users. Recording is : Keeping a systematic, chronological diary of events measured in dollars and cents. Accounting for government, foundations, hospitals, labor unions, colleges/universities, and charities is part of which broad category within the accounting profession? Not-for-profit accounting Management accounting Public accounting Cost accounting Answer: Not-for-profit accounting Which of the following is not an acceptable statement of basic accounting equation? Assets - Liabilities = Owner’s equity Assets = Liabilities – Owner’s equity Assets = Liabilities + Owner’s equity Assets- Owner’s equity = Liabilities Wrong statement: Assets = Liabilities – Owner’s equity The financial statement that summarizes information about the cash inflows and outflows during a period is the income statement statement of retained earnings balance sheet statement of cash flows Answer: statement of cash flows Transactions are initially recorded in the general ledger general journal trial balance balance sheet Answer: general journal The rights side of an account is referred to as the footing chart side debit side credit side Answer: credit side A purchase of office equipment for cash requires a credit to office equipment cash accounts payable owner’s equity Answer: cash The equality of the accounting
- 5. equation can be proven by preparing a trial balance journal general ledger T-account Answewr: T-account Which of the following accounts would be increased with a debit? rent payable owner’s capital service revenue owner’s drawing Answer: owner’s drawing