Question

Practice questions
1.Internal auditors perform the audit at the request of the board of directors to protect investor interests. *

True

False

2.A sole proprietorship is a business owned by one or more persons. *

True

False

3.The timeliness principle assumes that an organization's activities can be divided into specific periods. *

True

False

4.Withdrawals are a type of transaction that affects equity. *

True

False

5.Ownership of a corporation is divided into units called shares. *

True

False

6.The natural business year can only be used when the seasonal variation in sales does not match the calendar year. *

True

False

7.The underlying concepts that make up acceptable accounting practices are referred to as generally accepted accounting principles (GAAP). *

True

False

8.To prepare the balance sheet, all necessary numbers can be found in the balance sheet columns of the work sheet, including ending capital. *

True

False

9.After posting the entries to close all revenue and expense accounts, Hatfield Company's Income Summary account has a credit balance of $6,000, and the Hatfield, Withdrawals account has a debit balance of $2,500. These balances indicate that profit for the accounting period amounted to $3,500. *

True

False

10.The cash basis of accounting commonly results in financial statements that are not comparable from period to period. *

True

False

11.The main objective of accounting is to help people to invest in new products and businesses. *

True

False

12.Adjusting entries are normally entered in the General Journal before they are recorded on the work sheet. *

True

False

13.At the request of the Board of Directors, internal auditors perform the audit function to protect shareholder interests. *

True
false

14.A T-Account is a formal account frequently used in business. *

True

False

15.Accounting is an information system that identifies, measures, records and communicates relevant information that objectively and correctly represents an organization's economic activities. *

True

False

16.External business transactions are transactions between the business entity and some other (outside) party. *

True

False

17.A work sheet is a substitute for the financial statements. *

True

False

18.On the work sheet, a loss is indicated if the total of the Income Statement Debit column exceeds the total of the Income Statement Credit column. *

True

False

19.A company's fiscal year must correspond with the calendar year. *

True

False

20.The Income Summary account is used to close all other temporary accounts at the end of an accounting period. *

True

False

21.A ledger is a type of account. *

True

False

22.Gallery Corp. paid $6,000 for a six-month insurance policy for the company van. The policy coverage began on January 1. On January 31, $1,000 of insurance expense must be reported. *

True

False

23.Debits increase asset and expense accounts. *

True

False

24.Accounts that appear in the balance sheet are often called permanent or temporary accounts. *

True

False

25.To make it easier for the bookkeeper, the cost of land is separated from the cost of buildings located on the land. *

True

False

26.Cash withdrawn by the owner of an unincorporated business in the form of a monthly salary should be treated as an expense of the business. *

True
false

Answer 1

1.External auditors are appointed to audit the financial statements of the company and protect the interests of the shareholders.

So option is false.

2.Sole proprietorship is business owned by only one person

So option is false .

3.Timeliness principle is about presenting the accounting information in time to the users.

So option is false.

4. In company withdrawals are withdrawals of shares if effects the equity of the company.

So option is true.

5.Owership is divided into units it is called as shares.

So option is true.

6.Yes natural year is considered when there the seasonal variation does not match with calender year .example is school whose natural business year is july 1 to june 30.

So option is true.

7.Gaap is the generally accepted accounting principles ,standards,and procedures.

So option is true.

8.Yes notes to accounts are maintained in which each and number is explained in detail.

So option is true.

9.In profit and loss account credit is the income and debit is the expenses .So debit minus credit is the profit.

So option is true.

10.As in cash accounting system transactions will record only cash related transactions and to be received in the next year or previous year will not recorded so results in no comparision from period to period .

So option is true.

11.The main objective of accounting is to prepare ,maintain and analyse the financial position of the company.

So option is false.

12.Any transaction is first recorded in journal entry only.

So option is true.

13.External auditors are appointed to audit the financial statements of the company and protect the interests of the shareholders.

So option is false.

14.T forma is generally used in business for ledger transactions

So option is true.

15.Yes accounting records ,maintain and communicate the information to users.

So option is true.

16.External users are banks,suppliers,customers etc.

So option is true.

17.A worksheet is not a journal and cannot be used for posting to ledger accounts.so it is not a substitue for financial statements.

So option is false.

18.If total debit column increased it indicate it is expenses are more than income which indicate a loss for the company.

So option is true.

19.Company fiscal year cannot be correspond with the calender year .

So option is false.

20.yes income summary account is used for closing entries of revenue and expenses account for calculating net profit or loss.

So option is true.

21.Yes ledger is a type of accounting

So option is true.

22.Yes according to matching principle expense should be recorded to which it is related.

So option is true.

23. yes debit increase indicate asset( debit what comes in ) increase and expense (debit all expenses and losses rule )

So option is true.

24.A​​​​ccounts that are recorded in balance sheet are permanent accounts.

So option is false.

25. cost of land cannot be different for accounting record

So option is false.

26.Salary withdrawn is treated as salary

So option is true.