Question

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

1) Accounting is an information system that identifies, measures, records and 1) communicates relevant information that objectively and correctly represents an organization's economic activities.

2) The main objective of accounting is to help people to invest in new products and 2) businesses.

3) A sole proprietorship is a business owned by one or more persons. 3)

4) Unlimited liability is an advantage for both a proprietorship and a partnership. 4)

5) A corporation is responsible for its actions and any debts incurred. It can enter into its 5) own contracts, and it can buy, own, and sell property.

6) The purpose of an audit is to add credibility to the financial statements. 6)

7) Ethical practices are not necessary to build trust and long-term relationships with 7) customers.

8) The primary purpose of Generally Accepted Accounting Principles is to ensure the 8) usefulness of financial information.

9) According to the historical cost principle, it is acceptable for managers to use their own 9) estimate of an asset's value when recording the purchase.

10) The assumption that a business will continue to operate until it can sell its assets to pay 10) its creditors underlies the going concern principle.

11) Expenses are costs incurred or the using up of assets from generating revenue. 11)

12) The balance sheet is also called the statement of financial position because it shows the 12) financial position of the business on a particular date.

13) An account is a detailed record of increases and decreases in a specific asset, liability or 13) equity item.

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14) A prepaid expense occurs when a company pays in advance for a service or goods for 14) which the benefit extends beyond the current accounting period.

15) Unearned revenues are assets, because a service or product is owed to the customer. 15)

16) The left side of a T-account is always the credit side, while the right side is always the 16) debit side.

17) Posting is the process of copying the debit and credit amounts from a journal to the 17) general ledger accounts.

18) The total dollar value of all debits and credits recorded in a journal entry must be equal. 18)

19) Adjusting entries are used to record the effects of internal economic events. 19)

20) The timeliness principle assumes that an organization's activities can be divided into 20) specific periods.

21) The revenue recognition principle is the basis for making adjusting entries that pertain 21) to unearned and accrued revenues.

22) Gallery Corp. owes its employees $7,000 for the week ended March 31. The company 22) will pay the employees on April 5. The adjusting journal entry prepared on March 31

will include a debit to Salaries Expense and a credit to Cash.

23) A work sheet is prepared before entering the adjustments in the accounts. 23)

24) The book value of an asset is equivalent to the market value of that asset. 24)

25) Closing entries are normally entered in the General Journal and then recorded on the 25) work sheet.

26) The withdrawals account is normally closed by debiting it. 26)

27) Closing entries are designed to transfer the end-of-period balances in the revenue 27) accounts, the expense accounts, and the withdrawals account to a balance sheet equity account.

28) The Income Summary account is used to close all other temporary accounts at the end 28) of an accounting period.

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29) The first step in the accounting cycle is to analyze and record transactions during the 29) accounting period.

30) A post-closing trial balance is a list of permanent accounts and their balances from the 30) ledger after all closing entries are journalized and posted.

Answer 1

(1) T

(2) F, The main objective of accounting are maintaining a complete systematic record of all transaction and analysing thre financial position if business.

(3) F, Only one person operate the business.

(4) F,  The business owner's personal belonging may be at risk in the case of unlimited liability.

(5) T

(6) T, One of the main purpose of audit is to add credibility to the financial accounts.

(7) F, Ethical practices are necessary to build trust in business.

(8) F, The primary purpose of GAAP is to ensure that financial reporting is transparent and consistent from one organisation to another

(9) F, Under the historical cost basis of accounting, assets and liabilities are recorded at their values when first acquired ,cosst recorded are based on the historical cost

(10) F, The going concern principle is the assumption that an entity will remain in business for the forseeable future.

(11) F, An expense in accounting is the money spent, or cost incurred by a business in their effort to generate revenue not from generating revenue.

(12) T

(13) T, An account is a record in an accounting system that tracks the financial activities of a specific asset, liability equity, revenue and expense.

(14) T

(15) F, Unearned revenues are liabilities because it represent a debt owed to the customer.

(16) F, The left side of the T account is always debit and the right side is always credit.

(17) T

(18) T

(19) F, Adjusting enteries are journal entries made at the end of an accounting cycle to update certain revenue and expenses accounts and to make sure you comply with the matching principle.

(20) F, Time period priniple assumes that an organization's activities can be divided  into specific time.

(21) T, The revenue recognitin principle is the basis of making adjusting enteries that oertains to unearned and accrued revenues under accrual basis accounting.

(22) F, The adjusting entry will be  salary a/c debit and the outstanding salary a/c credit at the end of march.

(23) T

(24) F, The book value of an asset is its original purchase cost adjusted for any subsequent changes while market price is the price that could be obtained by selling an asset in open market.

(25) F, This statement is false.

(26) F, The entry will be debit to owner's capital account and credit the drawing account.

(27) T

(28) T

(29) T

(30) F, A post closing trial balance is a list of all the accounts not only permanent account in the general ledger with account balances after the closing entries have been posted.

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