ACC 303 Week 4 Quiz – Strayer NEW

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Quiz 3 Chapter 3

Chapter 3

THE ACCOUNTING INFORMATION SYSTEM

IFRS questions are available at the end of this chapter.

TRUE/FALSE

      1.      A ledger is where the company initially records transactions and selected other events.

      2.      Nominal (temporary) accounts are revenue, expense, and dividend accounts and are periodically closed.

      3.      Real (permanent) accounts are revenue, expense, and dividend accounts and are periodically closed.

      4.      An example of an internal event would be a flood that destroyed a portion of a company's inventory.

      5.      All liability and stockholders’ equity accounts are increased on the credit side and decreased on the debit side.

      6.      In general, debits refer to increases in account balances, and credits refer to decreases.

      7.      The first step in the accounting cycle is the journalizing of transactions and selected other events.

      8.      One purpose of a trial balance is to prove that debits and credits of an equal amount are in the general ledger.

      9.      A general journal chronologically lists transactions and other events, expressed in terms of debits and credits to accounts.

    10.      If a company fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit and credit balance accounts.

    11.      Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue earned in the current accounting period.

    12.      An adjustment for wages expense, earned but unpaid at year end, is an example of an accrued expense.

    13.      The book value of any depreciable asset is the difference between its cost and its salvage value.

    14.      The ending retained earnings balance is reported on both the retained earnings statement and the balance sheet.

    15.      The post-closing trial balance consists of asset, liability, owners' equity, revenue and expense accounts.

    16.      All revenues, expenses, and the dividends account are closed through the Income Summary account.

    17.      It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

  *18.      The accrual basis recognizes revenue when earned and expenses in the period when cash is paid.

  *19.      Reversing entries are made at the end of the accounting cycle to correct errors in the original recording of transactions.

  *20.      An adjusted trial balance that shows equal debit and credit columnar totals proves the accuracy of the adjusting entries.

True / False Answers — Conceptual

MULTIPLE CHOICE—Conceptual

  21.     Factors that shape an accounting information system include the

            a.   nature of the business.

            b.   size of the firm.

            c.   volume of data to be handled.

            d.   all of these.

  22.     Maintaining a set of accounting records is

            a.   optional.

            b.   required by the Internal Revenue Service.

            c.   required by the Foreign Corrupt Practices Act.

            d.   required by the Internal Revenue Service and the Foreign Corrupt Practices Act.

  23.     Debit always means

            a.   right side of an account.

            b.   increase.

            c.   decrease.

            d.   none of these.

  24.     An accounting record into which the essential facts and figures in connection with all transactions are initially recorded is called the

            a.   ledger.

            b.   account.

            c.   trial balance.

            d.   none of these.

  25.     A trial balance

a.   proves that debits and credits are equal in the ledger.

b.   supplies a listing of open accounts and their balances that are used in preparing financial statements.

c.   is normally prepared three times in the accounting cycle.

d.   all of these.

  26.     Which of the following is a real (permanent) account?

            a.   Goodwill

            b.   Sales

            c.   Accounts Receivable

            d.   Both Goodwill and Accounts Receivable

  27.     Which of the following is a nominal (temporary) account?

            a.   Unearned Revenue

            b.   Salary Expense

            c.   Inventory

            d.   Retained Earnings

  28.     Nominal accounts are also called

            a.   temporary accounts.

            b.   permanent accounts.

            c.   real accounts.

            d.   none of these.

  29.     The double-entry accounting system means

            a.   Each transaction is recorded with two journal entries.

            b.   Each item is recorded in a journal entry, then in a general ledger account.

            c.   The dual effect of each transaction is recorded with a debit and a credit.

            d.   More than one of the above.        

  30.     When a corporation pays a note payable and interest,

            a.   the account notes payable will be increased.

            b.   the account interest expense will be decreased.

            c.   they will debit notes payable and interest expense.

            d.   they will debit cash.

  31.     Stockholders’ equity is not affected by all

            a.   cash receipts.

            b.   dividends.

            c.   revenues.

            d.   expenses.

  32.     The debit and credit analysis of a transaction normally takes place

            a.   before an entry is recorded in a journal.

            b.   when the entry is posted to the ledger.

            c.   when the trial balance is prepared.

            d.   at some other point in the accounting cycle.

  33.     The accounting equation must remain in balance

            a.   throughout each step in the accounting cycle.

            b.   only when journal entries are recorded.

            c.   only at the time the trial balance is prepared.

            d.   only when formal financial statements are prepared.

  34.     The difference between the accounting process and the accounting cycle is

a.   the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.

b.   the accounting cycle represents the steps taken to accomplish the accounting process.

c.   the accounting process represents the steps taken to accomplish the accounting cycle.

d.   merely semantic, because both concepts refer to the same thing.

  35.     An optional step in the accounting cycle is the preparation of

a.   adjusting entries.

b.   closing entries.

c.   a statement of cash flows.

d.   a post-closing trial balance.

  36.     Which of the following criteria must be met before an event or item should be recorded for accounting purposes?

            a.   The event or item can be measured objectively in financial terms.

            b.   The event or item is relevant and reliable.

            c.   The event or item is an element.

            d.   All of these must be met.

  37.     Which of the following is a recordable event or item?

            a.   Changes in managerial policy

            b.   The value of human resources

            c.   Changes in personnel

            d.   None of these

  38.     Which of the following is not an internal event?

            a.   Depreciation

            b.   Using raw materials in the production process

            c.   Dividend declaration and subsequent payment

            d.   All of these are internal transactions.

  39.     External events do not include

            a.   interaction between an entity and its environment.

            b.   a change in the price of a good or service that an entity buys or sells, a flood or earthquake.

            c.   improvement in technology by a competitor.