1. Closing entries are necessary for
a. permanent accounts only.
b. temporary accounts only.
c. both permanent and temporary accounts.
d. permanent or real accounts only.
2. A post-closing trial balance will show
a. only permanent account balances.
b. only temporary account balances.
c. zero balances for all accounts.
d. the amount of net income (or loss) for the period.
3. The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.
4. A current asset is
a. the last asset purchased by a business.
b. an asset which is currently being used to produce a product or service.
c. usually found as a separate classification in the income statement.
d. an asset that a company expects to convert to cash or use up within one year.
1. The standards and rules that are recognized as a general guide for financial reporting are called
a. generally accepted accounting standards.
b. generally accepted accounting principles.
c. operating guidelines.
d. standards of financial reporting.
2. “Generally accepted” in the phrase generally accepted accounting principles means that the principles
a. are proven theories of accounting.
b. have substantial authoritative support.
c. have been approved by the Internal Revenue Service.
d. have been approved for use by the managements of business firms.
3. The conceptual framework developed by the Financial Accounting Standards Board
a. was approved by a vote of all accountants.
b. are rules that all accountants must follow.
c. is viewed as providing a constitution for setting accounting standards for financial reporting. d. is legally binding on all accountants.
4. Accounting principles must be
a. proven and tested.
b. hypothesized and theorized.
c. developed or decreed.
d. universally accepted.
1. FASB has had the responsibility for developing accounting principles since the early
a. 1900s.
b. 1920s.
c. 1940s.
d. 1970s.
2. Which one of the following is primarily interested in the liquidity of a company?
a. Federal government
b. Stockholders
c. Long-term creditors
d. Short-term creditors
3 Which one of the following is not a characteristic generally evaluated in analyzing financial statements?
a. Liquidity
b. Profitability
c. Marketability
d. Solvency
4. In analyzing the financial statements of a company, a single item on the financial statements a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
C. is significant only if it is large.
d. should be accompanied by a footnote.
1. Short-term creditors are usually most interested in evaluating
a. solvency.
b. liquidity.
c. marketability.
d. profitability.
2. Long-term creditors are usually most interested in evaluating
a. liquidity and solvency.
b. solvency and marketability.
c. liquidity and profitability.
d. profitability and solvency
3. “Generally accepted” in the phrase generally accepted accounting principles means that the principles
a. are proven theories of accounting.
b. have substantial authoritative support.
c. have been approved by the Internal Revenue Service.
d. have been approved for use by the managements of business firms.
4. The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.
1. Because accounting often requires estimates to be made to assess the effect of a transaction, the shorter the time period, the easier it becomes to determine the proper adjustments.
True
False
2. The time period assumption states that the economic life of a business entity can be divided into artificial time periods.
True
False
3. The time period assumption is often referred to as the matching principle.
True
False
4. A company’s calendar year and fiscal year are always the same.
True
False
1. Accounting time periods that are one year in length are referred to as interim periods.
True
False
2. Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.
True
False
3. The cash basis of accounting is not in accordance with generally accepted accounting
principles.
True
False
4. The matching principle requires that assets be matched with liabilities.
True
False
