Financial Reporting Quiz 3

What is the primary purpose of double-entry bookkeeping?

• To eliminate the need for ledgers

• To maintain the accounting equation

• To simplify financial statements

• To record transactions in a single account

What does a trial balance list?

• Only the debit balances

• Only the credit balances

• Only the balances of income accounts

• All debit and credit balances

What is the role of books of prime entry?

• To record all transactions directly in the general ledger

• To summarize large numbers of similar transactions

• To maintain the trial balance

• To prepare financial statements

What is a control account?

• An account that is used for personal expenses

• An account that records only cash transactions

• An account that summarizes a large number of transactions

• An account that is not part of the double-entry system

What is the purpose of a bank reconciliation?

• To summarize transactions in the general ledger

• To compare the cash book balance with the bank statement balance

• To prepare the trial balance

• To record bad debts

What is the accounting equation?

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

• Assets = Equity - Liabilities

• Assets = Equity + Liabilities

What is the effect of writing off a bad debt?

• It increases total receivables

• It reduces total assets

• It increases profit

• It has no effect on the financial statements

What is the purpose of closing adjustments?

• To finalize financial statements

• To adjust the cash book

• To prepare the trial balance

• To record daily transactions

What does depreciation represent?

• The cash received from selling an asset

• The total cost of an asset at purchase

• The systematic allocation of an asset's cost over its useful life

• The increase in asset value over time

What is the first step in accounting for the disposal of a non-current asset?

• Prepare the trial balance

• Transfer the cost of the asset to the disposal account

• Record the sale proceeds

• Calculate the accumulated depreciation