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WorksheetsAccounting Review Continued
Total questions: 44
Worksheet time: 4hrs 40mins
Preparing your income tax return is made easier with knowledge of accounting.
True
False
Computers will soon make accounting skills unnecessary.
False
True
In Canada, all corporations must use IFRS.
True
False
Bookkeepers are regulated, just like accountants.
False
True
Only corporations have to keep their business accounting separate from personal affairs.
False
True
A good accounting system should provide adequate information for the use of:
the management of the firm
the general public
the government
lenders
all of the above
Auditing may be described as:
serving the general public
the accounting procedures of a large company
testing a firm’s records and procedures for accuracy
keeping accounting records for the government
The first item under “Current Assets” on a balance sheet will always be:
Accounts Receivable
Inventory
Cash / Bank
Accounts Payable
Which of the following is not true?
A + L = E
A – L = E
L + E = A
A – E = L
Which of the following is true?
Every country in the world uses IFRS.
In many countries using IFRS, the liquidity order of assets is inverted.
Private corporations have to release their financial statements to the public.
Ethics are not important in the world of accounting.
If a business goes bankrupt, who is paid last, if at all?
The owner
The bank
The creditors
The owner’s relatives who loaned the business money
CPA stands for:
Certified Professional Accountant
Chartered Public Accountant
Chartered Professional Accountant
College of Professional Accountants
Which one of the following is equivalent to the expanded basic accounting equation?
Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenues – Expenses
Assets = Liabilities – Owner’s Capital + Owner’s Drawings – Revenues + Expenses
Assets = Liabilities – Owner’s Capital – Owner’s Drawings + Revenues + Expenses
Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses
Which of the following statements is true?
Debits increase assets and increase liabilities
Credits decrease assets and decrease liabilities
Credits decrease assets and increase liabilities
Debits increase liabilities and increase assets
Which of the following would lead to an exceptional account balance?
you pay off your accounts payable in full
you use overdraft protection when withdrawing funds from your bank account
a customer pays off their account in full
a business owner withdraws business funds for personal use
In recording an accounting transaction in a double-entry system . . .
The number of debit accounts must equal the number of credit accounts
There must always be entries made on both sides of the accounting equation
The dollar amount of the debits must equal the dollar amount of the credits
There must only be two accounts effected by any transaction
Bing Company has total liabilities of $10,000 and total assets of $15,000. Based on this information. Bing Company’s owner’s equity must be . . .
$10,000
0
$5,000
$15,000
Jackson's Small Engine Repair Shop, a proprietorship, started the year with total assets of $60,000 and total liabilities of $40,000. During the year, the business recorded $100,000 in repair revenues, $55,000 in expenses, and Mike Jackson, the owner, withdrew $10,000. Jackson's Capital balance at the end of the year was
$55,000
$35,000
$65,000
$45,000
Which of the following is the best source document?
an itemized invoice
a credit card statement
a bank statement
a handwritten note from the business owner
An accounting entry that balances is
Definitely correct
Not necessarily correct
Incorrect
Always one that contains an asset and a liability
The principle that states that all expenses must be matched in the same accounting period as the revenues they helped to earn is the:
Revenue Recognition Principle
Accrual Accounting Principle
Matching Principle
Double-Entry Accounting Principle
Which of these is not a common prepaid expense?
Insurance
Supplies
Equipment
Rent
Prepaid expenses start as ____________ and turn into ____________ as they are used up.
capital . . . expenses
expenses . . . liabilities
current assets . . . expenses
long-term assets . . . expenses
Depreciation can affect:
all assets
all long-term assets
all long-term assets except for land
all long-term assets except for land and vehicles
Depreciation is NOT
an expense
a calculation of the reduction in market value of an item
called the Capital Cost Allowance in CRA’s Income Tax Act
often determined by estimated profits and losses
CCA dictates
the minimum rate of depreciation for each class of asset
that the straight-line method is used
delivery charges, taxes and installation costs are not included in asset costs
that the declining-balance method is used
Prepaid expense adjustments
always occur on a regular basis
show up only on the balance sheet
show up only on the income statement
are normally recorded when the financial statements are prepared
Which of these is true?
Book Value = Actual Value
Depreciation = Valuation
Higher Expenses = Higher Net Income
Salvage Value = Residual Value
We can’t determine exact depreciation until
We know the life span
We know the salvage value
We get rid of an asset at the end of its life
We get the formula right
The rule that information that could affect the decisions of users of the financial statements has to be included when the statements are prepared falls under the
Matching Principle
Principle of Materiality
Principle of Conservatism
Revenue Recognition Principle
CCA stands for
Cost of Capital Allowance
Capital Cost Allowance
Conservative Calculations Approach
Cost Conscious Accountant
A merchandiser that buys goods from manufacturers and sells them to businesses that then sell to the public is called
a retailer
a wholesaler
a supplier
a general merchandiser
If the ending inventory is overstated by $2000 at the end of the accounting period, then
cost of goods sold will be understated
gross profit will be overstated
net income will be overstated
all of the above
none of the above
Sales less Sales Returns and Allowances and Sales Discounts =
Cost of Goods Available for Sale
Cost of Goods Sold
Net Sales
Ending Inventory
A credit invoice issued by a business will
decrease the liabilities
increase the capital
decrease the assets
increase the assets
none of the above
HST . . .
is a 12% tax added to the cost of most goods and services in Ontario
is short for Harmony Sales Tax
gets remitted to CRA and they forward the provincial portion on
is not recoverable for many business expenses
all of the above
Merchandise Inventory is classified as a(n) _______________ on the balance sheet.
current liability
current asset
long-term asset
long-term liability
none of the above – it only shows up on the income statement
Spoiled merchandise forces a credit to the _____________ account.
Merchandise Inventory
Cost of Goods Sold
Inventory Shrinkage
Purchases
Transportation charges on incoming merchandise are recorded in the _________ account.
Merchandise Inventory
Delivery Expense
Freight-In
Miscellaneous
Merchandise is recorded at _______ while Sales are recorded at ________.
selling price, selling price
cost, cost
cost, selling price
selling price, cost
The quick ratio excludes which of the following?
Inventory
Cash
Accounts Receivable
Temporary Investments
Generally, owners prefer a higher ________ ratio and lenders prefer a lower ________ ratio.
debt / debt
equity / equity
debt / equity
equity / debt
Which is true of the debt ratio and equity ratio?
Both have assets as their denominator
When added together, they equal 100%
Both measure how assets are financed
They are ratios and not percentages
If your debt ratio is 75%, how much of your assets have been financed through equity?
75%
20%
25%
Impossible to know without more information
