WorksheetsAccounting Principles and Concepts Worksheet
Total questions: 44
Worksheet time: 25mins
Which of the following is not a step in the accounting process?
Identification.
Economic entity.
Recording
Communication.
Which of the following statements about users of accounting information is incorrect?
Management is an internal user.
Taxing authorities are external users.
Present creditors are external users.
Regulatory authorities are internal users.
The historical cost principle states that:
assets should be initially recorded at cost and adjusted when the fair value changes.
activities of an entity are to be kept separate and distinct from its owner.
assets should be recorded at their cost.
only transaction data capable of being expressed in terms of money be included in the accounting records.
Which of the following statements about basic assumptions is correct?
Basic assumptions are the same as accounting principles.
The economic entity assumption states that there should be a particular unit of accountability.
The monetary unit assumption enables accounting to measure employee morale.
Partnerships are not economic entities.
The three types of business entities are:
Sole proprietorship, partnership, corporation.
Sole proprietorship, franchise, cooperative.
Corporation, LLC, nonprofit.
Partnership, trust, government agency.
Net income will result during a time period when:
assets exceed liabilities.
assets exceed revenues.
expenses exceed revenues.
revenues exceed expenses.
As of December 31, 2020, Stoneland AG has assets of €3,500 and equity of €2,000. What are the liabilities for Stoneland AG as of December 31, 2020?
€1,500.
€1,000.
€2,500.
€2,000.
Performing services on account will have the following effects on the components of the basic accounting equation:
increase assets and decrease equity.
increase assets and increase equity.
increase assets and increase liabilities.
increase liabilities and increase equity.
Which of the following events is not recorded in the accounting records?
Equipment is purchased on account.
An employee is terminated.
A cash investment is made into the business.
The company pays a cash dividend
During 2020, Xia Lin Company’s assets decreased ¥500,000 and its liabilities decreased ¥900,000. Its equity therefore:
increased ¥400,000.
decreased ¥1,400,000.
decreased ¥400,000.
increased ¥1,400,000.
Payment of an account payable affects the components of the accounting equation in the following way.
decreases equity and decreases liabilities.
increases assets and decreases liabilities.
decreases assets and increases equity.
decreases assets and decreases liabilities.
Which of the following statements is false?
A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.
A statement of financial position reports the assets, liabilities, and equity at a specific date.
An income statement presents the revenues, expenses, assets, and liabilities for a specific period of time.
A retained earnings statement summarizes the changes in retained earnings for a specific period of time.
On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect the:
income statement only.
statement of financial position only.
income statement and retained earnings statement only.
income statement, retained earnings statement, and statement of financial position.
The financial statement that reports assets, liabilities, and equity is the:
income statement.
retained earnings statement.
statement of financial position.
statement of cash flows.
Services performed by a public accountant include:
auditing, taxation, and management consulting.
auditing, budgeting, and management consulting.
auditing, budgeting, and cost accounting.
internal auditing, budgeting, and management consulting.
Which of the following statements about an account is true?
The right side of an account is the debit, or increase, side.
An account is an individual accounting record of increases and decreases in specific asset, liability, and equity items.
There are separate accounts for specific assets and liabilities but only one account for equity items.
The left side of an account is the credit, or decrease, side.
Debits:
increase both assets and liabilities.
decrease both assets and liabilities.
increase assets and decrease liabilities.
decrease assets and increase liabilities.
A revenue account:
is increased by debits.
is decreased by credits.
has a normal balance of a debit.
Accounts that normally have debit balances are:
assets, expenses, and revenues.
assets, expenses, and share capital—ordinary.
assets, liabilities, and dividends.
assets, dividends, and expenses.
The expanded accounting equation is:
Assets + Liabilities = Share Capital + Retained Earnings + Dividends + Revenues + Expenses.
Assets = Liabilities + Share Capital + Retained Earnings + Dividends + Revenues – Expenses.
Assets = Liabilities – Share Capital – Retained Earnings – Dividends – Revenues – Expenses.
Assets = Liabilities + Share Capital + Retained Earnings + Revenues – Expenses – Dividends.
Which of the following is not part of the recording process?
Analyzing transactions.
Preparing an income statement.
Entering transactions in a journal.
Posting journal entries.
Which of the following statements about a journal is false?
It is not a book of original entry.
It provides a chronological record of transactions.
It helps to locate errors because the debit and credit amounts for each entry can be readily compared.
It discloses in one place the complete effect of a transaction.
The purchase of supplies on account should result in:
a. a debit to Supplies Expense and a credit to Cash.
b. a debit to Supplies Expense and a credit to Accounts Payable.
c. a debit to Supplies and a credit to Accounts Payable.
d. a debit to Supplies and a credit to Accounts Receivable.
The order of the accounts in the ledger is:
assets, revenues, expenses, liabilities, share capital—ordinary, dividends.
assets, liabilities, share capital—ordinary, dividends, revenues, expenses.
share capital—ordinary, assets, revenues, expenses, liabilities, dividends.
revenues, assets, expenses, liabilities, share capital—ordinary, dividends.
A ledger:
contains only asset and liability accounts.
should show accounts in alphabetical order.
is a collection of the entire group of accounts maintained by a company.
is a book of original entry.
Posting:
normally occurs before journalizing.
transfers ledger transaction data to the journal.
is an optional step in the recording process.
transfers journal entries to ledger accounts.
Before posting a payment of €5,000, the Accounts Payable of Green Grocers had a normal balance of €16,000. The balance after posting this transaction was:
€21,000
€16,000
€11,000
€5,000
A trial balance:
is a list of accounts with their balances at a given time.
proves the journalized transactions are correct.
will not balance if a correct journal entry is posted twice.
proves that all transactions have been recorded.
A trial balance will not balance if:
a correct journal entry is posted twice.
the purchase of supplies on account is debited to Supplies and credited to Cash.
a £100 dividend is debited to Dividends for £1,000 and credited to Cash for £100.
a £450 payment on account is debited to Accounts Payable for £45 and credited to Cash for £45.
The trial balance of Jeong Company had accounts with the following normal balances: Cash 5,000,ServiceRevenue 85,000, Salaries and Wages Payable 4,000,SalariesandWagesExpense 40,000, Rent Expense 10,000,ShareCapital—Ordinary 42,000, Dividends 15,000,andEquipment 61,000. In preparing a trial balance, the total in the debit column is:
$131,000.
$216,000.
$91,000.
$116,000.
What is the amount in euros?
€21,000.
€5,000.
€11,000.
cannot be determined.
Which of the following is the revenue recognition principle?
revenue should be recognized in the accounting period in which a performance obligation is satisfied.
expenses should be matched with revenues.
the economic life of a business can be divided into artificial time periods.
the fiscal year should correspond with the calendar year.
The time period assumption states that:
companies must wait until the calendar year is completed to prepare financial statements.
companies use the fiscal year to report financial information.
the economic life of a business can be divided into artificial time periods.
companies record information in the time period in which the events occur.
Which of the following statements about the accrual basis of accounting is false?
Events that change a company’s financial statements are recorded in the periods in which the events occur.
Revenue is recognized in the period in which services are performed.
This basis is in accordance with International Financial Reporting Standards.
Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.
The principle or assumption dictating that efforts (expenses) should be recognized in the period in which a company consumes assets or incurs liabilities to generate revenue is the:
expense recognition principle.
cost assumption.
Adjusting entries are made to ensure that:
expenses are recognized in the period in which they are incurred.
revenues are recorded in the period in which services are performed.
statement of financial position and income statement accounts have correct balances at the end of an accounting period.
All the responses above are correct.
Each of the following is a major type (or category) of adjusting entries except:
prepaid expenses.
accrued revenues.
accrued expenses
recognized revenues.
The trial balance shows Supplies €1,350 and Supplies Expense €0. If €600 of supplies are on hand at the end of the period, the adjusting entry is:
Supplies 600 Supplies Expense 600
Supplies 750 Supplies Expense 750
Supplies Expense 750 Supplies 750
Supplies Expense 600 Supplies 600
Adjustments for prepaid expenses:
Accumulated Depreciation is:
a. a contra asset account.
b. an expense account.
c. an equity account.
d. a liability account.
Rivera Shipping computes depreciation on delivery equipment at ¥1,000 (amounts in thousands) for the month of June. The adjusting entry to record this depreciation is as follows.
Depreciation Expense 1,000 Accumulated Depreciation— Rivera Shipping 1,000
Depreciation Expense 1,000 Equipment 1,000
Depreciation Expense 1,000 Accumulated Depreciation— Equipment 1,000
Equipment Expense 1,000 Accumulated Depreciation— Equipment 1,000
Adjustments for unearned revenues:
decrease liabilities and increase revenues.
have an assets-and-revenues-account relationship.
increase assets and increase revenues.
decrease revenues and decrease assets.
Adjustments for accrued revenues:
have a liabilities-and-revenues-account relationship.
decrease assets and increase revenues.
decrease assets and increase expenses.
decrease revenues and increase assets.
Choose the correct answer:
have an assets-and-revenues-account relationship.
decrease assets and revenues.
decrease liabilities and increase revenues.
