Chapter 3 Questions

The financial statement that shows the financial condition of the enterprise at the end of a period is the: balance sheet All of the following accounts are increased on the credit side except: Dividends Which of the following are reported in the stockholders' equity section of the balance sheet? Common stock and retained earnings An optional step in the accounting cycle is the preparation of:

the worksheet
All of the following are external events except: consuming raw materials in production processes. Posting is the process of transferring items entered in a general journal to the: general ledger Which of the following statements about a trial balance is incorrect? It proves that all transactions have been recorded An adjusting entry would never include a: debit to an asset account and a credit to a liability account. The adjusting entry to record revenue that has been earned, but was previously recorded as unearned results in a debit to: a liability account and a credit to a revenue account. If the adjusting entry for an accrued expense is not made: liabilities will be understated. In the closing process all of the revenue and expense account balances are transferred to the: Income Summary account. All of the following accounts are used with a perpetual inventory system except:

Purchases The post-closing trial balance consists only of: real accounts. A work sheet: is an informal device for accumulating and sorting information needed for the financial statements. Which one of the following appears in both the income statement and balance sheet columns of a work sheet? Net income All of the following are points made about accounting information systems and their relationship to the convergence efforts by the IASB and the FASB except: the cost of good information and better internal controls is a general held reason for why U.S. security markets more competitive. Nominal accounts are periodically closed. True

Dividends are increased on the debit side. True Transactions are initially recorded in the general ledger False When an item of expense is paid and recorded in advance, it is normally called an accrued expense. False In a periodic inventory system, purchases and sales are recorded directly in the inventory account as the purchase and sales occur. False Revenue, equity and liability accounts have normal credit balances. True When an item of revenue is collected and recorded in advance, it is normally called a prepaid revenue.

False The book value of an asset is cost less salvage value. False Depreciation and amortization allocate the cost of a long-term assets to the periods which benefit from their use. True The revenue recognition principle requires that bad debts be estimated and expensed in the period of the sale. False Since non-U.S. markets are not affected by the Sarbanes Oxley Act (SOX), internal controls will not be discussed as part of the convergence efforts of the FASB and IASB. False In a double entry system every transaction affects: At least two accounts In a proprietorship, the Capital account takes the place of all of the following corporation accounts except: Dividends Which of the following is a real account? Common Stock Which of the following steps in the accounting cycle is not optional? Adjusted trial balance Journal entries are listed in: chronological sequence. Which of the following errors would cause a trial balance to not balance? Recording a transaction with several errors that are not offsetting. Adjusting entries can be classified as either: accruals or deferrals The difference between the cost of any depreciable asset and its related account, Accumulated Depreciation is referred to as the asset's:

Book Value Unearned revenues are classified as: Liabilities A perpetual inventory system does not contain which of the following accounts? Purchases