Chapter 002 Review of the Accounting Process True False Questions 1 Owners equity can be expressed as assets minus liabilities TRUE 2 Debits increase asset accounts and decrease liability accounts TRUE 3 Balance sheet accounts are referred to as temporary accounts because their balances are always changing FALSE 4 After an unadjusted trial balance is prepared the next step in the accounting processing cycle is the preparation of financial statements FALSE AACSB Reflective thinking Blooms Knowledge Learning Objective 1 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 2 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 2 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 3 Level of Learning 1 2 1 Chapter 002 Review of the Accounting Process 5 Adjusting journal entries are required to comply with the realization and matching principles TRUE 6 Accruals occur when the cash flow precedes either revenue or expense recognition FALSE 7 The adjusted trial balance contains only permanent accounts FALSE AACSB Reflective thinking Blooms Knowledge Learning Objective 4 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 4 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 5 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 6 Level of Learning 1 8 The income statement summarizes the operating activity of a firm at a particular point in time FALSE 2 2 Chapter 002 Review of the Accounting Process 9 The balance sheet can be considered a change or flow statement FALSE 10 The statement of cash flows summarizes transactions that caused cash and cash equivalents to change during a reporting period TRUE 11 The statement of shareholders equity discloses the changes in the temporary shareholders equity accounts FALSE 12 The post closing trial balance contains only permanent accounts TRUE AACSB Reflective thinking Blooms Knowledge Learning Objective 6 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 6 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 6 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective 7 Level of Learning 1 2 3 Chapter 002 Review of the Accounting Process 13 The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account TRUE 14 A reversing entry at the beginning of a period for salaries would include a debit to salaries expense FALSE 15 The sale of merchandise on account would be recorded in a sales journal TRUE 16 The payment of cash to a supplier would be recorded in a purchases journal FALSE AACSB Reflective thinking Blooms Knowledge Learning Objective 7 Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective Appendix B Level of Learning 2 AACSB Reflective thinking Blooms Knowledge Learning Objective Appendix C Level of Learning 1 AACSB Reflective thinking Blooms Knowledge Learning Objective Appendix C Level of Learning 1 2 4 Chapter 002 Review of the Accounting Process Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase Essay Questions Terms A Accruals B Adjusted trial balance C Adjusting entries D Bad debt expense E Balance sheet F Prepayments G Expenses H Post closing trial balance I Statement of cash flows J Unadjusted trial balance A F AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension 17 Assets or liabilities created when recognition precedes cash flows 18 Assets or liabilities created when cash flows precede recognition 2 5 Chapter 002 Review of the Accounting Process 19 A list of accounts and balances containing the source data for preparation of financial statements 20 A list of accounts and their balances prepared before the effects of internal transactions are recorded 21 A list of only permanent accounts and their balances prepared to show that the accounting equation is in balance B J H AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension 2 6 Chapter 002 Review of the Accounting Process Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase Terms A Accruals B Adjusted trial balance C Adjusting entries D Bad debt expense E Balance sheet F Prepayments G Expenses H Post closing trial balance I Statement of cash flows J Unadjusted trial balance I C E AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension 22 Reports operating investing and financing activities 23 Records internal transactions not previously reported 24 Portrays financial position at a point in time 2 7 Chapter 002 Review of the Accounting Process 25 Represents outflows of resources incurred to generate revenues 26 The last step in the accounting processing cycle Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase G H AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension Terms A Closing entries B Credit C Debit D Gains E General journal F General ledger G Losses H Periodic system I Perpetual system J Prepayments 2 8 Chapter 002 Review of the Accounting Process 27 Recorded when there are dispositions of assets for consideration in excess of book values D AACSB Reflective thinking Blooms Comprehension 2 9 Chapter 002 Review of the Accounting Process 28 Recorded when there are dispositions of assets for consideration less than book values G H I J AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension AACSB Reflective thinking Blooms Comprehension 29 Requires adjusting entries to update the inventory account 30 Requires entries to cost of goods sold account when merchandise is sold 31 When cash