Exam (elaborations) Test Bank For Financial And Managerial Accounting Information For Decisions 4th Edition Wild, Shaw
Test Bank For Financial And
... [Show More] Managerial Accounting Information For Decisions 4th Edition Wild, Shaw Analyzing and Recording Transactions True / False Questions 1. Accounting records are also referred to as the books. True False 2. The first step in the analyzing and recording process is to analyze each transaction and event from source documents. True False 3. Preparation of a trial balance is the first step in the analyzing and recording process. True False 4. Source documents provide evidence of business transactions and are the basis for accounting entries. True False 5. Items such as sales slips, invoices, checks and purchase orders are source documents. True False 6. An account is a record of increases and decreases in a specific asset, liability, equity, revenue or expense item. True False 7. According to the seller, a customer's promise to pay is called an account payable. True False 2-1 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 8. Dividends are a type of business expense. True False 9. As prepaid expenses are used up, the costs of these assets become expenses. True False 10. Land and buildings are generally recorded in the same ledger account. True False 11. It is not necessary to keep separate accounts for all items of importance for business decisions. True False 12. Unearned revenues are classified as liabilities. True False 13. Cash dividends should be treated as an expense to the business. True False 14. When a company provides services for which cash will not be received until some future date, the company should record unearned revenue for the amount charged to the customer. True False 15. The chart of accounts is a list of all the accounts used by a company and a corresponding identification number. True False 2-2 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 16. An account balance is the difference between the debits and credits for an account including any beginning balance. True False 17. Debit means the right-hand side of any account. True False 18. In a double-entry accounting system, total amount debited must always equal total amount credited. True False 19. Increases in liability accounts are recorded as debits. True False 20. Debits increase both asset and expense accounts. True False 21. Credits always increase account balances. True False 22. Crediting an expense account decreases it. True False 23. Double entry accounting requires that the impact of each transaction be recorded in, at least two accounts. True False 2-3 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 24. A revenue account normally has a debit balance. True False 25. Accounts are normally decreased by debits. True False 26. The dividends account normally has a credit balance since it is an equity account. True False 27. Asset accounts normally have credit balances and expense accounts normally have debit balances. True False 28. Common Stock normally has a debit balance. True False 29. A debit entry is always favorable. True False 30. A transaction that decreases an asset account and increases a liability account must also affect one or more other accounts. True False 31. A transaction that increases an asset and decreases a liability must also affect one or more other accounts. True False 2-4 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 32. If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance. True False 33. The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable. True False 34. If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash. True False 35. If a company provides services to a customer on credit the service provider company should credit Accounts Receivable. True False 36. When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue. True False 37. The debt ratio reflects the risk of a company to both its owners and creditors. True False 38. The higher the debt ratio, the higher risk of a company not being able to meet its obligations. True False 2-5 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 39. The debt ratio is calculated by dividing total assets by total liabilities. True False 40. A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage. True False 41. If a company is highly leveraged, this means that it has relatively low risk of not being able to repay its debt. True False 42. Hamilton Industries has liabilities of $105 million and total assets of $350 million. Its debt ratio is 33.3%. True False 43. High financial leverage is always bad for a company's owners. True False 44. A compound journal entry affects no more than two accounts. True False 45. Posting is the transfer of the information from each journal entry to the ledger. True False 46. Transactions are first recorded in the ledger. True False 2-6 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 47. The journal is known as a book of original entry. True False 48. A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction. True False 49. The journal is known as the book of final entry because financial statements are prepared from it. True False 50. A trial balance that balances is not proof of complete accuracy in recording transactions. True False 51. IFRSs requires that companies report four financial statements with explanatory notes: Balance Sheet; Income Statement; Statement of Changes in Equity and Statement of Cash Flows. True False 52. Generally, the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets, liabilities, equity, revenues and expenses. True False 53. The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits. True False 2-7 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 54. A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger and preparing the trial balance. True False 55. If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash account is out of balance by $100. True False 56. The balance sheet provides a link between beginning and ending income statements. True False 57. The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement) and Where (the organization's address). True False 58. Other names for the income statement are the earnings statement, statement of operations or a profit and loss statement. True False 59. Another name for the balance sheet is the statement of financial position. True False Multiple Choice Questions 2-8 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 60. The accounting process begins with: A. Analysis of business transactions and events B. Preparation of financial statements and other reports C. Summarizing the recorded effects of business transactions D. Presentation of financial information to decision-makers E. Preparation of the trial balance 61. Which of the following list of events properly reflects the early steps taken in the accounting process? A. Record relevant transactions, Post journal information to ledger accounts Analyze each transaction, Prepare and analyze the trial balance B. Post journal information to ledger accounts, Analyze each transaction, Post journal information to ledger accounts, Prepare and analyze the trial balance C. Prepare and analyze the trial balance, Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions D. Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions, Prepare and analyze the trial balance E. Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance 62. A sales invoice: A. Is a type of use document B. Is used by sellers for recording purposes C. Is not needed by buyers D. Gives rise to an entry in the accounting process E. Is not necessary in accounting 63. Source documents include all of the following except: A. Sales tickets B. Ledgers C. Checks D. Purchase orders E. Bank statements 2-9 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 64. Source documents: A. Include the ledger B. Are the sources of accounting information C. Must be in electronic form D. Are based on accounting entries E. Include the chart of accounts 65. Various types of documents and other papers that companies use when they conduct their business: A. Are called source documents B. Can include sales tickets C. Are the source of information for recording accounting entries D. Can be in electronic form E. All of the above 66. For what reason do most sellers require customers to have their receipts in order to exchange or return purchased items? A. The receipt contains coded information which the seller needs to prepare and analyze the trial balance. B. Sellers wish to ensure that the sale in question was rung up on the register in the first place. C. This is a legal requirement mandated by a federal law. D. The receipt is serving as a promissory note. E. To create an environment in which customer's do not want to return items. 67. A record of the increases and decreases in a specific asset, liability, equity, revenue or expense is a(n): A. Journal B. Posting C. Trial balance D. Account E. Chart of accounts 2-10 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 68. An account used to record the owner's investments in the business is called: A. Dividends B. Common Stock C. Revenue D. Expense E. Liability 69. The account used to record the transfers of assets from a business to its stockholders is: A. A revenue account B. The retained earnings account C. Common stock account D. An expense account E. A liability account 70. Which of the following statements is correct? A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense B. Promises of future payment are called accounts payable C. Increases and decreases in cash are always recorded in the retained earnings account D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business E. Accrued liabilities include accounts receivable 71. Unearned revenues are: A. Revenues that have been earned and received in cash B. Revenues that have been earned but not yet collected in cash C. Liabilities created when a customer pays in advance for products or services before the revenue is earned D. Recorded as an asset in the accounting records E. Increases to retained earnings 2-11 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 72. Prepaid expenses are: A. Payments made for products and services that do not ever expire B. Classified as liabilities on the balance sheet C. Decreases in retained earnings D. Assets that represent prepayments of future expenses E. Promises of payments by customers 73. A written promise to pay a definite sum of money on a specific future date is a(n): A. Unearned revenue B. Prepaid expense C. Credit account D. Note payable E. Account receivable 74. A collection of all accounts (with account balances) used by a business is called a: A. Journal B. Book of original entry C. General Journal D. Balance column journal E. Ledger 75. A ledger is: A. A record containing increases and decreases in a specific asset, liability, equity, revenue or expense item B. A journal in which transactions are first recorded C. A collection of documents that describe transactions and events during the accounting process D. A list of all accounts with their debit balances at a point in time E. A list of all accounts a company uses and includes an identification number assigned to each account 2-12 Full file at Decisions-4th-Edition-Wild,-Shaw,-Chiappetta 76. Which of the following statements about the Cash account is true? A. Because most companies earn their fees in cash, the cash account is categorized as revenue B. For any given transaction Accounts Receivable and Cash can be used interchangeably because both accounts are measured in terms of cash C. The cash account includes the value of any medium of exchange that a bank accepts for deposit D. Both A and B are true statements E. Both B and C are true statements 77. A list of all accounts used by a company and the identification number assigned to each account is called a: A. Ledger B. Journal C. Trial balance D. Chart of accounts E. General Journal 78. The general ledger of a business A. Is a collection of all accounts used in a company's information system B. Must be kept in a computer file C. A and B D. Is a set standard not affected by a company's size and diversity E. A, B and D 79. A debit is: A. An increase in an account B. The right-hand side of a T-account C. A decrease in an account D. The left-hand side of a T-account E. An increase to a liability account 2 [Show Less]