1/ When credit sales exceed collections of cash from accounts receivable, the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period.

TRUE / FALSE

2/ The accounting systems of most business organizations:

Multiple Choice

• Are designed by the CPA firm that performs the annual financial audit.
• Utilize data bases, rather than ledger accounts.
• Are tailored to meet the organization's needs for accounting information and the resources available for operating the system.
• Are similar in design to the journals, ledgers, and worksheets illustrated in this text.

3/ A revenue transaction may result in all of the following except:

Multiple Choice

• An increase in liabilities.
• An increase in owners' equity.
• An increase in assets.
• A positive cash flow in either the past, present, or future.

4 /Which of the following describes the proper form of a balance sheet?

Multiple Choice

• Cash is always the first asset listed, followed by permanent assets (such as land and buildings), and finally by assets such as receivables and supplies.
• Liabilities are listed before owners' equity.
• Owners equity is always the first section listed because it is the most important to external users.
• A subtotal for total assets plus total liabilities is shown.

5/ The balance sheet shows assets, liabilities, and equity, as an extension of the accounting equation.

True or False

6/ Costs to repair equipment are considered a direct cost.

True or False