1)Accounting is the process of recording and classifying business financial transactions.

True

False

2)One of the purposes of adjusting entries is to convert assets to expenses.

True

False

3)Ledger accounts are updated first, and then transactions are recorded in the journal.

True

False

4)The period of time over which the cost of an asset is allocated to depreciation expense is called its useful life.

True

False

5)Accounting is the process of recording and classifying business financial transactions.

True

False

6)Limited liability means that owners of a business are only liable for the debts of the business up to the amounts they can afford.

True

False

7)All liability accounts normally have a credit balance.

True

False

8)When a company uses the double-entry method, the total dollar amount of debits recorded must equal the total dollar amount of credits recorded, but the number of debit and credit entries may differ.

True

False

9)In which of the following situations would the largest amount be recorded as an expense of the current year? (Assume accrual basis accounting.)

		$4,000 is paid in January for equipment with a useful life of four years.
		$1,800 is paid in January for a two-year fire insurance policy.
		$1,200 cash dividends are declared and paid.
		$900 is paid to an attorney for legal services rendered during the current year.

10)Since most companies update their Retained Earnings balances only once per year, the Retained Earnings balance will always have a $0 balance in the trial balance.

True

False

11)During a reporting period, a companys assets increase by Rs. 80,000,000. Liabilities decrease by Rs. 20,000,000. Equity must therefore?

		(a) Decrease by Rs. 100,000,000
		(b) Increase by Rs. 100,000,000
		(c) Decrease by Rs. 60,00,000
		(d) Increase by Rs. 60,000,000

12)All economics costs that a business incur through its operation to earn revenues?

		(a) Assets
		(b) Drawing
		(c) Expense
		(d) Revenue