ANSWER THE FOLLOWING QUESTIONS ON THE TEST PAPER:

4. Give the assumption or principle that would have been violated if the following entries or information had not been given:

a. An Adjustment is made for payroll expense at the EFY even-

though it had not been paid:

b. A company was required to revalue all of its assets liabilities and owners equities at the end of the accounting year because it was going to file for bankruptcy and go out of business within a year.

c. Changing the method of recognizing depreciation is not allowed

from one accounting period to another.

d. An international corporation must record all of its foreign transactions in dollars for United States financial reporting purposes.

e. A company records a fixed asset for not only the invoice price but all of the costs that it takes to put that asset into use.

HIGHLIGHT THE CORRECT ANSWER IN YELLOW OR CIRCLE IT.

(Chose the most correct answer)

5. GAAP requires the use of the accrual accounting system when:

a. The IRS requires it if a business is dealing in inventory.

b. When a company is publicly owned.

c. When a company borrows money for a financial institution.

d. none of the abouve

6. A Deferred Revenue is:

a. A revenue that has been received and earned.

b. An revenue that will be collected in the future.

c. An revenue that has been received, but is a liability until earned.

d. A future revenue that is listed as an asset.

7. What kinds of accounts are closed at the end of a fiscal year?

a. Assets, Liabilities, Owner Equity, Revenue and Expenses.

b. Revenue and Expense accounts and temporary Balance Sheet

accounts

c. All accounts.

d. Temporay and perminate Balance Sheet accounts.

8. There are four basic financial statements required by GAAP. They are:

a. Balance Sheet, Income Statement, Cash Flow Statement and

a Trial Balance.

b. Balance Sheet, Income Statement, Cash Flow Statement and

a Work Sheet.

c. Balance Sheet, Income Statement, Cash Flow Statement and

a Statement of Change to Retained Earnings.

d. Balance Sheet, Income Statement, Cash Flow Statement and

a Post Close Trial Balance.

9. The Historical Cost Principle states that:

a. All financial information must be stated at what the company can realize in value if it sold all of the asset the company owned.

b. A revenue is recorded for the amount you paid for it.

c. Assets must be recorded at the cost they are acquired for and must be kept at that cost in the accounting system until they are disposed off.

d. All of the above.

10 The normal balance of an account for an Owners Equity account would be:

a. A debit.

b. The same as an Asset Account.

c. The amount that was invested by the companies owner.

d. A credit.

11. The Industrial Practices Principle states that:

a. A company must follow the same rules as other companies.

b. If all the companies in an industry violate the same principle then a company in that industry can violate the same principle.

c. Require a company to ahear to the priciples even if other companies within the industry are not.

d. Allows a company to change the way they are recording a transaction.

12. What is a Current Asset?

a. An asset that is about to be sold.

b. A fixed asset that has a long life.

c. Any asset that has an economic life of over a year.

d. An asset the will be consumed within a 12 month period.

13. In Finacial Accounting, cost is divided into 3 major catigories:

a. Depreciable assets, Liabilities and Owners Equity.

b. Period Costs, Long Term Cost and Short Term Cost.

c. Cost of Goods Sold, Cost of Items Purchased and Cost of Inventory.

d. Inventoriable Cost, Capital Cost and Period Cost.

14 The Cash basis of accounting can be used:

a. in an accrual accounting system.

b. by a company that sells merchandise.

c. to conform to GAAP

d. none of the above.

15. Define the Cost principle:

16. What is an Accured Revenue?

17. Define the Expense Recognition (Matching) principle:

18. What two accounting principles are most responsible for making adjusting entries

19. List the external users of Financial Statements:

20. Why is accounting important to the business world?