Instruction: Write letter "T" if the statement is correct and "F" if the statement is wrong.

____1. Adjusting entries are prepared at the beginning of the accounting period to update the records.

____2. The cash basis of accounting is said to be employed when the income and expenses are recorded only when cash is received and paid.

____3. Under the accrual method of accounting, expenses are recorded when paid in cash.

____4. Expenses already incurred but not yet paid are called accrued expenses.

____5. If no adjustments are made on accrued expenses, the expense account is overstated.

____6. Income earned but not collected is called accrued income.

____7. We adjust accrued income in order not to understate income in financial statements.

____8. Land is subject to depreciation.

____ 9. Depreciation is the increase in the utility of the asset thru its use.

____10. In straight-line method of computing depreciation, there is an unequal distribution of charges over the life of the asset.

____11. Salvage value is the amount that can be received from the sale of the asset after its estimated life.

____12. Bad debts account refers to that portion of the accounts receivable which may prove to the uncollectible.

____13. A certain percentage of sale is one method of computing bad debts.

____14. Doubtful accounts is another name for bad debts.

____15. Prepaid expenses are expenses paid in advance the benefits of which have not yet been received.

____16. The asset method is the only method in recording prepaid expenses.

____17. The liability method is used when an income account is credited at the time the money is received.

____18. Ineffective collection may contribute to bad debts.

____19. Adjusting entries made to adjust some hidden transactions.

____20. Salaries not yet paid during the period is one source of adjustment.

____21. Worksheet is used as a bridge connecting the trial balance and the financial statements.

____22. A worksheet which does not contain column for "adjustment" is a 6-column worksheet which is being called simple worksheet.

____23. In a worksheet, the amounts of debit and credit columns of both Income Statement and balance Sheet when totaled are not "in-balance".

____24. In a worksheet, when the total of the debit column of the Income Statement exceeds the total of the credit column, it signifies a "Loss"

____25. In a worksheet, when the total of the credit column of the Income Statement exceeds the total of the debit column, it signifies "Profit".

____26. When there is Profit, it is extended to the credit column of the Balance sheet to effect the increase in Owner's Equity.

____27. Drawing account is the only temporary account that is found in the debit column of the Statement of Financial Position section of the worksheet.

____28. The last step in the worksheet preparation is to enter Profit or Loss figure as a balancing amount in the Statement of Comprehensive Income and Statement of Financial Position columns.

____29. A statement of Financial Position regardless of monthly or quarterly preparation should always be worded "as of".

____30. The report form of a balance sheet shows the Asset, Liabilities and Owner's Equity in a horizontal order.

____31. Merchandise Inventory at the end of the period is determined through physical counting of the merchandise on hand.

____32. Merchandise Inventory, end is being priced at selling price rather than its cost.

____33. Beginning Inventory plus Net Purchases equals total goods available for sale.

____34. There are two (2) classes of merchandise inventory; the beginning and ending.

____35. The ending inventory of one period eventually becomes the beginning inventory of the next period.