Practice questions 1.Internal auditors perform the audit at the request of the board of directors to protect investor interests. *

True

False

2.A sole proprietorship is a business owned by one or more persons. *

True

False

3.The timeliness principle assumes that an organization's activities can be divided into specific periods. *

True

False

4.Withdrawals are a type of transaction that affects equity. *

True

False

5.Ownership of a corporation is divided into units called shares. *

True

False

6.The natural business year can only be used when the seasonal variation in sales does not match the calendar year. *

True

False

7.The underlying concepts that make up acceptable accounting practices are referred to as generally accepted accounting principles (GAAP). *

True

False

8.To prepare the balance sheet, all necessary numbers can be found in the balance sheet columns of the work sheet, including ending capital. *

True

False

9.After posting the entries to close all revenue and expense accounts, Hatfield Company's Income Summary account has a credit balance of $6,000, and the Hatfield, Withdrawals account has a debit balance of $2,500. These balances indicate that profit for the accounting period amounted to $3,500. *

True

False

10.The cash basis of accounting commonly results in financial statements that are not comparable from period to period. *

True

False

11.The main objective of accounting is to help people to invest in new products and businesses. *

True

False

12.Adjusting entries are normally entered in the General Journal before they are recorded on the work sheet. *

True

False

13.At the request of the Board of Directors, internal auditors perform the audit function to protect shareholder interests. *

True false

14.A T-Account is a formal account frequently used in business. *

True

False

15.Accounting is an information system that identifies, measures, records and communicates relevant information that objectively and correctly represents an organization's economic activities. *

True

False

16.External business transactions are transactions between the business entity and some other (outside) party. *

True

False

17.A work sheet is a substitute for the financial statements. *

True

False

18.On the work sheet, a loss is indicated if the total of the Income Statement Debit column exceeds the total of the Income Statement Credit column. *

True

False

19.A company's fiscal year must correspond with the calendar year. *

True

False

20.The Income Summary account is used to close all other temporary accounts at the end of an accounting period. *

True

False

21.A ledger is a type of account. *

True

False

22.Gallery Corp. paid $6,000 for a six-month insurance policy for the company van. The policy coverage began on January 1. On January 31, $1,000 of insurance expense must be reported. *

True

False

23.Debits increase asset and expense accounts. *

True

False

24.Accounts that appear in the balance sheet are often called permanent or temporary accounts. *

True

False

25.To make it easier for the bookkeeper, the cost of land is separated from the cost of buildings located on the land. *

True

False

26.Cash withdrawn by the owner of an unincorporated business in the form of a monthly salary should be treated as an expense of the business. *

True false