QUESTION 1

Liabilities

		are future economic benifits.
		are existing debts and obligations.
		possess service potential.
		are things of value used by the business in its operation.

0.5 points

QUESTION 2

Owner's equity can be described as

		creditorship claim on total assets.
		ownership claim on total assets.
		benefactor's claim on total assets.
		debtor claim on total assets.

0.5 points

QUESTION 3

Revenues are

		the cost of assets consumed during the period.
		gross increases in owner's equity resulting from business activities.
		the cost of services used during the period.
		actual or expected cash outflows.

0.5 points

QUESTION 4

Credits

		decrease both assets and liabilities.
		decrease assets and increase liabilities.
		increase both assets and liabilities.
		increase assets and decrease liabilities.

0.5 points

QUESTION 5

A debit to an asset account indicates

		an error.
		a credit was made to a liability account.
		a decrease in the asset.
		an increase in the asset.

0.5 points

QUESTION 6

A balance sheet shows

		revenues, liabilities, and owner's equity.
		expenses, drawings, and owner's equity.
		revenues, expenses, and drawings.
		assets, liabilities, and owner's equity.

0.5 points

QUESTION 7

An income statement

		summarizes the changes in owner's equity for a specific period of time.
		reports the changes in assets, liabilities, and owner's equity over a period of time.
		reports the assets, liabilities, and owner's equity at a specific date.
		presents the revenues and expenses for a specific period of time.

0.5 points

QUESTION 8

The revenue recognition principle dictates that revenue should be recognized in the accounting records

		when cash is received.
		when it is earned.
		at the end of the month.
		in the period that income taxes are paid.

0.5 points

QUESTION 9

The matching principle matches

		customers with businesses.
		expenses with revenues.
		assets with liabilities.
		creditors with businesses.

0.5 points

QUESTION 10

If the adjusting entry for depreciation is not made,

		assets will be understated.
		owner's equity will be understated.
		net income will be understated.
		expenses will be understated.

0.5 points

QUESTION 11

Closing entries that reset accounts to a zero balance are necessary for

		permanent accounts only.
		temporary accounts only.
		both permanent and temporary accounts.
		permanent or real accounts only.

0.5 points

QUESTION 12

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

		Merchandise Inventory account.
		Purchases account.
		Supplies account.
		Cost of Goods Sold account.

0.5 points

QUESTION 13

Which of the following accounts has a normal credit balance?

		Sales Returns and Allowances
		Sales Discounts
		Sales
		Selling Expense

0.5 points

QUESTION 14

Merchandise inventory is

		reported under the classification of Property, Plant, and Equipment on the balance sheet.
		often reported as a miscellaneous expense on the income statement.
		reported as a current asset on the balance sheet.
		generally valued on the books at the price for which the goods can be sold.

0.5 points

QUESTION 15

Overstating ending inventory will overstate all of the following except

		assets.
		cost of goods sold.
		net income.
		owner's equity.

0.5 points

QUESTION 16

Cash from sales of merchandise will be recorded in the

		purchases journal.
		sales journal.
		cash receipts journal.
		general journal.

0.5 points

QUESTION 17

Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited

		when a credit sale is past due.
		at the end of each accounting period.
		whenever a pre-determined amount of credit sales have been made.
		when an account is determined to be uncollectible.

0.5 points

QUESTION 18

The allowance method of accounting for uncollectible accounts is required if

		the company makes any credit sales.
		bad debts are significant in amount.
		the company is a retailer.
		the company charges interest on accounts receivable.

0.5 points

QUESTION 19

The balance in the Accumulated Depreciation account represents the

		cash fund to be used to replace plant assets.
		amount to be deducted from the cost of the plant asset to arrive at its fair market value.
		amount charged to expense in the current period.
		amount charged to expense since the acquisition of the plant asset.

0.5 points

QUESTION 20

The book value of an asset is equal to the

		asset's market value less its historical cost.
		blue book value relied on by secondary markets.
		replacement cost of the asset.
		asset's cost less accumulated depreciation.

0.5 points