Question 1

1. The process of posting occurs:

   	A.	after transaction analysis but before journalizing.
   	B.	after journalizing but before preparing the trial balance.
   	C.	after preparing the trial balance but before financial statements are prepared.
   	D.	at none of the times listed in the other answers.

2 points

Question 2

1. A payment to the stockholders of a business as a return on the investment they provided is called a (an):

   	A.	account receivable.
   	B.	dividend.
   	C.	revenue.
   	D.	example.

2 points

Question 3

1. The statement of retained earnings shows the net income from the income statement and calculates the ending Retained Earnings balance to be shown on the balance sheet.

   True

   False

2 points

Question 4

1. Providing services on account results in an increase in service revenue and a decrease in accounts receivable.

   True

   False

2 points

Question 5

1. The chart of accounts is a complete listing of the account numbers and account titles of all the accounts in the ledger.

   True

   False

2 points

Question 6

1. The "business entity" concept indicates that a business organization is separate from its owner(s).

   True

   False

2 points

Question 7

1. A partnership is an unincorporated business owned by two or more persons associated as partners.

   True

   False

2 points

Question 8

1. Debits:

   	A.	increase assets and stockholders' equity accounts and decrease liabilities, expenses, and revenues.
   	B.	increase assets and dividends and decrease expenses, liabilities, revenues, capital stock, and retained earnings.
   	C.	decrease assets and expenses and increase liabilities, revenues, and stockholders' equity accounts.
   	D.	increase assets, expenses, and dividends and decrease liabilities, revenues, capital stock, and retained earnings.

2 points

Question 9

1. Vertical analysis shows the percentage that each item in a financial statement is of some significant total, such as total assets or sales.

   True

   False

2 points

Question 10

1. The sacrifice made, or the cost incurred, to produce revenue is called a(n):

   	A.	distribution.
   	B.	liability.
   	C.	asset.
   	D.	expense.

2 points

Question 11

1. A written agreement is desirable when establishing a partnership.

   True

   False

2 points

Question 12

1. The assumption that every corporation has an existence separate from its stockholders and other persons and businesses is called the continuity assumption.

   True

   False

2 points

Question 13

1. Merchandising companies purchase goods that are ready for sale and sell them to customers.

   True

   False

2 points

Question 14

1. The trial balance is prepared after the financial statements have been prepared.

   True

   False

2 points

Question 15

1. A single proprietorship is an incorporated business owned by an individual and often managed by that individual.

   True

   False

2 points

Question 16

1. In a single proprietorship, the owner is not held solely responsible for all the debts of the business.

   True

   False

2 points

Question 17

1. When stockholders invest cash in a business the:

   	A.	stockholders' equity is increased.
   	B.	company's liabilities are decreased.
   	C.	Cash account increases and the Capital Stock account decreases.
   	D.	company's liabilities are increased.

2 points

Question 18

1. An out-of-balance trial balance always signals the presence of an error.

   True

   False

2 points

Question 19

1. Paying back a loan at the bank would decrease cash and increase retained earnings.

   True

   False

2 points

Question 20

1. The underlying assumption that assets are to be recorded at their acquisition cost is called the:

   	A.	money measurement concept.
   	B.	business entity concept.
   	C.	going-concern concept.
   	D.	cost (or exchange-price) concept.

2 points

Question 21

1. Collecting cash on accounts receivable results in increasing cash and increasing service revenue.

   True

   False

2 points

Question 22

1. The periodicity concept states that an entity's life can be subdivided into time periods for purposes of reporting its economic activities.

   True

   False

2 points

Question 23

1. The Dividends account has the same increase/decrease rules as an expense account.

   True

   False

2 points

Question 24

1. Stockholders' equity can be calculated by subtracting the company's debts from the company's assets.

   True

   False

2 points

Question 25

1. The effect of a dividend is to reduce cash and retained earnings.

   True

   False

2 points

Question 26

1. An in-balance trial balance shows only that equal amounts of debits and credits have been entered and that account balances are mathematically correct.

   True

   False

2 points

Question 27

1. If stockholders receive cash dividends from the company, retained earnings and cash will decrease.

   True

   False

2 points

Question 28

1. If equipment is purchased for cash, both equipment and cash will increase.

   True

   False

2 points

Question 29

1. Payment of a note payable decreases liabilities.

   True

   False

2 points

Question 30

1. A financial statement may report on a business for a stated period of time or as of a specific point in time. The financial statement(s) that pertain(s) to a stated period of time is (are) the:

   	A.	balance sheet and income statement.
   	B.	balance sheet and trial balance.
   	C.	income statement.
   	D.	balance sheet.