QUESTION ONE (20marks) 1. Financial accounting serves which primary functions? a. Measures business activities. b. Communicates business activities to interested parties. c. Make business decisions on behalf of interested parties. d. Both a. and b. are functions of financial accounting. 2. Which financial statement conveys a company's ability to generate profits in the current period? a. Income statement b. Statement of cash flows c. Balance sheet d. Statement of cash flows 3.A debit is used to increase which of the following accounts?( ) a. Utilities expense b. Accounts payable c. Service revenue d. Common stock 4. A trial balance can best be explained as a list of a. The income statement accounts used to calculate net income. b. Revenue, expense, and dividend accounts used to show the balances of the components of retained earnings. c. The balance sheet accounts used to show the equality of the accounting equation. d. All accounts and their balances at a particular date. 5. Which of the following accounts is not listed in a post-closing trial balance? ) a. prepaid rent b. account payable c. salaries expense d. retained earnings 6. Which of the following is not a characteristic of adjusting entries? ( ) a. Reduce the balance of revenue, expense, and dividend account to zero. b.Allow for proper application of the revenue recognition principle(revenue) or the matching principle(expense). c. Are part of accrual-basis accounting. d. Are recorded at the end of the accounting period. 7.What are the two primary qualitative characteristics identified by the Financial ) Accounting Standards Board' s (FASB) conceptual framework? a. Relevance and faithful representation. b. Materiality and efficiency, C. Comparability and consistency. d. Costs and benefits. 8.Which of the following is considered cash for financial reporting purposes? ) a. account receivable b. investment with maturity dates greater than three months. c. checks received from customers d. accounts payable 9. Which financial statement shows that a company's resources equal NAME claims to those resources?( ) a. Income statement. ........ EXAM PAPER INSPECTOR b. Statement of stockholders' equity. c. Balance sheet. d. Statement of cash flows. STUDENT NUMBER 15 10. On May 5, Johnson Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7. On May 7, Johnson installs the new water heater. The customer pays for services on May 10. According to the revenue recognition principle, on which date should Johnson record service revenue?( ) a. May 5 (date of phone call), b. May 7 (date of service). c. May 10 (date of cash receipt). d. Evenly over the three dates. CAM PAPER
