True/False
Indicate whether the statement is true or false.
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1.
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Abbreviations should never be used on formal financial statements, unless the
abbreviation is in fact a proper name.
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2.
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Assets are listed in alphabetical order, and liabilities are listed in the order
that they are paid.
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3.
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An owner of a sole proprietorship is responsible for all the debts of the
business, even if it means selling his/her house to pay for them. The owners of a corporation risk
only the amount of their investment should the business go under from too much debt.
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4.
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Accountants spend the majority of their time doing record keeping, and entering
transactions into the books of the company.
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5.
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If a company’s Assets have increased by 45,000 and the Owner’s
Equity has increased by 16,000 then it’s liabilities must have increased by 29,000.
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6.
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Looking at Johnson Smith Brothers’ Balance Sheet you see that the
Owner’s Equity is $75,000. This naturally means that the owner can withdraw as much as $75,000
in cash out of the business.
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Multiple Choice
Identify the choice that best completes the statement or answers the
question.
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7.
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This form of business sends its profits to its owner in form of
dividends.
a. | Sole Proprietorship | b. | Partnership | c. | Franchise | d. | Corporation |
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8.
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If five people go into business together, but only one has a role in managing
the business so that the others can enjoy limited liability, then this is a:
a. | General Partnership | b. | Corporation | c. | Sole
Proprietorship | d. | Limited Partnership |
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9.
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This form of business ownership claims as its greatest advantage the limited or
restricted liability of all of its owners to lose only that which they invest in the company,
and not their personal assets as well.
a. | General Partnership | b. | Corporation | c. | Sole
Proprietorship | d. | Limited Partnership |
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10.
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The easiest and most inexpensive business form to start up is:
a. | General Partnership | b. | Corporation | c. | Sole
Proprietorship | d. | Limited Partnership |
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11.
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Which of the following is not correct?
a. | A - L = E | b. | A = L + E | c. | A + L =
E | d. | L = A - E |
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12.
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What does a single line mean on a financial statement?
a. | It is really important | b. | It is a final total | c. | The number that
follows is a mathematical calculation | d. | None of these is
correct. |
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13.
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Which is an incorrect way to express the date on an Income Statement?
a. | For the Year Ending December 31, 2014 | b. | The Year Ended December 31,
2014 | c. | For the Period Ending December 31, 2014 | d. | Month End, December
31, 2014 |
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14.
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The organization responsible for regulating the standards of the accounting
industry in Canada is known as:
a. | BCOMM | b. | BBA | c. | MBA | d. | CICA | e. | CGA | f. | CA | g. | CMA |
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15.
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This represents the owner's increase in wealth during the period resulting
from financial performance.
a. | Owner’s Drawings | b. | Net Income | c. | Revenue | d. | Total change in equity for the
period | e. | None of these is correct |
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16.
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The Generall Accepted Accounting Principle (GAAP) that states that balance sheet
of a business must reflect the financial position of the business alone, and not its owner(s), is
known as:
a. | Business Entity | b. | Going Concern | c. | Conservatism | d. | Form of Business
Ownership |
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17.
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When a company goes out of business, the value of its assets often are sold for
much less than the book value, because they are sold under unfavourable circumstances. This is why we
don’t change the value of the assets, because we assume that a business will continue to
operate unless we know otherwise. The GAAP that covers this is known as:
a. | The Full Disclosure Principle | b. | Consistency | c. | The Going Concern
Assumption | d. | The Matching Principle |
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18.
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The Sales department mentions to the accountant that there’s a large
chance that a large client may go bankrupt. The accountant decides to write off (turn into expense)
all accounts receivable from this company since they likely won’t be collected. This is done
because of this GAAP:
a. | Business Entity | b. | Conservatism | c. | Consistency | d. | Revenue
Recognition |
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19.
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The purchasing department informs Accounting that they just received
confirmation from the supplier that the new shipment of widgets that came in cost $1200. The
accountant thanks purchasing for the info and records nothing as of yet because of this GAAP:
a. | Conservatism | b. | Matching | c. | Historical
Cost | d. | Objectivity |
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20.
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Jones gives Smith money today for the pool he’ll install next month at the
Jones’ home. Smith’s accountant records no revenue until next month because of this
GAAP.
a. | Time period concept | b. | Revenue Recognition | c. | Matching
Principle | d. | Objectivity |
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21.
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The cost of concrete purchased this month for pool production, is not recorded
as an expense until next month when the pool is built because of this GAAP:
a. | Objectivity | b. | Historical Cost | c. | Revenue
Recognition | d. | Matching |
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22.
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An asset of a business must be recorded in the books at the value stated on the
invoice or receipt of the purchaser of the asset because of this GAAP.
a. | Objectivity | b. | Historical Cost | c. | Conservatism | d. | Matching
Principle |
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23.
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Reporting for accounting purposes usually occurs every year, which is known as a
fiscal year. Reports are usually prepared after standard periods of time (i.e. monthly, quarterly,
and even bi-annually as well). This is because of this GAAP:
a. | Matching Principle | b. | Consistency Principle | c. | Time Period
Concept | d. | Full Disclosure Principle |
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24.
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Accountants must apply the same methods and procedures from period to period.
Any changes must be clearly explained on the financial statements because of this GAAP:
a. | Materiality Concept | b. | Full Disclosure | c. | Principle of
Conservatism | d. | Time Period Concept |
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25.
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All information that affects the interpretation of a company’s financial
statements must be included with those statements. Items that do not affect the ledger accounts
directly should appear in footnotes to the financial statements because of this GAAP:
a. | Matching | b. | Consistency | c. | Materiality | d. | Full Disclosure |
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26.
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The cost of pop purchased today for a confectionary stand is not recorded as an
expense until next week when it is actually sold because of this GAAP:
a. | Matching | b. | Revenue Recognition | c. | Materiality | d. | Conservatism |
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27.
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A change in a ten year old accounting practice is suddenly changed this year and
thus, is reported in the notes to the financial statements due to this GAAP.
a. | Full Disclosure | b. | Materiality | c. | Business
Entity | d. | Revenue Recognition |
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28.
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Accounting for a business should be fair and reasonable, and evaluations,
opinions and estimates should be done in such a way that they neither overstate nor understate the
affairs of the business. This is the definition of this GAAP:
a. | Revenue Recognition | b. | Matching Principle | c. | Full
Disclosure | d. | Time Period Concept | e. | Consistency Principle | f. | Principle of
Conservatism |
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29.
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Accountants must use GAAPs except when doing so would be prohibitively
expensive, or difficult and would make little difference in the final result. This is the description
of the following GAAP:
a. | Going Concern | b. | Materiality | c. | Matching | d. | Revenue Recognition | e. | Full
Disclosure | f. | Time Period | g. | Conservatism | h. | Business
Entity |
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30.
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A garbage bin is bought for the office for a mere $20. Technically this is a
long-term asset, but the accountant writes off this $20 as an expense because of this GAAP.
a. | Consistency | b. | Going Concern | c. | Materiality | d. | Full disclosure |
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31.
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Which of the following adjectives describing financial information does not
relate to the purpose of accounting?
a. | Useful | b. | Reliable | c. | Timely | d. | Decision-making | e. | Accurate |
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32.
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How does the revenue recognition GAAP relate to the purpose of
accounting?
a. | It helps you measure financial performance in a more useful and relevant
way. | b. | It ensures that your cash earned from sales is accurate and therefore a useful value
for decision-making. | c. | It prevents you from recording too much revenue
or too little. | d. | It makes sure you can measure the change in equity for the
period. |
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33.
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How does the objectivity GAAP relate to the purpose of accounting?
a. | It makes sure accounting information is up to date | b. | It ensures that
accounting information is reliable | c. | It prevents accountants from committing
fraud | d. | It allows users to make objective decisions. |
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34.
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How does the business entity GAAP relate to the purpose of accounting?
a. | It makes information more trustworthy | b. | It requires you to keep your personal
transactions separate from those of your business. | c. | It prevents the owner from using the assets of
the business | d. | It ensures you are analysing what you think you are
analysing |
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Matching
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Match the following accounting terms to their definition.
a. | Assets | d. | Liabilities | b. | Equity | e. | Revenue | c. | Expenses | f. | Net Income |
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35.
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The total value of all money coming in from the sale of goods and
services
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36.
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The difference between Total Revenues and Total Expenses
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37.
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The owner’s claim on the Assets of the business
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38.
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Any item of monetary value owned by a business
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39.
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Money owed by the business to others
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40.
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The money spent on goods and services to generate Revenue that is consumed in
the process
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Match the regularly used accounting terminology in the list below, with other
common layman’s terms used in everyday english.
a. | Assets | d. | Liabilities | b. | Equity | e. | Revenue | c. | Expenses | f. | Net Income |
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41.
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Profit
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42.
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Capital
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43.
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Net Worth
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44.
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Debt
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45.
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Cost
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46.
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Earnings
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47.
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Gross Income
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48.
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Net Earnings
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49.
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Sales
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The following are accounts for the XYZ Corporation. Select the appropriate
letter below, to match the account to the corresponding question. a. | Accounts Payable | f. | Truck | b. | Cash | g. | Supplies | c. | Equipment | h. | Building | d. | Accounts Receivable | i. | Capital | e. | Land | j. | Furniture |
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50.
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The first asset listed at the top of the Balance Sheet
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51.
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The second asset listed
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52.
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The third
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53.
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The fourth
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54.
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The fifth
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55.
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The sixth
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56.
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The seventh
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57.
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The eighth
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The following are several liabilities for a business. Below select which one
would appear in the given order. a. | Accounts Payable - R. Smith | d. | Accounts Payable - J.
Bajwa | b. | Bank Loan - Truck (due in 2 months) | e. | Bank Loan - Equipment | c. | Mortgage |
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58.
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This would be listed first.
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59.
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This would be listed second.
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60.
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This would be listed third.
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61.
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This would be listed fourth.
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62.
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This would be listed fifth.
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The following are the three components of the title of a financial statement.
Match them with the proper order in which they belong below. a. | Name of company | c. | Name of financial
statement | b. | Date |
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63.
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This goes on the top line.
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64.
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This goes on the second line.
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65.
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This goes on the third line.
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List the order of the steps in the accounting cycle
a. | Post | e. | Adjustments | b. | Complete the Worksheet | f. | Produce Financial
Statements | c. | Journalize | g. | Close | d. | Balance |
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66.
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First
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67.
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Second
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68.
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Third
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69.
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Fourth
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70.
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Fifth
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71.
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Sixth
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72.
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Seventh
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