Test-Bank-for-Cornerstones-of-Financial-and-Managerial-Accounting-2nd-Edition-Rich,-Jones,-Heitger,-
Mowen,-Hansen
Chapter 2--The Accounting Information System
Student:
1. The time-period assumption assumes that a company prepares its financial statements every month.
True False
2. Because it tends to provide the most reliable measure of activity, all assets are reported on the balance sheet
at their fair market values.
True False
3. The term used to refer to an asset's original cost is book value.
True False
4. The going concern assumption infers that a company will continue to operate into the near future.
True False
5. A company in the process of liquidation is considered to be under the going concern assumption.
True False
6. The International Accounting Standards Board (IASB) was created in order to develop worldwide accounting
standards that are required for all financial statements, regardless of the country where the financial statements
were prepared.
True False
7. The initial step in the recording process is sometimes referred to as journalizing.
True False
,8. The issuance of common stock increases a company's assets and stockholders’ equity.
True False
9. The payment of a dividend increases both cash and stockholders' equity of the distributing entity.
True False
10. According to the historical cost principle, assets are always carried at their current market value.
True False
11. An accounting transaction may impact only one financial statement or multiple statements.
True False
12. The accounting equation must balance before and after every accounting transaction.
True False
13. A chart of accounts is prepared to determine whether the books have gotten out of balance.
True False
14. GAAP has established a universal chart of accounts that is applicable to all businesses in the United States.
True False
15. A T-account for Cash cannot contain any credits.
True False
16. A debit entry increases assets and revenue accounts.
True False
17. The dividends account has a normal debit balance.
True False
18. Under the double-entry system of accounting, every transaction is entered in at least two accounts on
,opposite sides of a T-account.
True False
19. Under the double-entry system of accounting, a debit is always a negative entry.
True False
20. Income statement accounts have normal credit balances.
True False
21. Only events that can be measured with sufficient reliability will be recognized in the accounting system.
True False
22. The general ledger is an example of a book of original entry.
True False
23. The general ledger is often used for the initial recording of repetitive transactions.
True False
24. A trial balance is the listing of each active account and its corresponding debit or credit balance at a
particular point in time.
True False
25. Even though a trial balance reveals that the debits equal the credits, there still may be errors in the
company’s books.
True False
26. The purchase of office supplies from a supplier is an example of an external event.
True False
27. The conservatism principle is concerned with the possibility of understating assets or income.
True False
, 28. A full disclosure policy stipulates that all information that would make a difference to financial statement
users should be revealed.
True False
29. If a company performed services for credit, then the debit side of the journal entry would be to Accounts
Payable and the credit would be to Service Revenue.
True False
30. If a company made a payment on account, then assets and liabilities would both decrease.
True False
31. The various rules and conventions that have evolved over time to guide the preparation of financial
statements in the U.S. are called .
32. The concept that assumes that assets are recorded at the amount to acquire them is called the
principle.
33. The concept that assumes that an entity is not in the process of bankruptcy is called the
concept.
34. The is the U.S. federal government agency with the ultimate authority to
determine the accounting rules for companies whose stock is sold to the public.
Mowen,-Hansen
Chapter 2--The Accounting Information System
Student:
1. The time-period assumption assumes that a company prepares its financial statements every month.
True False
2. Because it tends to provide the most reliable measure of activity, all assets are reported on the balance sheet
at their fair market values.
True False
3. The term used to refer to an asset's original cost is book value.
True False
4. The going concern assumption infers that a company will continue to operate into the near future.
True False
5. A company in the process of liquidation is considered to be under the going concern assumption.
True False
6. The International Accounting Standards Board (IASB) was created in order to develop worldwide accounting
standards that are required for all financial statements, regardless of the country where the financial statements
were prepared.
True False
7. The initial step in the recording process is sometimes referred to as journalizing.
True False
,8. The issuance of common stock increases a company's assets and stockholders’ equity.
True False
9. The payment of a dividend increases both cash and stockholders' equity of the distributing entity.
True False
10. According to the historical cost principle, assets are always carried at their current market value.
True False
11. An accounting transaction may impact only one financial statement or multiple statements.
True False
12. The accounting equation must balance before and after every accounting transaction.
True False
13. A chart of accounts is prepared to determine whether the books have gotten out of balance.
True False
14. GAAP has established a universal chart of accounts that is applicable to all businesses in the United States.
True False
15. A T-account for Cash cannot contain any credits.
True False
16. A debit entry increases assets and revenue accounts.
True False
17. The dividends account has a normal debit balance.
True False
18. Under the double-entry system of accounting, every transaction is entered in at least two accounts on
,opposite sides of a T-account.
True False
19. Under the double-entry system of accounting, a debit is always a negative entry.
True False
20. Income statement accounts have normal credit balances.
True False
21. Only events that can be measured with sufficient reliability will be recognized in the accounting system.
True False
22. The general ledger is an example of a book of original entry.
True False
23. The general ledger is often used for the initial recording of repetitive transactions.
True False
24. A trial balance is the listing of each active account and its corresponding debit or credit balance at a
particular point in time.
True False
25. Even though a trial balance reveals that the debits equal the credits, there still may be errors in the
company’s books.
True False
26. The purchase of office supplies from a supplier is an example of an external event.
True False
27. The conservatism principle is concerned with the possibility of understating assets or income.
True False
, 28. A full disclosure policy stipulates that all information that would make a difference to financial statement
users should be revealed.
True False
29. If a company performed services for credit, then the debit side of the journal entry would be to Accounts
Payable and the credit would be to Service Revenue.
True False
30. If a company made a payment on account, then assets and liabilities would both decrease.
True False
31. The various rules and conventions that have evolved over time to guide the preparation of financial
statements in the U.S. are called .
32. The concept that assumes that assets are recorded at the amount to acquire them is called the
principle.
33. The concept that assumes that an entity is not in the process of bankruptcy is called the
concept.
34. The is the U.S. federal government agency with the ultimate authority to
determine the accounting rules for companies whose stock is sold to the public.
