CHAP002 - Chapter 2 Review of the Accounting Process...

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Chapter 2 Review of the Accounting Process True/False Questions 1. Owners' equity can be expressed as assets minus liabilities. Answer: True Learning Objective: 1 Level of Learning: 1 2. Debits increase asset accounts and decrease liability accounts. Answer: True Learning Objective: 2 Level of Learning: 1 3. Balance sheet accounts are referred to as temporary accounts because their balances are always changing. Answer: False Learning Objective: 2 Level of Learning: 1 4. The adjusted trial balance contains only permanent accounts. Answer: False Learning Objective: 5 Level of Learning: 1 5. The post-closing trial balance contains only permanent accounts. Answer: True Learning Objective: 7 Level of Learning: 1 6. Adjusting journal entries are required to comply with the realization and matching principles. Answer: True Learning Objective: 4 Level of Learning: 2 7. Accruals occur when the cash flow precedes either revenue or expense recognition. Answer: False Learning Objective: 4 Level of Learning: 1 8. The income statement summarizes the operating activity of a firm at a particular point in time. Answer: False Learning Objective: 6 Level of Learning: 1 9. The balance sheet can be considered a change or flow statement. Answer: False Learning Objective: 6 Level of Learning: 1 10. The statement of cash flows summarizes transactions that caused cash and cash equivalents to change during a reporting period. Answer: True Learning Objective: 6 Level of Learning: 1 11. The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts. Answer: False Learning Objective: 6 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 33
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Chapter 2 Review of the Accounting Process 12. The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account. Answer: True Learning Objective: 7 Level of Learning: 1 Matching Pair Questions 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase. Terms: A. Accruals B. Adjusted trial balance C. Adjusting entries D. Bad debt expense E. Balance sheet F. Prepayments G. Expenses H. Post-closing trial balance I. Statement of cash flows J. Unadjusted trial balance Phrases: 13. ____ Assets or liabilities created when recognition precedes cash flows. 14. ____ Assets or liabilities created when cash flows precede recognition. 15. ____ A list of accounts and balances containing the source data for preparation of financial statements. 16. ____ A list of accounts and their balances prepared before the effects of internal transactions are recorded. 17.
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CHAP002 - Chapter 2 Review of the Accounting Process...

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