ch02 - Chapter 02 - Review of the Accounting Process...

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Unformatted text preview: Chapter 02 - Review of the Accounting Process Chapter 02 Review of the Accounting Process True / False Questions 1. Owners' equity can be expressed as assets minus liabilities. True False 2. Debits increase asset accounts and decrease liability accounts. True False 3. Balance sheet accounts are referred to as temporary accounts because their balances are always changing. True False 4. After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements. True False 5. Adjusting journal entries are required to comply with the realization and matching principles. True False 6. Accruals occur when the cash flow precedes either revenue or expense recognition. True False 7. The adjusted trial balance contains only permanent accounts. True False 2-1 Chapter 02 - Review of the Accounting Process 8. The income statement summarizes the operating activity of a firm at a particular point in time. True False 9. The balance sheet can be considered a change or flow statement. True False 10. The statement of cash flows summarizes transactions that caused cash and cash equivalents to change during a reporting period. True False 11. The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts. True False 12. The post-closing trial balance contains only permanent accounts. True False 13. The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account. True False 14. A reversing entry at the beginning of a period for salaries would include a debit to salaries expense. True False 15. The sale of merchandise on account would be recorded in a sales journal. True False 2-2 Chapter 02 - Review of the Accounting Process 16. The payment of cash to a supplier would be recorded in a purchases journal. True False Matching Questions 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. 1. Prepayments Assets or liabilities created when recognition precedes cash flows. ____ 2. Post-closing trial balance Assets or liabilities created when cash flows precede recognition. ____ 3. Accruals A list of accounts and balances containing the source data for preparation of financial statements. ____ 4. Unadjusted trial balance A list of accounts and their balances prepared before the effects of internal transactions are recorded. ____ 5. Adjusted trial balance A list of only permanent accounts and their balances prepared to show that the accounting equation is in balance. ____ 18. 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. term in the space provided by the phrase....
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ch02 - Chapter 02 - Review of the Accounting Process...

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