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Unformatted text preview: True or False Questions T 1. Debits are used to record increases in assets, dividends and expenses. F 2. The process of recording transactions in a journal is called posting. F 3. In double entry accounting, all errors are avoided by being sure that debits and credits equal when transactions are recorded. T 4. The cost of renting an office during the current period is an expense, however the cost of renting an office six periods in advance is an asset. T 5. Liability accounts include Accounts Payable, Unearned Revenues and Notes Payable. T 6. The effect of a debit to an Unearned Revenue account and a corresponding credit to a revenue account is to transfer the earned portion of the fee from the liability account to the revenue account. T 7. If the accountant failed to make the end of period adjustment to remove from the Prepaid Expense account the amount of expenses incurred, the omission would cause an overstatement of Net Income. F 8. If accrued interest is not recorded, the result is that interest expense is understated and interest payable is overstated. T 9. Under the accrual basis of accounting, revenues are recognized when they are earned and expenses are matched with revenues. F 10. Amortizing capital assets causes the expense to be recorded when the asset is purchased. T 11. If a business follows the practice of debiting prepayments of expenses to expense accounts, the adjusting entries for prepaid expenses requires a debit to prepaid expense accounts. F 12. If a business records receipts of unearned revenues with debits to cash and credits to revenue accounts, no adjusting entries are required at the end of the period. Multiple Choice Questions 1. Joe Boxlings company had a Retained Earnings balance of $33,400 on June 30 and $46,700 on July 31. Withdrawals for the month of July were $5,200. How much was the Net Income for the business during July? a. ($8,100) b. $5,200 c. $8,100 d. $13,300 e. $18,500 2. Which of the following transactions does not affect the Shareholders/Owners Equity in a proprietorship? a. Investments by the owner. b. Withdrawals of cash by the owner. c. Cash receipts for earned revenues. d. Cash receipts for unearned revenues. e. Cash payments for incurred expenses. 3. A ledger is: a. A book of original entry in which the effects of transactions are first recorded. b. The collection of all accounts with transactions and balances used by a business. c. A book of original entry in which any type of transaction can be recorded. d. A book of special journals. e. An account with debit and credit columns and a third column for showing the balance of the account....
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This note was uploaded on 06/18/2011 for the course MGT b05 taught by Professor Liang during the Spring '11 term at University of Toronto- Toronto.
- Spring '11