Task: Choose the correct answer
Problem 1: Under the accrual basis of accounting
A) cash must be received before revenue is recognized
B) net income is calculated by matching cash outflows against cash inflows
C) events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.
Problem 2: Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates
A) documentation procedures are violated
B) independent internal verification is violated
C) segregation of duties if violated
D) establishment of responsibility is violated
Problem 3: When two or more people get together for the purpose of circumventing prescribed controls, it is called
A) a fraud committee
B) Collusion
C) a division of duties
D) bonding of employees
Problem 4: Small repairs made to keep a truck running over its useful life have been debited to the vehicles account. As a result of this, which of the following occurred?
A) The balance in the vehicles account was correctly stated
B) The expenses for the period were overstated
C) The net income for the period was understated
D) The balance in the vehicles account was overstated
Problem 5: Which of the following would NOT be considered an advantage of the corporate form of organization?
A) Limited liability of stockholders
B) Separate legal existence
C) Continuous life
D) Ease of formation
Problem 6: An income statement would NOT include
A) Other revenue and gains
B) Extraordinary items
C) Discontinued operation
D) Dividends paid
Problem 7: Which of the following items is an intangible asset?
A) Accounts receivable
B) Inventory
C) Accumulated depreciation
D) Goodwill
Problem 8: A credit is NOT the normal balance for which account listed below?
A) Notes payable
B) Common stock
C) Service revenue
D) Supplies expense
Problem 9: Unearned revenue is a(n):
A) Asset account
B) Liability account
C) Income account
D) Expense account