2-1
Copyright © 2026 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
Chapter 02 Review of the Accounting Process Answer Key
True / False Questions
1.
Owners' equity can be expressed as assets minus liabilities.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Accounting equation
2.
Debits increase asset accounts and decrease liability accounts.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Account relationships and records
3.
Balance sheet accounts are referred to as temporary accounts because their balances are
always changing.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
,Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Account relationships and records
4.
After an unadjusted trial balance is prepared, the next step in the accounting processing
cycle is
the preparation of financial statements.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Accounting processing cycle steps
5.
Adjusting journal entries are recorded at the end of any period when financial statements
are
prepared.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-04 Identify and describe the different types of adjusting journal
entries.
Level of Difficulty: 1 Easy
Topic Area: Analyze updating-Record adjusting entry
6.
Accruals occur when the cash flow precedes either revenue or expense recognition.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-04 Identify and describe the different types of adjusting journal
entries.
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
Level of Difficulty: 1 Easy
Topic Area: Analyze updating-Identify type of adjustment
7.
The adjusted trial balance contains only permanent accounts.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-05 Record adjusting journal entries in general journal format; post
entries; and prepare an adjusted trial
balance.
Level of Difficulty: 1 Easy
Topic Area: Trial balance―Adjusted
8.
The income statement summarizes the operating activity of a firm at a particular point in
time.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Income Statement
9.
The balance sheet can be considered a change or flow statement.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Balance sheet
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
10.
The statement of cash flows summarizes transactions that caused cash to change during a
reporting period.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Cash flow
11.
The statement of shareholders' equity discloses the changes in the temporary shareholders'
equity accounts.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 2 Medium
Topic Area: Financial statement―Shareholders equity
12.
The post-closing trial balance contains only permanent accounts.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-07 Explain the closing process.
Level of Difficulty: 1 Easy
Topic Area: The closing process
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
Copyright © 2026 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
Chapter 02 Review of the Accounting Process Answer Key
True / False Questions
1.
Owners' equity can be expressed as assets minus liabilities.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Accounting equation
2.
Debits increase asset accounts and decrease liability accounts.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Account relationships and records
3.
Balance sheet accounts are referred to as temporary accounts because their balances are
always changing.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
mynursytest.store
2-2
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
,Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Account relationships and records
4.
After an unadjusted trial balance is prepared, the next step in the accounting processing
cycle is
the preparation of financial statements.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-01 Analyze routine economic events-transactions-and record their
effects on a company's financial
position using the accounting equation format.
Level of Difficulty: 1 Easy
Topic Area: Accounting processing cycle steps
5.
Adjusting journal entries are recorded at the end of any period when financial statements
are
prepared.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-04 Identify and describe the different types of adjusting journal
entries.
Level of Difficulty: 1 Easy
Topic Area: Analyze updating-Record adjusting entry
6.
Accruals occur when the cash flow precedes either revenue or expense recognition.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-04 Identify and describe the different types of adjusting journal
entries.
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
,mynursytest.store
2-3
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
Level of Difficulty: 1 Easy
Topic Area: Analyze updating-Identify type of adjustment
7.
The adjusted trial balance contains only permanent accounts.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-05 Record adjusting journal entries in general journal format; post
entries; and prepare an adjusted trial
balance.
Level of Difficulty: 1 Easy
Topic Area: Trial balance―Adjusted
8.
The income statement summarizes the operating activity of a firm at a particular point in
time.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Income Statement
9.
The balance sheet can be considered a change or flow statement.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Balance sheet
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
, mynursytest.store
2-4
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of
McGraw-Hill Education.
10.
The statement of cash flows summarizes transactions that caused cash to change during a
reporting period.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 1 Easy
Topic Area: Financial statement―Cash flow
11.
The statement of shareholders' equity discloses the changes in the temporary shareholders'
equity accounts.
FALSE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-06 Describe the four basic financial statements.
Level of Difficulty: 2 Medium
Topic Area: Financial statement―Shareholders equity
12.
The post-closing trial balance contains only permanent accounts.
TRUE
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 02-07 Explain the closing process.
Level of Difficulty: 1 Easy
Topic Area: The closing process
DOWNLOAD THE Test Bank for Intermediate Accounting 9th Edition Spiceland
mynursytest.store
2-5
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or
