C213 FINAL PAPER UPDATED COMPLETE
QUESTIONS AND CORRECT ANSWERS
BUNDLED REVIEW GUIDE
●● If the total amount for Rent Expense is inadvertently posted to
Prepaid Rent at the end of the year, what will be the effect on the year-
end financial statements?
Expenses will be overstated
Revenues will be understated
Owner's equity will be understated
Assets will be overstated
Answer: Assets will be overstated
●● If the total amount for Insurance Expense is inadvertently posted to
Prepaid Insurance at the end of the year, what will be the effect on the
year-end financial statements?
Owner's equity will be overstated
Owner's equity will be understated
Revenues will be understated
Revenues will be overstated
Answer: Owner's equity will be overstated
,●● Which one of the following errors causes net income to be
understated?
Failure to record depreciation expense
Failure to record collection of accounts receivable
Failure to record wages employees have earned but not yet been paid
Failure to record revenue earned but not billed
Answer: ***Failure to record revenue earned but not billed ***
●● Recording the payment of an account payable twice will result in
the:
Understatement of total assets and total liabilities
Overstatement of total assets and understatement of total liabilities
Overstatement of total assets and total liabilities
Understatement of total assets and overstatement of total liabilities
Answer: Understatement of total assets and total liabilities
●● Control Environment to safeguard accurate accounting
Answer: The overall attitude of management and employees about the
importance of controls.
, 1. Management philosophy and operating style
2. Organizational structure
3. Audit committee
●● Control Activities (Procedures) to safeguard accurate accounting
Answer: 1. Segregation of duties (preventative control)
2. Proper procedures for authorization (preventative control)
3. Physical control over assets and records (preventative control)
4. Adequate documents and records (detective control)
5. Independent checks on performance (detective control)
●● Which of the following is an example of an independent check on
performance?
John, a clerk, is authorized to perform transactions as large as $5,000 but
must maintain authorization from Andrea to perform larger transactions.
Every year, Doug is required to take one full week of vacation time.
Greg is in charge of recording receipt of payments made to accounts
receivable, while Susan is in charge of making deposits to the bank.
Every evening, Shellie makes a back-up file of all transactions recorded
in the computer that day, burns the back-up file onto a CD and then
locks the CD into a fire-proof vault for the night.
Answer: *** Every year, Doug is required to take one full week of
vacation time.***
QUESTIONS AND CORRECT ANSWERS
BUNDLED REVIEW GUIDE
●● If the total amount for Rent Expense is inadvertently posted to
Prepaid Rent at the end of the year, what will be the effect on the year-
end financial statements?
Expenses will be overstated
Revenues will be understated
Owner's equity will be understated
Assets will be overstated
Answer: Assets will be overstated
●● If the total amount for Insurance Expense is inadvertently posted to
Prepaid Insurance at the end of the year, what will be the effect on the
year-end financial statements?
Owner's equity will be overstated
Owner's equity will be understated
Revenues will be understated
Revenues will be overstated
Answer: Owner's equity will be overstated
,●● Which one of the following errors causes net income to be
understated?
Failure to record depreciation expense
Failure to record collection of accounts receivable
Failure to record wages employees have earned but not yet been paid
Failure to record revenue earned but not billed
Answer: ***Failure to record revenue earned but not billed ***
●● Recording the payment of an account payable twice will result in
the:
Understatement of total assets and total liabilities
Overstatement of total assets and understatement of total liabilities
Overstatement of total assets and total liabilities
Understatement of total assets and overstatement of total liabilities
Answer: Understatement of total assets and total liabilities
●● Control Environment to safeguard accurate accounting
Answer: The overall attitude of management and employees about the
importance of controls.
, 1. Management philosophy and operating style
2. Organizational structure
3. Audit committee
●● Control Activities (Procedures) to safeguard accurate accounting
Answer: 1. Segregation of duties (preventative control)
2. Proper procedures for authorization (preventative control)
3. Physical control over assets and records (preventative control)
4. Adequate documents and records (detective control)
5. Independent checks on performance (detective control)
●● Which of the following is an example of an independent check on
performance?
John, a clerk, is authorized to perform transactions as large as $5,000 but
must maintain authorization from Andrea to perform larger transactions.
Every year, Doug is required to take one full week of vacation time.
Greg is in charge of recording receipt of payments made to accounts
receivable, while Susan is in charge of making deposits to the bank.
Every evening, Shellie makes a back-up file of all transactions recorded
in the computer that day, burns the back-up file onto a CD and then
locks the CD into a fire-proof vault for the night.
Answer: *** Every year, Doug is required to take one full week of
vacation time.***
