,Intermediate Accounting, 10e (Spiceland)
Chapter 2 Review of the Accounting Process
1) Owners' equity can be expressed as assets minus liabilities.
Answer: TRUE
Difficulty: 1 Easy
Topic: Accounting equation
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
2) Debits increase asset accounts and decrease liability accounts.
Answer: TRUE
Difficulty: 1 Easy
Topic: Account relationships and records
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
3) Balance sheet accounts are referred to as temporary accounts because their balances are
always changing.
Answer: FALSE
Difficulty: 1 Easy
Topic: Account relationships and records
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
1
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
,4) After an unadjusted trial balance is prepared, the next step in the accounting processing cycle
is the preparation of financial statements.
Answer: FALSE
Difficulty: 1 Easy
Topic: Accounting processing cycle steps
Learning Objective: 02-02 Describe the steps in the accounting processing cycle.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
5) Adjusting journal entries are recorded at the end of any period when financial statements are
prepared.
Answer: TRUE
Difficulty: 1 Easy
Topic: Accounting processing cycle steps
Learning Objective: 02-02 Describe the steps in the accounting processing cycle.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
6) Accruals occur when the cash flow precedes either revenue or expense recognition.
Answer: FALSE
Difficulty: 1 Easy
Topic: Analyze updating-Identify type of adjustment
Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
7) The adjusted trial balance contains only permanent accounts.
Answer: FALSE
Difficulty: 1 Easy
Topic: Trial balance―Adjusted
Learning Objective: 02-06 Record adjusting journal entries in general journal format, post
entries, and prepare an adjusted trial balance.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
2
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
, 8) The income statement summarizes the operating activity of a company at a particular point in
time.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial statement―Income Statement
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
9) The balance sheet can be considered a change or flow statement.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial statement―Balance sheet
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
10) The statement of cash flows summarizes transactions that caused cash to change during a
reporting period.
Answer: TRUE
Difficulty: 1 Easy
Topic: Financial statement―Cash flow
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
11) The statement of shareholders' equity discloses the changes in the temporary shareholders'
equity accounts.
Answer: FALSE
Difficulty: 2 Medium
Topic: Financial statement―Shareholders equity
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
3
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Chapter 2 Review of the Accounting Process
1) Owners' equity can be expressed as assets minus liabilities.
Answer: TRUE
Difficulty: 1 Easy
Topic: Accounting equation
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
2) Debits increase asset accounts and decrease liability accounts.
Answer: TRUE
Difficulty: 1 Easy
Topic: Account relationships and records
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
3) Balance sheet accounts are referred to as temporary accounts because their balances are
always changing.
Answer: FALSE
Difficulty: 1 Easy
Topic: Account relationships and records
Learning Objective: 02-01 Understand routine economic events-transactions-and determine their
effects on a company's financial position and on specific accounts.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
1
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
,4) After an unadjusted trial balance is prepared, the next step in the accounting processing cycle
is the preparation of financial statements.
Answer: FALSE
Difficulty: 1 Easy
Topic: Accounting processing cycle steps
Learning Objective: 02-02 Describe the steps in the accounting processing cycle.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
5) Adjusting journal entries are recorded at the end of any period when financial statements are
prepared.
Answer: TRUE
Difficulty: 1 Easy
Topic: Accounting processing cycle steps
Learning Objective: 02-02 Describe the steps in the accounting processing cycle.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
6) Accruals occur when the cash flow precedes either revenue or expense recognition.
Answer: FALSE
Difficulty: 1 Easy
Topic: Analyze updating-Identify type of adjustment
Learning Objective: 02-05 Identify and describe the different types of adjusting journal entries.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
7) The adjusted trial balance contains only permanent accounts.
Answer: FALSE
Difficulty: 1 Easy
Topic: Trial balance―Adjusted
Learning Objective: 02-06 Record adjusting journal entries in general journal format, post
entries, and prepare an adjusted trial balance.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking / Keyboard Navigation
2
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
, 8) The income statement summarizes the operating activity of a company at a particular point in
time.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial statement―Income Statement
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
9) The balance sheet can be considered a change or flow statement.
Answer: FALSE
Difficulty: 1 Easy
Topic: Financial statement―Balance sheet
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
10) The statement of cash flows summarizes transactions that caused cash to change during a
reporting period.
Answer: TRUE
Difficulty: 1 Easy
Topic: Financial statement―Cash flow
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
11) The statement of shareholders' equity discloses the changes in the temporary shareholders'
equity accounts.
Answer: FALSE
Difficulty: 2 Medium
Topic: Financial statement―Shareholders equity
Learning Objective: 02-07 Describe the four basic financial statements.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA/Accessibility: BB Critical Thinking; FN Measurement / Keyboard Navigation
3
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
