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Fundamental Accounting Principles 23rd
Edition By by John Wild – Test Bank

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Sample Test
Chapter 03 Adjusting Accounts and Preparing Financial Statements



MULTIPLE CHOICE QUESTIONS
1) A company’s fiscal year must correspond
with the calendar year.
1. True
2. False

Answer: B Explanation:
Diff: 1
Topic: The Accounting Period

,Learning Objective: 03-C1 Explain the importance of periodic reporting and
the time period assumption. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Decision Making




• The time period assumption assumes that an organization’s activities
can be divided into specific time periods such as months, quarters, or

A) True
1. False

Answer: A Explanation:
Diff: 1
Topic: The Accounting Period
Learning Objective: 03-C1 Explain the importance of periodic reporting and
the time period assumption. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Decision Making




3) Interim financial statements report a
company’s business activities for a one-year
period.
1. True
2. False

Answer: B Explanation:
Diff: 1

,Topic: The Accounting Period
Learning Objective: 03-C1 Explain the importance of periodic reporting and
the time period assumption. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Reporting


• A fiscal year refers to an organization’s accounting period that spans
twelve consecutive months or 52

A) True
1. False

Answer: A Explanation:
Diff: 1
Topic: The Accounting Period
Learning Objective: 03-C1 Explain the importance of periodic reporting and
the time period assumption. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Decision Making




5) Adjusting entries are made after the
preparation of financial statements.
1. True
2. False

Answer: B Explanation:
Diff: 1
Topic: Accrual Basis versus Cash Basis

, Learning Objective: 03-C2 Explain accrual accounting and how it improves
financial statements. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement




6) Adjusting entries result in a better matching
of revenues and expenses for the period.
1. True
2. False

Answer: A Explanation:
Diff: 1
Topic: Accrual Basis versus Cash Basis
Learning Objective: 03-C2 Explain accrual accounting and how it improves
financial statements. Bloom’s: Remember
AACSB: Communication
AICPA: BB Industry; FN Measurement


• Two main accounting principles used in accrual accounting are expense
recognition and full closure.

A) True
1. False

Answer: B Explanation:
Diff: 1
Topic: Accrual Basis versus Cash Basis