BOOKKEEPING FOR SMALL BUSINESS EXAM QUESTIONS WITH CORRECT ANSWERS

BOOKKEEPING FOR SMALL BUSINESS EXAM QUESTIONS WITH CORRECT ANSWERS 20. Journal entries generally fall into two categories: standard journal entries and adjusting journal entries. Which of the following statements regarding journal entries is false? Incorrect A) Standard journal entries are prepared to make regular entries to the general ledger. B) Adjusting journal entries are made to correct errors noted in the general ledger. C) As a general rule, standard journal entries are made earlier in the monthly closing process and adjusting journal entries are made in the later stages. D) Only standard journal entries require "reversing entries" in the following month. - ANSWER-D) Only standard journal entries require "reversing entries" in the following month. 21. Unlike the detailed, account-by-account approach used when reviewing the general ledger, the financial statement review uses a high-level analytical review approach. In other words, instead of assessing the reasonableness of an amount by looking at it in isolation, the analytical approach assesses the reasonableness of an amount by comparing it to other amounts and relationships within the financial statement. The type of review generally varies depending on whether balance sheet or income statement accounts are being reviewed. Which of the following statements regarding the financial statement review is false? Incorrect A) Analytical procedures are generally very effective when applied to income statement amounts. Certain income statement amounts are often fairly fixed from one period to the next, while others tend to fluctuate in relation to sales. Once these relationships are understood, accounting personnel c - ANSWER-C) In comparison to income statement amounts, balance sheet amounts are typically more predictable from one period to the next. Therefore, analytical reviews are generally more effective on balance sheet amounts. 22. There are four types of financial statements required by generally accepted accounting principles: balance sheet, income statement, statement of retained earnings or changes in stockholders' equity, and statement of cash flows. Most small businesses prepare a balance sheet and an income statement on a monthly basis, but fewer businesses routinely prepare a statement of retained earnings (or changes in stockholders' equity) and a cash flow statement. Which of the following statements regarding the four types of financial statements is false? Incorrect