TEST BANK FOR INTERMEDIATE ACCOUNTING
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7TH EDITION SPICELAND, SEPE, NELSON
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LATEST EDITION &. &.
,Chapter 02 Review of the Accounting Process
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True / False Questions with verified answers at the bottom
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1. Owners' equity can be expressed as assets minus liabilities.
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True False
2. Debits increase asset accounts and decrease liability accounts.
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True False
3. Balance sheet accounts are referred to as temporary accounts because their
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balances are always changing.
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True False
4. After an unadjusted trial balance is prepared, the next step in the accounting
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processing cycle is the preparation of financial statements.
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True False
5. Adjusting journal entries are required to comply with the realization and matching
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principles.
True False
6. Accruals occur when the cash flow precedes either revenue or expense recognition.
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True False
,7. The adjusted trial balance contains only permanent accounts.
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True False
8. The income statement summarizes the operating activity of a firm at a particular
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point in time.
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True False
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9. The balance sheet can be considered a change or flow statement.
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True False
10. The statement of cash flows summarizes transactions that caused cash to change
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during a reporting period.
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True False
11. The statement of shareholders' equity discloses the changes in the temporary
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shareholders' equity accounts. &. &.
True False
12. The post-closing trial balance contains only permanent accounts.
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True False
, 13. The closing process brings all temporary accounts to a zero balance and updates
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the balance in the retained earnings account.
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True False
14. A reversing entry at the beginning of a period for salaries would include a debit to
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salaries expense.
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True False
15. The sale of merchandise on account would be recorded in a sales journal.
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True False
16. The payment of cash to a supplier would be recorded in a purchases journal.
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True False
Multiple Choice Questions
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17. The accounting equation can be stated as:
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A. A + L - OE = 0.
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B. A - L + OE = 0.
&. &. &. &. &. &.
&. &. &. &. &.
7TH EDITION SPICELAND, SEPE, NELSON
&. &. &. &. &.
LATEST EDITION &. &.
,Chapter 02 Review of the Accounting Process
&. &. &. &. &. &.
True / False Questions with verified answers at the bottom
&. &. &. &. &. &. &. &. &.
1. Owners' equity can be expressed as assets minus liabilities.
&. &. &. &. &. &. &. &.
True False
2. Debits increase asset accounts and decrease liability accounts.
&. &. &. &. &. &. &.
True False
3. Balance sheet accounts are referred to as temporary accounts because their
&. &. &. &. &. &. &. &. &. &. &.
balances are always changing.
&. &. &.
True False
4. After an unadjusted trial balance is prepared, the next step in the accounting
&. &. &. &. &. &. &. &. &. &. &. &. &.
processing cycle is the preparation of financial statements.
&. &. &. &. &. &. &.
True False
5. Adjusting journal entries are required to comply with the realization and matching
&. &. &. &. &. &. &. &. &. &. &. &.
principles.
True False
6. Accruals occur when the cash flow precedes either revenue or expense recognition.
&. &. &. &. &. &. &. &. &. &. &.
True False
,7. The adjusted trial balance contains only permanent accounts.
&. &. &. &. &. &. &.
True False
8. The income statement summarizes the operating activity of a firm at a particular
&. &. &. &. &. &. &. &. &. &. &. &. &.
point in time.
&. &.
True False
&.
9. The balance sheet can be considered a change or flow statement.
&. &. &. &. &. &. &. &. &. &.
True False
10. The statement of cash flows summarizes transactions that caused cash to change
&. &. &. &. &. &. &. &. &. &. &. &.
during a reporting period.
&. &. &.
True False
11. The statement of shareholders' equity discloses the changes in the temporary
&. &. &. &. &. &. &. &. &. &. &.
shareholders' equity accounts. &. &.
True False
12. The post-closing trial balance contains only permanent accounts.
&. &. &. &. &. &. &.
True False
, 13. The closing process brings all temporary accounts to a zero balance and updates
&. &. &. &. &. &. &. &. &. &. &. &. &.
the balance in the retained earnings account.
&. &. &. &. &. &.
True False
14. A reversing entry at the beginning of a period for salaries would include a debit to
&. &. &. &. &. &. &. &. &. &. &. &. &. &. &. &.
salaries expense.
&.
True False
15. The sale of merchandise on account would be recorded in a sales journal.
&. &. &. &. &. &. &. &. &. &. &. &.
True False
16. The payment of cash to a supplier would be recorded in a purchases journal.
&. &. &. &. &. &. &. &. &. &. &. &. &.
True False
Multiple Choice Questions
&. &.
&.
17. The accounting equation can be stated as:
&. &. &. &. &. &.
A. A + L - OE = 0.
&. &. &. &. &. &.
B. A - L + OE = 0.
&. &. &. &. &. &.
