ACC 131 EXAM 1 MITCHELL | QUESTIONS AND
ANSWERS | WITH COMPLETE SOLUTION
Which of the following best describes the term "retained earnings?" Answer -
The accumulated net income of a company that have been distributed to
owners in the form of dividends
Depreciation is normally associated with which asset on the balance sheet?
Answer - Equipment
Which of the following statements regarding accounts is FALSE? Answer -
Dividends are increased with credits and decreased with debits
The normal balance of Accounts Receivable is a _____ because it is a _____.
Answer - debit; asset
A trial balance is a useful device because it provides a check on accuracy by
showing whether _____. Answer - total debits = total credits
The normal balance of an Expense account is a _____ because expenses
decrease with _____. Answer - debit; stockholders' equity
An accrual refers to an event _____. Answer - where cash has not yet been
exchanged between 2 parties
, In order for accounting information to be useful in making informed decisions,
it must be _____. Answer - both relevant and faithful representation
An expense incurred at 2010 is not paid until 2011. Using the accrual basis of
accounting the expense should appear on the _____. Answer - the 2010
income statement
The adjusting entry made to record prepaid rent which has been expired during
the period would include a debit to _____. Answer - Rent Expense
In what order are financial statements generally prepared? Answer - Income
Statement, Statement of Retained Earnings, and Balance Sheet
The entry made to close service revenue would include a _____. Answer -
debit Service Revenue; credit Income Summary
When a business records revenue before it is earned, it has violated the
measurement issue _____. Answer - Recognition
All of the following will affect retained earnings except _____. Answer - An
equipment purchase
The process of transferring journal entry information from the journal to the
ledger is called _____. Answer - Posting
Under the revenue recognition principle, a business should record revenue
when the business _____. Answer - Delivers good or services to a customer
ANSWERS | WITH COMPLETE SOLUTION
Which of the following best describes the term "retained earnings?" Answer -
The accumulated net income of a company that have been distributed to
owners in the form of dividends
Depreciation is normally associated with which asset on the balance sheet?
Answer - Equipment
Which of the following statements regarding accounts is FALSE? Answer -
Dividends are increased with credits and decreased with debits
The normal balance of Accounts Receivable is a _____ because it is a _____.
Answer - debit; asset
A trial balance is a useful device because it provides a check on accuracy by
showing whether _____. Answer - total debits = total credits
The normal balance of an Expense account is a _____ because expenses
decrease with _____. Answer - debit; stockholders' equity
An accrual refers to an event _____. Answer - where cash has not yet been
exchanged between 2 parties
, In order for accounting information to be useful in making informed decisions,
it must be _____. Answer - both relevant and faithful representation
An expense incurred at 2010 is not paid until 2011. Using the accrual basis of
accounting the expense should appear on the _____. Answer - the 2010
income statement
The adjusting entry made to record prepaid rent which has been expired during
the period would include a debit to _____. Answer - Rent Expense
In what order are financial statements generally prepared? Answer - Income
Statement, Statement of Retained Earnings, and Balance Sheet
The entry made to close service revenue would include a _____. Answer -
debit Service Revenue; credit Income Summary
When a business records revenue before it is earned, it has violated the
measurement issue _____. Answer - Recognition
All of the following will affect retained earnings except _____. Answer - An
equipment purchase
The process of transferring journal entry information from the journal to the
ledger is called _____. Answer - Posting
Under the revenue recognition principle, a business should record revenue
when the business _____. Answer - Delivers good or services to a customer
