Chapter 02 Review of the Accounting Process Answer Key

2-1 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Review of the Accounting Process Answer Key True / False Questions

• Owners' equity can be expressed as assets minus liabilities.

TRUE

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Learning Objective: 02-01 Analyze routine economic events-transactions-and record their effects on a company's financial position using the accounting equation format.

Level of Difficulty: 1 Easy

Topic Area: Accounting equation

• Debits increase asset accounts and decrease liability accounts.

TRUE

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Blooms: Remember

Learning Objective: 02-01 Analyze routine economic events-transactions-and record their effects on a company's financial position using the accounting equation format.

Level of Difficulty: 1 Easy

Topic Area: Account relationships and records

• Balance sheet accounts are referred to as temporary accounts because their balances are

always changing.

FALSE

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Intermediate Accounting 9th Edition Spiceland Test Bank Visit TestBankDeal.com to get complete for all chapters

2-2 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Blooms: Remember

Learning Objective: 02-01 Analyze routine economic events-transactions-and record their effects on a company's financial position using the accounting equation format.

Level of Difficulty: 1 Easy

Topic Area: Account relationships and records

• After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is

the preparation of financial statements.

FALSE

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Blooms: Remember

Learning Objective: 02-01 Analyze routine economic events-transactions-and record their effects on a company's financial position using the accounting equation format.

Level of Difficulty: 1 Easy

Topic Area: Accounting processing cycle steps

• Adjusting journal entries are recorded at the end of any period when financial statements are

prepared.

TRUE

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AICPA: BB Critical Thinking

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Blooms: Remember

Learning Objective: 02-04 Identify and describe the different types of adjusting journal entries.

Level of Difficulty: 1 Easy

Topic Area: Analyze updating-Record adjusting entry

• Accruals occur when the cash flow precedes either revenue or expense recognition.

FALSE

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Learning Objective: 02-04 Identify and describe the different types of adjusting journal entries.

2-3 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Level of Difficulty: 1 Easy

Topic Area: Analyze updating-Identify type of adjustment

• The adjusted trial balance contains only permanent accounts.

FALSE

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Learning Objective: 02-05 Record adjusting journal entries in general journal format; post entries; and prepare an adjusted trial balance.

Level of Difficulty: 1 Easy

Topic Area: Trial balance―Adjusted

• The income statement summarizes the operating activity of a firm at a particular point in time.

FALSE

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Learning Objective: 02-06 Describe the four basic financial statements.

Level of Difficulty: 1 Easy

Topic Area: Financial statement―Income Statement

• The balance sheet can be considered a change or flow statement.

FALSE

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Learning Objective: 02-06 Describe the four basic financial statements.

Level of Difficulty: 1 Easy

Topic Area: Financial statement―Balance sheet

2-4 Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

10.The statement of cash flows summarizes transactions that caused cash to change during a reporting period.

TRUE

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Learning Objective: 02-06 Describe the four basic financial statements.

Level of Difficulty: 1 Easy

Topic Area: Financial statement―Cash flow

11.The statement of shareholders' equity discloses the changes in the temporary shareholders' equity accounts.

FALSE

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Learning Objective: 02-06 Describe the four basic financial statements.

Level of Difficulty: 2 Medium

Topic Area: Financial statement―Shareholders equity

12.The post-closing trial balance contains only permanent accounts.

TRUE

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Learning Objective: 02-07 Explain the closing process.

Level of Difficulty: 1 Easy

Topic Area: The closing process