Deck 3: Financial Statements: Interrelations and Construction

Question 1

In terms of debit and credit,revenues accounts function in a similar way to:

A) Liabilities accounts
B) Assets accounts
C) Expenses accounts
D) None of these

Answer 1

A

Question 2

The income statement impact on the statement of cash flows is through revenues and expenses collected or paid during the year.

Answer 2

True

Question 3

Repaying the principal of a debt will generate a cash outflow.

Answer 3

True

Question 4

Which coding method(s)is (are)used to establish a chart of accounts?

A) Alphabetical
B) Alphanumerical
C) Numerical
D) All of these.

Question 5

The accounting process relies only on the use of technical tools and does not require human intervention and interpretation.

Question 6

Which of the following statements is true?

A) If you decrease an asset account,you could decrease a liability account.
B) If you increase a liability account,you could increase a shareholders' equity account.
C) If you increase an asset account,you could increase another asset account.
D) All of these.

Question 7

Which of the following accounts is expected to present a credit balance?

A) Accounts receivable
B) Provision for doubtful debts
C) Doubtful debt accounts
D) Selling expenses

Question 8

By convention,the left-hand side of a T-account is called:

A) Debt side
B) Cash side
C) Debit side
D) Credit side

Question 9

Which of the following statements is true?

A) The accounts kept by a company constitute legal evidence,must be easily accessible to controllers and comply with laws and regulations.
B) The accounts kept by a company are a source of management information.
C) The accounts kept by a company are an instrument for business management.
D) All of these.

Question 10

The statement of financial position/balance sheet emphasizes the dynamics of the cash flowing in and out of the business.

Question 11

What is the trial balance used to verify?

A) Sum of debit entries = Sum of credit entries
B) Sum of debit entries < Sum of credit entries
C) Sum of debit entries > Sum of credit entries
D) None of these.

Question 12

What is the process of transferring entries from the journal to the ledger called?

A) Journalizing
B) Posting
C) Recording
D) Accounting

Question 13

Alf sells merchandise on credit to Bob for 100 CU.How will the transaction be recorded in Bob's accounting records?

A) Purchases of merchandise => Credit : 100
Supplier Alf => Debit : 100
B) Purchases of merchandise => Credit : 100
Supplier Alf => Credit : 100
C) Purchases of merchandise => Debit : 100
Supplier Alf => Debit : 100
D) Purchases of merchandise => Debit : 100
Supplier Alf = >Credit : 100

Question 14

Which of the following statements is true?

A) The statement of financial position/balance sheet,the income statement and the statement of cash flows are totally linked.
B) There are links only between the statement of financial position/balance sheet and statement of cash flows.
C) There is no link between the statement of financial position/balance sheet,the income statement and the statement of cash flows.
D) There are links only between the income statement and the statement of cash flows.

Question 15

The income statement offers a dynamic vision of the financial position of the firm.

Question 16

Where no specific document exists for a transaction the operation is classified as:

A) Miscellaneous.
B) Insignificant.
C) Immaterial.
D) None of these.

Question 17

On a statement of financial position/balance sheet the total of debit balances equals the total of credit balances.

Question 18

The term 'credit' is synonymous with 'increase'.

Question 19

The need for a statement of cash flows arises from:

A) Cash accounting
B) Accrual accounting.
C) International accounting.
D) None of these.

Question 20

Which of the following equations is correct?

A) Using balance sheet accounts:
Sum of debit balances - Sum of credit balances = Net income
B) Using trial balance accounts:
Sum of debit balances = Sum of credit balances
C) Using income statement accounts:
Sum of credit balances - Sum of debit balances = Net income
D) All of these.

Question 21

All over the world,the overall structure of the accounts code is left entirely up to company management.

Question 22

Proponents of using national standardized charts of accounts argue that:

A) It facilitates the mobility of qualified accountants since all firms use the same basic structure.
B) It facilitates inter-company comparability of published accounts.
C) It reduces the cost of designing accounting software packages.
D) All of these.