Test Bank For Intermediate Accounting 9th Edition By Spiceland

Chapter 02 Review of the Accounting Process Answer Key True / False Questions

1. Owners’ equity can be expressed as assets minus liabilities.

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation 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 equation

2. Debits increase asset accounts and decrease liability accounts.

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation 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

3. Balance sheet accounts are referred to as temporary accounts because their balances are always changing.

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation

2-1

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

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

the preparation of financial statements.

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation 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

5. Adjusting journal entries are recorded at the end of any period when financial statements are prepared.

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation 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

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

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

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

2-2

Level of Difficulty: 1 Easy
Topic Area: Analyze the updating-Identify type of adjustment

7. The adjusted trial balance contains only permanent accounts.

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

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

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

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking
AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-06 Describe the four basic financial statements. Level of Difficulty: 1 Easy
Topic Area: Financial statement―Income Statement

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

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking
AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-06 Describe the four basic financial statements. Level of Difficulty: 1 Easy
Topic Area: Financial statement―Balance sheet

2-3

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

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking
AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember

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

AACSB: Reflective Thinking AICPA: BB Critical Thinking
AICPA: FN Measurement Accessibility: Keyboard Navigation Blooms: Remember

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

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-07 Explain the closing process. Level of Difficulty: 1 Easy
Topic Area: The closing process

2-4

13. The closing process brings all temporary accounts to a zero balance and updates the balance in

the retained earnings account.

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-07 Explain the closing process. Level of Difficulty: 1 Easy
Topic Area: The closing process

14. A reversing entry at the beginning of a period for salaries would include a debit to salaries expense.

FALSE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-Appendix 2B Reversing Entries. Level of Difficulty: 2 Medium
Topic Area: Reversing entries–Appendix B

15. The sale of merchandise on account would be recorded in a sales journal.

TRUE

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember

Learning Objective: 02-Appendix 2C Subsidiary Ledgers and Special Journals. Level of Difficulty: 1 Easy
Topic Area: Subsidiary ledger-Special journal–App C