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FBLA Accounting 1 – True/False

Total current assets should always equal total current liabilities
F
The matching concept states expenses should be offset against revenue to determine net income
T
The balance sheet shows the financial position of a business over a period of time
F
analysis paper on which the financial condition of a business is conveniently summarized is a trial balance
F
Journal entries made to bring general ledger accounts up to date are adjusting entries
T
The complete series of activities involved in double-entry accounting during a fiscal period is the accounting cycle
T
If the debit part of a journal entry is not posted but the credit side is, assets will be understated.
F
A change in the balance of a customer’s account also changes the balance of the controlling account, Accounts Receivable.
T
Each amount in the General Debit column of the combination journal is posted separately to an account in the general ledger.
T
If an adjusting entry is not recorded for supplies used during the accounting period, net income for the current period will be overstated.
T
If the totals on the trial balance of the work sheet do not balance and the difference between the debits and credits is $9,000, it is possible that a slide error has been made.
T
If the totals on the trial balance of the work sheet do not balance and the difference between the debits and credits is $1,000, it is possible that a transposition error has been made.
F
If an adjustment is not recorded for unearned revenue that has been earned by year-end, net income for the current period will be overstated.
F
The Purchases account does not provide a continuous record of the cost of the goods on hand.
T
When prices are falling, LIFO generally results in a higher cost of goods sold and therefore helps reduce the tax liability.
F
Overstating ending inventory in the current period will understate the following year’s net income.
T
The endorsement on the check represents a promise to pay.
T
The matching concept requires that the income statement for a time period be matched with the balance sheet of the same time period.
F
A deficit is reported in the stockholders’ equity section of the balance sheet.
T
(1) A professional organization, such as the American Institute of Certified Public Accountants, is a group of people who have common career interests.
T
Being able to make decisions is an important skill for someone interested in becoming a musician.
F
Responsibility is one example of a personality trait.
T
The more you know about yourself, the easier it will be to make career choices.
T
The Internet is a source of educational and career information.
T
In the U.S. economy, for-profit businesses are outnumbered by not-for-profit organizations.
F
One of the best ways to find out about particular careers is by talking to people who work in those fields.
T
Once you decide upon a career, you will probably stay in that career for the rest of your life.
F
Most careers require some education or training beyond high school.
T
On-the-job training provides an opportunity to learn the ins and outs of a particular job and get paid while you’re learning.
T
Today, most accounting work is still done with pencil and paper.
F
All businesses need accounting services.
T
AT&T is an example of a not-for-profit organization.
F
A CPA is a person who has passed a national test and met specified experience and educational standards to become “certified” to practice accounting.
T
A person’s skills are the principles by which they live and are the core of their belief system.
F
Only businesses that earn a profit will have the economic resources to continue to operate.
T
All types of businesses sell a product.
F
In a free enterprise system, businesses compete for customers.
T
One advantage of owning your own business is that any financial gain from operating the business is yours.
T
For accounting purposes, a business is an entity separate from its owners.
T
A business owner must always get permission to operate from the state government.
F
Basic accounting rules and procedures differ from business to business.
F
The corporation is the easiest form of business to organize.
F
All businesses set up their accounting systems in the same manner.
F
Corporations often start out as sole proprietorships or partnerships.
T
A business is earning a profit if the selling price of its product covers the cost of the raw materials needed to make the product.
F
The life of a business is divided into specific periods for reporting purposes.
T
A partnership can be owned by a more than two individuals.
T
GAAP is a way to communicate financial information in a form understood by those interested in the operations and financial condition of the business.
T
Service businesses are not intended to operate at a profit
F
After each transaction, the basic accounting equation should remain in balance.
T
A business transaction affects at least two accounts.
T
“Assets + Liabilities = Owner’s Equity” is another way to express the basic accounting equation.
F
The increases and decreases caused by business transactions are recorded in specific accounts.
T
The free enterprise system is based on the right to own property.
T
One of the purposes of accounting is to provide financial information about property and the rights to that property.
T
The owner’s claims to the assets of a business are liabilities.
F
A creditor has a financial claim to the assets of a business.
T
An account is a record of only the increases in the balance of a specific item such as cash or equipment.
F
The total financial claims do not have to equal the total cost of the property.
F
The top of the T account is used for account titles. Credits are entered on the left side of the T; debits, on the right.
F
Debit and credit rules for accounts on one side of the accounting equation are mirror images of those on the other side.
T
A credit to an account always increases it; a debit to an account always decreases it.
F
An asset account appears on the right side of the accounting equation and is also increased on the right side of its T account
F
The payment of a liability is recorded by a debit to the liability account and a credit to the owner’s capital account.
F
Every transaction affects two or more accounts and is recorded by equal amounts of debits and credits.
T
A business groups its accounts in a ledger.
T
A business transaction can affect two accounts on the same side of the accounting equation and still leave the equation in balance.
T
A chart of accounts is limited to 50 accounts.
F
The difference between the debit and credit amounts in an account is the account balance.
T
Liability, expense, and capital accounts all have normal credit balances.
F
Expenses decrease owner’s equity and are recorded as debits.
T
The rules of debit and credit for expense accounts are the same as the rules for asset accounts.
T
A business should have separate accounts for recording revenue and expenses.
T
Liability, revenue, and withdrawal accounts all have normal credit balances.
F
The withdrawal of cash by the owner of a business decreases owner’s equity.
T
Expenses have the opposite effect from revenue on the capital account.
T
Temporary capital accounts are extensions of the owner’s capital account.
T
Permanent accounts start each accounting period with a zero balance.
F
Revenues increase owner’s equity, and increases in revenues are recorded as debits.
F
The total of all accounts with normal debit balances should equal the total of all accounts with normal credit balances if the rules of debit and credit were followed correctly.
T
Income from Fees is a permanent account.
F
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