Multiple Choice Question – Set 2
1. Which of the following statements is true concerning assets?(a). They are recorded at cost and adjusted for inflation.(b). They are recorded at market value for financial reporting because historical cost is arbitrary.(c). Accounting principles require that companies report assets on the income statement.(d). Assets are measured using the cost concept.
2. When the concept of conservation is applied to the Balance Sheet, it results in(a). Overstatement of Capital(b). Understatement of Capital(c). Overstatement of Assets(d). Understatement of Assets.
3. Which of the following is a correct expression of the accounting equation?(a). Assets – Liabilities + Owners’ Equity(b). Assets = Liabilities – Owners’ Equity(c). Assets + Owners’ Equity = Liabilities(d). Assets = Liabilities + Owners’ Equity
4. How is the balance sheet linked to the other financial statements?(a). The beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reported on the balance sheet.(b). Retained earnings is added to total assets and reported on the balance sheet.(c). Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet.(d). There is no link between the balance sheet and the other statements.
5. The process of recording the economic effects of business transactions in a book of original entry:(a). Double entry system(b). Debit(c). Credit(d). Journalizing
6. If the sum of the debits and credits in a trial balance is not equal, then(a). There is no concern because the two amounts are not meant to be equal.(b). The chart of accounts also does not balance.(c). It is safe to proceed with the preparation of financial statements.(d). Most likely an error was- made in posting journal entries to the general ledger or in preparing the trial balance.
7. Z Ltd had Rs. 1800 of supplies on hand at…