Which of the following best describes the use and financial information included on a income statement?

1. Which of the following best explains the basic purpose of a financial accounting system?

a. Meet an organization’s need for accounting information as efficiently as possible.

b. Provide as much useful information to decision makers as possible, regardless of cost.

c. Develop financial statements in conformity with generally accepted accounting principles.

d. Record changes in the financial position of an organization by applying the concepts of

double-entry accounting.

2. The going-concern assumption of accounting is best explained as the assumption that:

a. enables accountants to ignore the effect of inflation in the accounting records.

b. maintains that each organization, or section of an organization, stands apart from other

organizations and individuals.

c. ensures that accounting records and statements are based on the most reliable data

available.

d. holds that the entity will remain in operation long enough to use its existing assets.

3. One commonly used accounting equation can be stated as:

a. Assets + Shareholders’ Equity = Liabilities.

b. Assets – Shareholders’ Equity + Liabilities = Zero.

c. Assets – Liabilities = Shareholders’ Equity.

d. Assets = Liabilities – Shareholders’ Equity.

4. A record of all changes in a particular asset, liability, or shareholders’ equity during a period is

described as a(n):

a. trial balance.

b. transaction.

c.journal.

d. account.

5. The statement that presents assets, liabilities and equity of a business entity as of a specific date

is identified or known as:

a. statement of cash flows.

b. statement of comprehensive income.

c.statement of changes in equity.

d. statement of financial position.

In explaining the general rules of debits and credits, which of the following is true?

- Only assets, expenses and owners’ equity are increased by debits.

-Only assets, expenses and dividends are increased by debits.

Analyse the following: Credits to the revenue account will ultimately result in a(n):

-increase in owners’ equity and assets.

Accountants use the trial balance to check whether:

-total debits = total credits.

A shareholder invests land and building into the company. When recording this transaction, the

journal entry would include:

-a debit to Land and Building and a credit to Share Capital.

Which category does “economic resources of a business that are expected to produce a

benefit in the future” fall under?

-Assets.

The statement that presents assets, liabilities and equity of a business entity as of a specific date is

identified or known as:

-statement of financial position.

Using the appropriate accounting equation, if total assets decreased by $10,000 during a period of

time and equity increased by $30,000 during the same period, the amount and direction (increase or

decrease) of the period’s change in total liabilities is:

-$40,000 decrease.

Which of the following best describes financial statements?

-They are the business documents that companies use to report the results of their financial

activities to various user groups.

Analyse the following transaction: A company paid creditors on account. The effect of this transaction

on the accounting equation would be to:

-increase an asset, increase a liability.

Which of the following provide information about the balance in each account in the

accounting books?

-Ledgers.

The financial statements are prepared from the

-adjusted trial balance.

Which of the following is NOT an example of a non-cash transaction under the accrual

basis of accounting?

-Collection of cash from customers

In a discussion involving the use of internal controls over cash, it is important to

highlight that the person who prepares the bank reconciliation:

-should have no other cash duties.

Applying the accrual basis of accounting, for cash received in 20X2 for goods delivered

to customers in 20X1, the revenue should be reported in:

-the 20x1 income statement.

When preparing a bank reconciliation, which of the following items would need to be journalised from

the bank reconciliation?

-All items on the book and bank side of the bank reconciliation.

Which of the following best describes the use and financial information included on a statement of owner's equity?

Which of the following best describes the information reported in the income statement?

Which of the following would be included on an income statement?

Which of the following best describes financial statements?