1. Which of the following is not part of the recording process?

a. Analyzing transactions. c. Entering transactions in a journal.

b. Preparing a trial balance. d. Posting transactions.

2. Transactions that affect inventories on hand have an effect on both the balance sheet and the
income statement. (a) True (b) False
3. Which one of the following is not an example of cash set aside for a particular purpose?

a. Petty cash, c. dividend funds

b. payroll, d. change fund

4. The specific identification method of costing inventories tracks the actual physical flow of the
goods available for sale. (a) True (b) False
5. Goods that have been purchased FOB destination but are in transit, should be excluded from a
physical count of goods. (a) True (b) False
6. Biological Asset (milking cows): Reported on the Statement of financial position as a non-
current asset at fair value less costs to sell (net realizable value).
(a) True (b) False
7. The retail inventory method requires a company to value its inventory on the balance
sheet at retail prices. (a) True (b) False
8. The gross profit method is based on the assumption that the rate of gross profit remains
constant from one year to the next. (a) True (b) False
9. Depreciation is a process of:

a. valuation. c. cost allocation.

b. cash accumulation. d. appraisal.

10. Resources consumed or services used in the process of earning revenue are

a. Withdrawal c. Expense
b. Revenue d. Investment

11. A decrease in owner's equity resulting from none of the business operation is

a. Withdrawal

b. Revenue
c. Expense

d. None of the above

12. When cash is decreased and supplies are increased by an equal amount,
a. there is an increase in liabilities
b. there is a decrease in liabilities
c. there is an increase in owner's equity
d. liabilities and capital are not changed
13. The time period assumption states that:
a. revenue should be recognized in the accounting period in which it is earned.
b. expenses should be matched with revenues.
c. the economic life of a business can be divided into artificial time periods.
d. the fiscal year should correspond with the calendar year.
14. One of the following statements about the accrual basis of accounting is false?
a. Events that change a company’s financial statements are recorded in the periods in which
the events occur.
b. Revenue is recognized in the period in which the performance obligation is satisfied.
c. The accrual basis of accounting is in accord with generally accepted accounting principles.