Test Bank Chapter 3 The Accounting Information System.
CHAPTER 3
THE ACCOUNTING INFORMATION SYSTEM
IFRS questions are available at the end of this chapter.
TRUE/FALSE
Description
F 1. Recording transactions.
T 2. Nominal accounts.
F 3. Real (permanent) accounts.
F 4. Internal event example.
F 5. Liability and stockholders’ equity accounts.
F 6. Debits and credits.
F 7. Steps in accounting cycle.
T 8. Purpose of trial balance.
T 9. General journal.
F 10. Posting and trial balance.
T 11. Adjusting entries for prepayments.
T 12. Example of accrued expense.
F 13. Book value of depreciable assets.
T 14. Reporting ending retained earnings.
F 15. Post-closing trial balance.
F 16. Closing entries and Income Summary.
F 17. Posting closing entries.
F *18. Accrual basis accounting.
F *19. Purpose of reversing entries.
F *20. Adjusted trial balance.
MULTIPLE CHOICE—Conceptual
Description
d 21. Purpose of an accounting system.
d 22. Necessity of accounting records.
d 23. Purpose of an accounting system.
d 24. Book of original entry.
d 25. Purpose of trial balance.
d 26. Identification of a real account.
b 27. Identification of a temporary account.
a 28. Temporary vs. permanent accounts.
c 29. Meaning of debit.
c 30. Double-entry system.
a 31. Effect on stockholders’ equity.
a 32. Transaction analysis.
a 33. Accounting equation.
b 34. Accounting process vs. accounting cycle.
d 35. Accounting cycle steps.
d 36. Criteria for recording events.
d 37. Identification of a recordable event.
c 38. Identification of internal events.
d 39. External events.
d 40. Limitations of trial balance.
a 41. General journal.
b 42. Journal entry.
c 43. Journal entry.
d 44. Journal entry.
d 45. Imbalance in a trial balance.
d 46. Purpose of unadjusted trial balance.
b 47. Format of adjusting entry.
b 48. Example of accrued expense.
d 49. Accrual basis of accounting.
c 50. Accrued expense adjusting entry.
a 51. Effect of not recording accrued expense.
b 52. Description of a deferral.
d 53. Effect of not recording accrued revenue.
a 54. Effect of not recording depreciation expense.
a 55. Timing of adjustments.
a 56. Prepaid expense.
a 57. Expiration of prepaid expenses.
b 58. Effect of depreciation entry.
a 59. Unearned revenue relationships.
a 60. Computation of interest expense for adjusting entry.
d 61. Purpose of adjusting entries.
c 62. Matching principle.
a 63. Prepaid items.
d 64. Accrued items.
c 65. Definition of unearned revenue.
d 66. Definition of accrued expense.
c 67. Adjusting entry for accrued expense.
d 68. Factors to consider in estimating depreciation.
d 69. Adjusting entries.
d 70. Effect of adjusting entries.
b 71. Prepaid expense and the matching principle.
c 72. Accrued revenue and the matching principle.
b 73. Unearned revenue and the matching principle.
b 74. Adjusted trial balance.
c 75. Closing entry process.
c 76. Purpose of closing entries.
d 77. Cash collections vs. revenue earned.
d *78. Cash basis revenue.
c *79. Convert cash receipts to service revenue.
c *80. Convert cash paid for operating expenses.
c *81. Purpose of reversing entries.
d *82. Identification of reversing entries.
d *83. Identification of reversing entries.
b *84. Adjusting entries reversed.
d *85. Reporting inventory on a worksheet.
MULTIPLE CHOICE—Computational
Description
c 86. Effect of transactions on owners’ equity.
c 87. Effect of transactions on owners’ equity.
c 88. Unearned rent adjustment.
c 89. Unearned rent adjustment.
d 90. Determine adjusting entry.
c 91. Adjusting entry for bad debts.
b 92. Adjusting entry for bad debts.
c 93. Adjusting entry for interest receivable.
c 94. Subsequent period entry for interest.
d *95. Use of reversing entry.
d 96. Adjusting entry for unearned rent.
b 97. Adjusting entry for supplies.
d 98. Effect of closing entries.
b *99. Calculate cash received for interest.
b *100. Calculate cash paid for salaries.
d *101. Calculate cash paid for insurance.
c *102. Calculate insurance expense.
c *103. Calculate interest revenue.
c *104. Calculate salary expense.
d *105. Adjusting entry for supplies.
c *106. Reversing entries.
b *107. Unearned rent adjustment.
a *108. Determine adjusting entry.
d *109. Determine adjusting entry.
MULTIPLE CHOICE—CPA Adapted
Description
c 110. Determine accrued interest payable.
b 111. Determine balance of unearned revenues.
a 112. Calculate subscriptions revenue.
c 113. Determine interest receivable.
b 114. Calculate balance of accrued payable.
b 115. Calculate accrued salaries.
a 116. Calculate royalty revenue.
d 117. Calculate deferred revenue.
b *118. Difference between cash basis and accrual method.
c *119. Determine cash basis revenue.
b *120. Determine accrual basis revenue.
a *121. Calculate cost of goods sold.
*This topic is dealt with in an Appendix to the chapter.
EXERCISES
Item Description
E3-122 Definitions.
E3-123 Terminology.
E3-124 Accrued and deferred items.
E3-125 Adjusting entries.
E3-126 Adjusting entries.
E3-127 Financial statements.
*E3-128 Cash basis vs. accrual basis accounting.
*E3-129 Accrual basis.
*E3-130 Accrual basis.
*E3-131 Accrual basis.
*E3-132 Cash basis.
PROBLEMS
Item Description
P3-133 Adjusting entries and account classifications.
P3-134 Adjusting entries.
P3-135 Adjusting and closing entries.
*P3-136 Cash to accrual accounting.
*P3-137 Accrual accounting.
*P3-138 Accrual accounting.
*P3-139 Eight-column work sheet.
CHAPTER LEARNING OBJECTIVES
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting entries.
6. Prepare financial statements from the adjusted trial balance.
7. Prepare closing entries.
*8. Differentiate the cash basis of accounting from the accrual basis of accounting.
*9. Identify adjusting entries that may be reversed.
*10. Prepare a 10-column worksheet.
SUMMARY OF LEARNING OBJECTIVES BY QUESTIONS
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Learning Objective 1
1. TF 3. TF 22. MC 24. MC 26. MC 28. MC
2. TF 21. MC 23. MC 25. MC 27. MC 123. E
Learning Objective 2
4. TF 6. TF 30. MC 32. MC 34. MC
5. TF 29. MC 31. MC 33. MC
Learning Objective 3
7. TF 35. MC 36. MC 37. MC 38. MC 39. MC
Learning Objective 4
8. TF 10. TF 40. MC 42. MC 44. MC 87. MC
9. TF 25. MC 41. MC 43. MC 86. MC
Learning Objective 5
11. TF 51. MC 60. MC 69. MC 92. MC 114. MC 133. P
12. TF 52. MC 61. MC 70. MC 93. MC 115. MC 134. P
13. TF 53. MC 62. MC 71. MC 94. MC 116. MC 135. P
45. MC 54. MC 63. MC 72. MC 96. MC 117. MC
46. MC 55. MC 64. MC 73. MC 97. MC 122. E
47. MC 56. MC 65. MC 88. MC 110. MC 123. E
48. MC 57. MC 66. MC 89. MC 111. MC 124. E
49. MC 58. MC 67. MC 90. MC 112. MC 125. E
50. MC 59. MC 68. MC 91. MC 113. MC 126. E
Learning Objective 6
14. TF 74. MC 127. E
Learning Objective 7
15. TF 16. TF 17. TF 75. MC 76. MC 98. MC 135. P
Learning Objective *8
18. TF 80. MC 102. MC 119. MC &
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