True/False
Indicate whether the sentence or statement is true
or false.
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1.
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The
amount of information a business needs and can afford varies with the business's size and
complexity.
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2.
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Only
one type of accounting system can be used to record, summarize, and report a business's financial
information.
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3.
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An
organization with the legal rights of a person and which may be owned by many persons is a
corporation.
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4.
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A
corporation can own property but cannot incur liabilities in its own name.
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5.
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A
corporation cannot enter into contracts.
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6.
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Total
shares of ownership in a corporation is called capital stock.
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7.
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A
purchases journal is used for cash purchases only.
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8.
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Recording purchases at the amount paid for them is an application of the accounting
concept Objective Evidence.
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9.
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The
amount on each line of a purchases journal is posted as a credit to the named vendor account in the
accounts payable ledger.
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10.
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When
several journals are used, an abbreviation is used in the Post. Ref. column of a ledger to show the
journal from which the posting is made.
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11.
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Generally, prices listed in catalogs are the manufacturers' suggested retail
prices.
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12.
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A
reduction in the list price granted to customers is a cash discount.
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13.
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Trade
discounts normally are recorded in the purchases discount account.
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14.
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Purchases Discount is increased by a credit entry.
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15.
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To
keep a petty cash fund at a constant amount, differences are recorded at the end of a fiscal period
as well as other times when the petty cash fund is replenished.
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16.
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If
the actual petty cash on hand is $53.00 but the records show that $55.00 should be on hand, the petty
cash fund is said to be over.
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17.
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An
entry in the Accounts Payable Debit column of a cash payments journal does not affect the vendor
named in the Account Title column.
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18.
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A
journal with two amount columns in which all kinds of entries can be recorded is a general
journal.
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19.
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A
form prepared by the customer showing the price deduction taken by the customer for returns and
allowances is a credit memorandum.
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20.
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Purchases Returns and Allowances is a contra account to Cost of
Merchandise.
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21.
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All
transactions recorded in a purchases journal increase the balance of a vendor account.
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22.
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Purchases on account are recorded in a purchases journal at list price.
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23.
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When
purchases are recorded at their cost, including any related shipping costs and taxes, the Historical
Cost accounting concept is being applied.
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24.
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The
monthly total of a purchases journal is posted as a credit to Purchases.
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25.
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All
transactions recorded in a purchases journal increase the balance of the purchases
account.
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26.
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The
monthly total of the General Debit column of a cash payments journal is posted to the general
ledger.
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27.
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When
a cash payments journal is used, all payments of cash are recorded in it.
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28.
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The
terms of sale l/10, n/30 mean that the customer may deduct 1 percent of the invoice amount if payment
is made within 30 days of the invoice date.
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29.
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The
terms of sale 2/15, n/30 mean that 2 percent of the invoice amount may be deducted if paid within 15
days of the invoice date or the total invoice amount must be paid within 30 days.
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30.
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Purchases discounts are subtracted from the purchases journal total.
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31.
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Each
amount in the Accounts Payable Debit column of a cash payments journal is posted individually to the
general ledger account Accounts Payable.
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32.
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Each
amount in the Accounts Payable Debit column of a cash payments journal is posted individually to the
account named in the Account Title column.
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33.
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The
source document for a purchases return is a check.
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34.
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The
amount recorded in the Debit column of a general journal for a purchases return must be posted to two
different accounts.
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35.
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A
contra purchases account has a normal credit balance.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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36.
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Reporting financial information for a specific period of time is an application of the
accounting concept ____. a. | Accounting Period Cycle | c. | Objective Evidence | b. | Going
Concern | d. | Historical
Cost | | | | |
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37.
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Each
unit of ownership in a corporation is ____. a. | a share of stock | c. | a trade discount | b. | capital
stock | d. | none of the
above | | | | |
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38.
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Total
shares of ownership in a corporation is ____. a. | a share of stock | c. | a trade discount | b. | capital
stock | d. | none of the
above | | | | |
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39.
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A
corporation has separate capital accounts for the stock issued and ____. a. | plant
assets | c. | drawings | b. | current liabilities | d. | earnings kept in the business | | | | |
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40.
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Keeping information in a corporation's accounting system separate from the personal
records of the owners is an application of the accounting concept ____. a. | Going
Concern | c. | Unit of
Measurement | b. | Objective Evidence | d. | Business Entity | | | | |
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41.
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Recording purchases at their cost is an application of the accounting concept
____. a. | Accounting
Period Cycle | c. | Objective
Evidence | b. | Going Concern | d. | Historical Cost | | | | |
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42.
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The
amount on each line of a purchases journal is posted as a ____. a. | debit to the
purchases account in the general ledger | b. | debit to the accounts payable account in the general
ledger | c. | credit to the cash account in the general
ledger | d. | credit to the vendor account in the accounts payable
ledger | | |
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43.
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A
special journal used to record only cash payment transactions is ____. a. | a cash payments
journal | c. | a cash receipts
journal | b. | a purchases journal | d. | none of the above | | | | |
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44.
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Most
cash payments are for ____. a. | expenses | c. | payments to vendors | b. | cash
purchases | d. | all of
these | | | | |
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45.
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A
reduction in the list price granted to a customer is a ____. a. | trade
discount | c. | list
price | b. | trade price | d. | cash discount | | | | |
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46.
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A
deduction that a vendor allows on the invoice amount to encourage prompt payment is a
____. a. | trade
discount | c. | list
price | b. | trade price | d. | cash discount | | | | |
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47.
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If
merchandise is purchased for $1,000.00 on August 1, with terms of sale of 2/10, n/30, the amount due
to the vendor on August 9 is ____. a. | $1,000.00 | c. | $980.00 | b. | $990.00 | d. | $20.00 | | | | |
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48.
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Since
contra accounts are offsets to their related accounts, contra account normal balances are
____. a. | debits | b. | credits | c. | opposite the
normal balances of their related accounts | d. | the same as the normal balances of their related
accounts | | |
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49.
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To
replenish a $300.00 petty cash fund, if the petty cash custodian had receipts totaling $224.00 and
cash of $74.00 in the petty cash box, one part of the journal entry is a ____. a. | debit to Cash
Short and Over for $2.00 | c. | debit to Petty
Cash for $224.00 | b. | credit to Cash for $224.00 | d. | credit to Cash Short and Over for
$2.00 | | | | |
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50.
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To
replenish a $200.00 petty cash fund, if the petty cash custodian had receipts totaling $168.00 and
cash of $35.00 in the petty cash box, one part of the journal entry is a ____. a. | debit to Cash
for $168.00 | c. | credit to Cash
for $165.00 | b. | debit to Petty Cash for $168.00 |
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