Ch. 6 Objective Study Guide
True/False
Indicate whether the sentence or statement is true or false.
____
1. A fiscal period is also known as an accounting period.
____
2. All fiscal periods are one year long.
____
3. Most businesses use a fiscal period of one year because tax reports must be made at least once a year.
____
4. All fiscal periods must begin on January 1.
____
5. Many businesses choose a one-year fiscal period that ends during a period of high business activity.
____
6. Financial information may be reported any time a business needs it.
____
7. A trial balance is a proof of the equality of debits and credits in a general ledger.
____
8. All general ledger account titles are listed on a trial balance even if some accounts do not have a balance.
____
9. The column in which an account balance is recorded on a trial balance shows whether the account has a debit or
credit balance.
____ 10. All account balances are written in the Trial Balance Credit column.
____ 11. A double line ruled across both Trial Balance columns shows that the two columns are to be totaled.
____ 12. Making adjustments to general ledger accounts is an application of the Matching Expenses with Revenue
accounting concept.
____ 13. Every adjustment has debit and credit parts.
____ 14. The balance of the supplies account plus the value of the supplies on hand equals the up-to-date balance of the
supplies account.
____ 15. The value of the prepaid insurance coverage used during a fiscal period is an expense.
____ 16. The adjustment for prepaid insurance is a debit to Prepaid Insurance and a credit to Insurance Expense.
____ 17. When the Income Statement Credit column total is greater than the Income Statement Debit column total on a
work sheet, the business has a net income.
____ 18. A net loss results when total revenue is greater than total expenses.
____ 19. If an amount is written in an incorrect column on a work sheet, the error should be erased and the amount should
be written in the correct column.
____ 20. If the Trial Balance columns are not equal and the difference is $50.00, the error most likely is a $25.00 amount
written in the wrong column.
____ 21. The accounting concept Consistent Reporting is being applied when a word processing service business reports
revenue per page one year and revenue per hour the next year.
____ 22. Journals, ledgers, and work sheets are considered permanent records.
____ 23. All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts.
____ 24. The four questions asked when analyzing an adjustment are: Why? Where? When? and How?
____ 25. The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.
____ 26. The two accounts affected by the adjustment for insurance are Prepaid Insurance Expense and Insurance.
____ 27. Totaling and ruling the Adjustments columns of a work sheet is necessary to prove the equality of debits and
credits.
____ 28. Two financial statements are prepared from the information on the work sheet.
____ 29. Net income on a work sheet is calculated by subtracting the Income Statement Credit column total from the
Income Statement Debit column total.
____ 30. When two column totals are not in balance on the work sheet, the difference between the two totals is calculated
and checked.
____ 31. If the difference between the totals of Debit and Credit columns on a work sheet can be evenly divided by 9, then
the error is most likely in addition.
____ 32. If there are errors in the work sheet's Trial Balance columns, it might be because not all general ledger account
balances were copied in the Trial Balance columns correctly.
____ 33. Errors in general ledger accounts should never be erased.
____ 34. Most errors occur in doing arithmetic.
____ 35. Using a calculator will help prevent errors in accounting records, but not all errors are due to incorrect
calculations.
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____ 36. Following the same accounting procedures in the same way in each accounting period is an application of the
accounting concept ____.
a. Matching Expenses with Revenue
c. Consistent Reporting
b. Accounting Period Cycle
d. Going Concern
____ 37. Reporting changes in financial information for a specific period of time in the form of financial statements is an
application of the accounting concept ____.
a. Matching Expenses with Revenue
c. Consistent Reporting
b. Accounting Period Cycle
d. Going Concern
____ 38. A columnar form used to summarize general ledger information needed to prepare financial statements is ____.
a. a balance sheet
c. a work sheet
b. a trial balance
d. an income statement
____ 39. On a trial balance, ____.
a. all general ledger account titles are listed
b. only general ledger accounts that have balances are listed
c. only accounts with debit balances are listed
d. only accounts with credit balances are listed
____ 40. Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period are ____.
a. found on a trial balance
b. recorded in a work sheet's Income Statement columns
c. reported on financial statements
d. adjustments
____ 41. Recording revenue from business activities and expenses associated with earning that revenue in the same
accounting period is an application of the accounting concept ____.
a. Matching Expenses with Revenue
c. Consistent Reporting
b. Accounting Period Cycle
d. Going Concern
____ 42. On a work sheet, the balance of Cash is extended to the ____.
a. Balance Sheet Debit column
c. Income Statement Debit column
b. Balance Sheet Credit column
d. Income Statement Credit column
____ 43. On a work sheet, the balance of the owner's capital account is extended to the ____.
a. Balance Sheet Debit column
c. Income Statement Debit column
b. Balance Sheet Credit column
d. Income Statement Credit column
____ 44. On a work sheet, the balance of the Sales account is extended to the ____.
a. Balance Sheet Debit column
c. Income Statement Debit column
b. Balance Sheet Credit column
d. Income Statement Credit column
____ 45. On a work sheet, the balance of an expense account is extended to the ____.
a. Balance Sheet Debit column
c. Income Statement Debit column
b. Balance Sheet Credit column
d. Income Statement Credit column
____ 46. When total revenue is greater than total expenses, the difference is a ____.
a. net income
c. debit balance
b. net loss
d. none of the above
____ 47. A net loss is entered in the work sheet's ____.
a. Income Statement Debit and Balance Sheet Credit columns
b. Income Statement Credit and Balance Sheet Debit columns
c. Balance Sheet Debit and Trial Balance Credit columns
d. Income Statement Debit and Trial Balance Credit columns
____ 48. If a pair of work sheet columns do not balance and the difference between the totals is an amount that appears
elsewhere on the work sheet, the error is probably ____.
a. an error in addition
b. an amount that has been written in the wrong column
c. an amount that has not been extended
d. a slide
____ 49. If the Trial Balance columns are not equal and the difference is 1, the error often is ____.
a. transposed numbers or a "slide"
b. in writing an amount in the wrong column
c. in posting
d. in addition
____ 50. If the Trial Balance columns are not equal and the difference can by divided evenly by 9, the error most likely is
____.
a. in transposed numbers or a "slide"
b. subtraction
c. addition
d. in writing an amount in the wrong column