Chosen Answer
Sandy:  1)An audit guarantees that the financial statements are free of all misstatements - False. The audit report only says whether the a/cs give a true and fair view, not whether they are accurate. 2)The payment of a liability in cash will decrease owners' equity - False. Payment of a liab in cash will decrease cash and decrease liab. Owners' equity is not affected. 3)It is not possible for the left side of the equation to both increase/decrease as a result of the same transaction - True 4)Debits always increase and credits always decrease the accounts - False. Debits will always increase asset and expense a/cs and credits will always increase liability, revenue and equity a/cs. 5)In a journal entry, the debits must equal the credits and at least three accounts are affected by the transaction - False. At least two a/cs are affected by one journal entry. 6)An example of ongoing operations is revenue earned through the sale of a new automobile by a car dealership - True. Selling cars is its principal activity. 7)Example of revenue earned from ongoing operating activities is the sale of an extended warranty contract on a washer and dryer - True. I see this as part and parcel of the sale of the washer and dryer and part of the same business. I wouldn't say this is a non-operating item. Just ensure you match the revenue to the correct a/cg period if the warranty stretches over more than one a/cg period. 8)Cash flow operations would include cash used to purchase new equip - True in the sense that every business has to have Property plant & equipment so it's part of operating a business. False if this has to do with the cash flow statement. Acquisitions of PPE are cash outflows in investing activities not operations. 9)The ledger contains info which has been posted from the journal - True 10)Usually, adjusted entries are entered in the accounts at the beginning of the accounting period - False. Adjusting entries are usually made at the end of the period to close off the a/cs. 11)Rev collected in advance of being earned reps a liability until it is earned - True. It stays in liab as deferred income, for e.g. a magazine subscription for 12 mths. Every mth, the appropriate amt is journalised from deferred income to income until the deferred income a/c reaches 0 after the 12th issue has been delivered.
2007-07-12 19:22:45