True/False
Indicate whether the sentence or statement is true
or false.
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1.
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A
business activity that changes assets, liabilities, or net worth is a transaction.
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2.
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A
general journal is used to record only cash payment transactions.
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3.
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Copying information from a ledger account to a journal entry is called
posting.
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4.
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An
accounts receivable ledger keeps track only of money owed to you by customers to whom you have sold
merchandise on account.
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5.
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If
you have a personal checking account, you do not need a separate account for your
business.
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6.
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Most
businesses use voucher checks for their payrolls because these checks have a check register that
shows the business how employees’ pay was calculated.
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7.
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Income tax must be prepaid at the beginning of each quarter, so you will need to
estimate your income taxes.
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8.
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An
advantage of computerized record keeping is that computer programs can help you analyze
data.
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9.
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The
balance sheet is based on the accounting equation, which states that assets equal liabilities plus
owner’s equity.
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10.
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A
balance sheet can be used to analyze your costs to determine where you may need to cut
back.
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11.
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Operating expenses include salaries, rent, cost of goods sold, and
utilities.
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12.
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A
cash flow statement deals with actual cash coming in and going out of a business.
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13.
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Net
cash flow, which is the difference between cash receipts and disbursements, is always
positive.
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14.
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Accounting assistants must pass a series of accounting examinations and are licensed
by the state in which they work.
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15.
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To
avoid running out of items customers want to buy, businesses use inventory tracking
methods.
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16.
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The
perpetual inventory method keeps track of inventory levels on a daily basis.
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17.
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A low
stock report, which can be generated by a computer, shows the dates when items were
received.
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18.
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To
take a physical inventory, one person counts the items on the shelves and another person records the
information.
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19.
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The
cost of carrying inventory depends on the method used to track inventory.
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20.
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If
the stock turnover rate for your industry is 3, you should keep four months worth of inventory in
stock at all times.
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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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21.
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A
business keeps tax records to record payments for a. | sales tax | c. | income tax | b. | payroll
deductions | d. | all of
these | | | | |
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22.
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An
advantage of computerized record keeping is that a. | computers prevent all mistakes | c. | computers can create reports that help a business owner make
decisions | b. | copies of files can be kept on floppy
disks | d. | the computer
automatically adds an item to inventory when a sale is made. | | | | |
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23.
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Social security and Medicare contributions by employees are shown a. | in a sales
journal | c. | on a bank
statement | b. | on a voucher check statement | d. | in an accounts receivable ledger | | | | |
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24.
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If a
customer receives goods that will be paid for later, the transaction should be recorded in
a a. | sales
journal | c. | cash receipts
journal | b. | cash payment journal | d. | purchases journal | | | | |
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25.
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To
identify categories of expenditures you may want to increase or decrease, you can use
your a. | income
statement | c. | cash flow
statement | b. | bank statement | d. | balance sheet | | | | |
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26.
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Net
cash flow is negative if cash receipts are a. | less than disbursements | c. | greater than disbursements | b. | equal to
disbursements | d. | none of
thses | | | | |
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27.
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The
financial statement that shows what a business owes and what it owns is the a. | income
statement | c. | cash flow
statement | b. | bank statement | d. | balance sheet | | | | |
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28.
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The
periodic inventory method involves a. | using stock cards to record
information | c. | taking weekly or
monthly physical inventories | b. | using a computer to track inventory
levels | d. | calculating
carrying costs | | | | |
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29.
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If
you hold too much inventory, your carrying costs can increase due to a. | out-of-stock
situations | c. | increased
accounts receivable | b. | a high turnover rate | d. | deterioration | | | | |
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30.
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An
inventory record in a perpetual inventory method should show all of the following
except a. | the current
amount of inventory | c. | the reorder
point | b. | the cost of the item | d. | the stock number of the item | | | | |
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Matching
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a. | cost of goods
sold | f. | by
type | b. | cash
receipts | g. | stock turnover
rate | c. | Sales
Journal | h. | transaction | d. | perpetual inventory method | i. | income taxes | e. | check
register | j. | revenue/sales | | | | |
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31.
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What
journal is used to record only sales of merchandise on account?
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32.
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What
is a business activity called that changes assets, liabilities, or net worth?
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33.
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How
do journals separate business transactions?
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34.
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Where
do you record checks you have written?
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35.
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What
kind of taxes must a business estimate and pay quarterly?
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36.
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What
is the cost of the inventory a business sells during a particular period called?
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37.
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What
are cost of goods sold and operating expenses subtracted from to find net profit before
taxes?
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38.
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What
are disbursements subtracted from to find net cash flow?
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39.
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Which
inventory method keeps track of inventory levels on a daily basis?
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40.
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What
is 12 divided by to find out how many months of inventory to keep in stock?
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