LMULTIPLE CHOICE: 15 questions @2 points each Circle the letter for the statemen
ID: 2597489 • Letter: L
Question
LMULTIPLE CHOICE: 15 questions @2 points each Circle the letter for the statement which bests answer each of the following 1. Marcus has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client If he does all of the work himself and takes no legal steps to form a s pecial organization, which type of business organization, in effect, has he chosen? A) A limited-liability company B) A partnership C) A corporation D) A sole proprietorship Posting a transaction means: A) calculating the balance in an account. B) transferring the data from the journal to the ledger C) finding the account number in the chart of accounts. D) recording the transaction including a brief explanation. 2. 3. Which of the following assumes that the financial statements of a business can be prepared for specific periods? A) matching principle B) revenue recognition principle C) time period concept D) adjusting entry principle 4. The purposes of the adjusting process are: A) to adjust expenses and revenues to the proper accrual basis. B) to adjust asset and liability balances to the proper accrual basis. C) to adjust expenses and revenues as well as asset and liability balances to the proper accrual basis. D) none of the above. 5. Having one person responsible for the related activities of ordering merchandise receiving goods, and paying for them A) increases the potential for errors and fraud. B) decreases the potential for errors and fraud. C) is an example of good internal control. D) is a good example of safeguarding the company's assets. 204 Final Fall 2017 Page 2BExplanation / Answer
Answer to 1: D) A sole proprietorship.
Reason: Since he didn't carry out any legal formalities, it can't be any of the others.
Answer to 2: B) transferring the data from the journal to the ledger.
Reason: Posting is the process of entering the details of a transaction from Journal to Ledger.
Answer to 3: C) time period concept
Reason: Finnancial Statements of a business can be prepared for a specific period as per the "time period concept"
Answer to 4: A) to adjust expenses and revenues to the proper accrual basis
Reason: expenses and revenues of a period are adjusted on accrual basis
Answer to 5: A) increase the potential for errors and fraud.
Reason: Since only one person is dealing in everthing and no one else is there to keep a check on him, therefore it increases the potential for errors and fraud.
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