1: Closing entries are made

a. In order to terminate the business as an operating entity.

b. So that all assets, liabilities, and owner's capital accounts will have zero balances when the nex accounting period starts.

c. In order to transfer net income (or loss) and owner's drawings to the owner's capital account.

d. So that financial statements can be prepared.

2: Flip Company purchased merchandise from Flop Company with freight terms of FOB shipping point. The freight costs will be paid by the

a. Seller.

b. Buyer.

c. Transportation company.

d. Buyer and the seller.

3: A Sales Returns and Allowances account is not debited if a customer

a. Returns defective merchandise.

b. Receives a credit for merchandise of inferior quality.

c. Utilizes a prompt payment incentive.

d. Returns goods that are not in accordance with specifications.

4: Which of the following statements is incorrect?

a. A major consideration in developing an accounting system is cost effectiveness.

b. When an accounting system is designed, no consideration needs to be given to the needs and knowledge of the various users.

c. The accounting system should be able to accommodate a variety of users and changing information needs.

d. To be useful, information must be understandable, relevant, reliable, timely, and accurate.

5: Flip is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

a. Documentation procedures are violated.

b. Independent internal verification is violated.

c. Segregation of duties is violated.

d. Establishment of responsibility is violated.

Answer rating: 100% (QA)

1 c In order to transfer net income or loss and owners drawings ... View the full answer