multiplechoice 15. The primary objective of financial accounting is: A. To serve

Question

multiplechoice

15. The primary objective of financial accounting is: A. To serve the decision-making needs of internal users B. To provide financial statements to help external users analyze an organization's activities. C. To monitor and control company activities. D. To provide information on both the costs and benefits of looking after products and services. E. To know what, when, and how much to produce 16. Adjusting entries: A. Affect only income statement accounts. B. Affect only balance sheet accounts. C. Affect both income statement and balance sheet accounts. D. Affect only cash flow statement accounts. E. Affect only equity accounts. 17. An adjusting entry could be made for each of the following except A. Prepaid expense:s B. Depreciation. C. Owner withdrawals. D. Unearned revenues. E. Accrued revenues. 18. An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n): A. Accrued expense. B. Contra account C. Accrued revenue. D. Intangible asset. E. Adjunct account. 19. Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period are: A. Real accounts. B. Temporary accounts. C. Closing accounts. D. Permanent accounts.

Explanation / Answer

15. Answer - B - To provide financial statements to help external users analyse as organisation's activities.

The primary objectives of financial accounting are to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to wide range of external users in making investment and credit decisions and assessing the amount, timing, and uncertainty of future cash flows; and in learning about the enterprise's economic resources, claims to resources, and changes in claims to resources.

16. Answer - C - Affect both income statement and balance sheet account

Adjusting entries are journal entries recorded at the end of an accounting period to adjust income and expense accounts so that they comply with the accrual concept of accounting which include revenues not yet received nor recorded and expenses not yet paid nor recorded . Their main purpose is to match incomes and expenses to appropriate accounting periods.

17. Answer - C - Owner withdrawals.

As explain in 16's answer adusting entries are made to complay with the accrual concept of accounting which include revenues not yet received nor recorded and expenses not yet paid nor recorded. Accouning of owners withdrawal is done on actual basis not on accrual basis.

18. Answer - B - Contra Account

An account linked with another account and having an opposite normal balance reported as a subtraction from the other account's balance so that more complete information than simply the net amount is provided.

19. Answer - B - Temporary Account

A temporary account is a general ledger account that begins each accounting year with a zero balance. At the end of the accounting year any balance in the account will be transferred to another account (Capital or retain earnings).

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