Q. What is the effect of a purchase return on the inventory account?
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A.
Increase inventory
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B.
Decrease inventory
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C.
No effect on inventory
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D.
Transfer inventory to expenses
Solution
A purchase return decreases the inventory account as the goods are returned to the supplier.
Correct Answer:
B
— Decrease inventory
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Q. What is the primary basis for inventory valuation under the FIFO method?
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A.
First In, First Out
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B.
First In, Last Out
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C.
Last In, First Out
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D.
Weighted Average Cost
Solution
FIFO stands for First In, First Out, meaning the oldest inventory items are sold first.
Correct Answer:
A
— First In, First Out
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Q. Which method of depreciation spreads the cost of an asset evenly over its useful life?
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A.
Declining Balance Method
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B.
Units of Production Method
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C.
Straight-Line Method
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D.
Sum-of-the-Years'-Digits Method
Solution
The Straight-Line Method allocates an equal amount of depreciation expense each year over the asset's useful life.
Correct Answer:
C
— Straight-Line Method
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Q. Which of the following is a component of the final accounts?
-
A.
Trial Balance
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B.
Balance Sheet
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C.
Journal Entries
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D.
Cash Flow Statement
Solution
The Balance Sheet is one of the components of the final accounts, along with the Income Statement.
Correct Answer:
B
— Balance Sheet
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Q. Which of the following is a component of the trial balance?
-
A.
Net Income
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B.
Retained Earnings
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C.
Total Assets
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D.
Total Liabilities
Solution
Total Liabilities is a component of the trial balance, which lists all account balances.
Correct Answer:
D
— Total Liabilities
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