Question

1. Oleander Company paid $22,000 for goods it had purchased last month on account. What is the effect of the payment?

a) an increase in cost of good sold

b) a decrease in accounts payable

c) an increase in inventory

d) a decrease in inventory

2. Information that has been determined based on the best information available using the correct process and with an adequate explanation provided is an example of which fundamental characteristic?

a) Faithful representation

b) neutral

c) verifiability

d) timeliness

3. The sale of merchandise to a customer partly for cash and partly on account would require which of the following?

a) decrease in accounts payable, increase in accounts receivable, increase in sales revenue

b) increase in cash, decrease in accounts payable, increase in sales revenue

c) increase in accounts receivable, increase in cash, increase in sales revenue

d) increase in cash, increase in sales revenue

4. an income summary can be used when closing the books?

a) true

b) false

5. The chart of accounts is

a) static

b) not generally useful

c) contains only permanent accounts

d) dynamic

Answer 1

1. Option (b) is correct

Paying $22000 for goods purchased on account last month will have effect on decrease in accounts payable, because by paying the creditors, last month's  accounts payable balance will reduce in current month.

2. Option (a) is correct

Faithful representation

3. Option (c) is correct

Sale of merchandise to a customer partly for cash and partly on account would require increase in accounts receivable, increase in cash and increase in sales revenue.

4. TRUE

Accounts / books are closed using an income summary.