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This post addresses accounting practice questions.

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1. What is the key distinction between current and non-current assets?
Current assets will be used up or converted to cash within one year or one operating cycle.
Non-current assets are which do not lose their value over time.
Current assets always have lower balances than non-current assets.
Non-current assets will not be used until the future.

2. Which of the following statements MOST precisely describes a classified balance sheet?
Accounts are classified by their purchase dates.
Account balances are listed from the highest amount to the lowest amount.
Assets are listed in their order of liquidity.
Assets are listed in alphabetical order.

3. To what account is the balance in the Income summary account closed?
The Withdrawal account
The net income account
The Capital account
The Revenue account

4. Which of the following accounts will still show a balance after the closing process is completed?
Withdrawal account
Expense accounts
Accumulated depreciation account
Service revenue account

5. Which of the following is TRUE?
Accrual accounting is required by generally accepted accounting principles.
Accrual accounting records expenses when incurred. Cash-basis accounting records expenses when cash is paid.
Accrual accounting records revenue when services are rendered. Cash-basis accounting records revenue when cash is received.
All of the above are true.

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Solution Preview

1. What is the key distinction between current and non-current assets?
Current assets will be used up or converted to cash within one year or one operating cycle. <-- this is true. All current assets and current liabilities are within one year, which is what makes them current assets/liabilities.

Non-current assets are which do not lose their value over time.
Current assets always have lower balances than non-current assets.
Non-current assets will not be ...

Solution Summary

The solution provides the correct answers with explanations for the asset/liabilities, financial accounting, and income statement questions listed.

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