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MGT120H 2006 Summer Test and Test Solution.pdf

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University of Toronto Mississauga
Elisa Zuliani

MGT120 H1F Financial Accounting I Part A 9 marks1 Under the revenue principle a business should record revenue when the businessa receives an order from a customer for goods or services b prepares the invoice bill for goods or services c delivers goods or services to a customer d receives payment from a customer for goods or services2 If a bank statement included an EFT payment of 670 for insurance the journal entry to record this reconciling item would include aa debit to Cash for 670 b debit to Accounts Payable for 670 c credit to Cash for 670 d credit to Prepaid Insurance for 670 3 If the debit amount of an entry to record the purchase of supplies on account was not posteda liabilities would be understated b liabilities would be overstated c assets would be overstated d assets would be understated4 When a business sells inventory in exchange for cash which of the following accounts is crediteda Revenue b Cash c Owners Equity d Accounts Payable5 A company using the cash basis of accounting pays for one year of rent in advance The entry to record this transaction will involve a debit toa Deferred Rent Revenue b Rent Revenue c Rent Expense d Prepaid Rent
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