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Solutions

Multiple Choice Questions - Solutions​

  1. Which accounting principle requires expenses to be recorded in the same period as related revenues?

    • Answer: c) The Matching Principle requires expenses to match with related revenues.

  2. In the expanded accounting equation, revenue:

    • Answer: c) Revenue increases equity, which increases the right side of the equation.

  3. Which step comes first in the accounting cycle?

    • Answer: c) Identifying transactions is the first step in the accounting cycle.

  4. A debit to an asset account:

    • Answer: a) Debits increase assets (normal balance is debit).

  5. In Luxembourg, accounting records must be retained for:

    • Answer: d) Luxembourg requires 10-year retention of accounting records.

  6. Which PCN class contains cash and bank accounts?

    • Answer: c) Class 5 contains financial accounts (cash and banks).

  7. A trial balance that balances proves:

    • Answer: c) A balanced trial balance only proves mathematical accuracy, not correctness.

  8. The normal balance for expense accounts is:

    • Answer: a) Expenses have a debit normal balance (increases are debits).

  9. In Luxembourg, double-entry bookkeeping is:

    • Answer: c) Double-entry bookkeeping is a legal requirement in Luxembourg.

  10. When a business purchases inventory on credit, which accounts are affected?

  • Answer: b) Inventory (asset) increases and Accounts Payable (liability) increases.

Note: Solutions will be provided in a separate solutions manual. For now, students should work through problems and cases, then compare with instructor-provided solutions or discuss in class.