Chapter 1 Asset Liability Owners Equity Revenue and
Chapter 1 Asset, Liability, Owner’s Equity, Revenue, and Expense Accounts
Question 1 The purchase of an asset (like Equipment) on account will a) b) c) d) e) increase total liabilities and decrease total assets. have no effect on total assets or total liabilities. increase total assets and increase owner's equity. increase total assets and decrease owner's equity. 1|2
Question 2 Capital represents the owner's investment, or equity, in a business. a) True b) False 1|3
Question 3 Which of the following is not considered an account? a) b) c) d) e) Equipment Revenues Accounts Payable Cash Accounts Receivable 1|4
Question 4 An owner can invest cash or other assets of value in the business. a) True b) False 1|5
Question 5 When the rent for the business is paid with a check, a) Cash is decreased and Rent Expense is decreased. b) Cash is decreased and Rent Income is increased. c) Cash is decreased and Rent Expense is increased. d) Cash is decreased and Accounts Payable is decreased. e) Cash is increased and Rent Expense is decreased. 1|6
Question 6 When a business receives a payment from a charge customer, the revenue account is not affected. a) True b) False 1|7
Question 7 Which of the following is a form of Revenue? a) b) c) d) e) A check paying a mortgage A credit purchase invoice Credit sales to charge customers A cash purchase invoice A check paying utilities 1|8
Question 8 The amounts owed by charge customers are recorded in the Accounts Receivable account. a) True b) False 1|9
Question 9 The purchase of supplies for cash will a) increase Supplies and decrease Cash. b) increase Supplies Expense and decrease Cash. c) decrease Cash and increase Accounts Payable. d) increase Supplies Expense and increase Accounts Payable. e) decrease Cash and increase Capital. 1 | 10
Question 10 People who loan money to a company are considered the company’s debtors. a) True b) False 1 | 11
Chapter 2 T Accounts, Debits and Credits, Trial Balance, and Financial Statements
Question 11 The normal balance of an account is on the a) b) c) d) e) plus side. left side. debit side. right side. credit side. 1 | 13
Question 12 An increase in an expense is recorded as a debit. a) True b) False 1 | 14
Question 13 Which of the following classifications of accounts has/have a normal credit balance? a) b) c) d) e) Drawing Revenues Liabilities Revenues and liabilities All of these 1 | 15
Question 14 A verification of the equality of debits and credits in the ledger at the end of a fiscal period is called a balance sheet. a) True b) False 1 | 16
Question 15 The receipt of cash on account from a customer should be recorded as a) b) c) d) e) a debit to Cash and a credit to Accounts Payable. a debit to Cash and a credit to Income from Services. a debit to Cash and a credit to Accounts Receivable. a debit to Cash and a credit to the Capital account. none of these. 1 | 17
Question 16 Recording $520 as $5. 20 is an example of a slide. a) True b) False 1 | 18
Question 17 A purchase of supplies on account should be recorded as a) a debit to Supplies Expense and a credit to Cash. b) a debit to Accounts Payable and a credit to Supplies. c) a debit to Supplies Expense and a credit to Accounts Payable. d) a debit to Supplies Expense and a credit to Accounts Receivable. e) none of these. 1 | 19
Question 18 The third line in the heading of a balance sheet indicates one specific date. a) True b) False 1 | 20
Question 19 To locate an error in a trial balance, a) re-add. b) look for the correct location of normal balances. c) verify figures transferred from the account to the trial balance. d) check footings and balances of the accounts. e) do all of these. 1 | 21
Question 20 To prepare the financial statements for a business, you should prepare the balance sheet first, followed by the income statement, and then the statement of owner’s equity. a) True b) False 1 | 22
Chapter 3 The General Journal and the General Ledger
Question 21 A book of original entry is known as a) b) c) d) e) a ledger account. a general ledger a trial balance. a journal. a T account. 1 | 24
Question 22 The explanation for a transaction in the general journal in a manual system is indented under the credit part of the entry. a) True b) False 1 | 25
Question 23 When posting from the journal to the ledger, the accountant failed to post a $52 debit to Cash. The effect of this error will be that a) the amounts in the journal will be in error. b) the trial balance will not balance. c) the total debits in the trial balance will be larger than the total credits. d) the Cash account balance will be overstated. e) the trial balance will not be affected. 1 | 26
Question 24 The Item column in the ledger is mostly used at the end of a financial period to make brief notations about end-of-period entries. a) True b) False 1 | 27
Question 25 If the number of an account is 211, this probably means that the account is a) the first account in the Owner's Equity section. b) the first account in the Assets section. c) the first account in the Revenues section. d) the first account in the Liabilities section. e) the first account in the Expenses section. 1 | 28
Question 26 A ledger account contains a complete record of the transaction activity in that account. a) True b) False 1 | 29
Question 27 A cash payment of $130 on account was recorded as a $310 debit to Accounts Payable and a $310 credit to Cash. The necessary correcting entry is a) b) c) d) e) debit Cash, $180; credit Accounts Receivable, $180. debit Accounts Payable, $180; credit Cash, $180. debit Cash, $180; credit Accounts Payable, $180. debit Accounts Receivable, $180; credit Cash, $180. debit Cash $130, credit Accounts Payable, $130. 1 | 30
Question 28 A number in the Post. Ref. column in the ledger account indicates that the balance has been recorded in the trial balance. a) True b) False 1 | 31
Question 29 Which of the following errors will probably show up in the preparation of a trial balance? a) Posting the debit of a journal entry as a credit and the credit as a debit b) Failure to record an entire entry in the journal c) Failure to post an entire entry in the ledger d) Failure to post part of an entry e) Posting the correct amount to the incorrect credit account 1 | 32
Question 30 Failure to post an entire transaction from the journal to the ledger will cause an error in the trial balance. a) True b) False 1 | 33
Chapter 4 Adjusting Entries and the Work Sheet
Question 31 Accrued wages are a) wages that have been paid. b) wages that have been earned by employees but not paid. c) wages that have been neither earned by employees nor paid. d) wages that were earned by employees and have been paid. e) wages that have been paid but not earned by employees. 1 | 35
Question 32 Financial statements are prepared from the Adjusted Trial Balance columns of a work sheet. a) True b) False 1 | 36
Question 33 If equipment cost $20, 000 and accumulated depreciation amounts to $6, 000, the book value of the equipment is a) b) c) d) e) $26, 000. $14, 000. $20, 000. Cannot be determined with the information provided 1 | 37
Question 34 The owner's personal withdrawals for the year cause a decrease in net income. a) True b) False 1 | 38
Question 35 Failure to record the entry for accrued wages results in a) b) c) d) e) wages payable being overstated. net income being understated. wages expense being understated. total assets being overstated. 1 | 39
Question 36 The cost of insurance used will appear in the Adjustments Debit column, the Adjusted Trial Balance Debit column, and the Income Statement Debit column. a) True b) False 1 | 40
Question 37 The difference between the balance of the Equipment account and its related Accumulated Depreciation account is called a) b) c) d) e) trade-in value. a contra asset. book value. an accrued asset. an accrued liability. 1 | 41
Question 38 The purpose of a work sheet is to enable the accountant to prepare the financial statements. a) True b) False 1 | 42
Question 39 If total credits exceed total debits in the Balance Sheet columns of a work sheet, a) b) c) d) a mistake has been made. a net income has occurred. a net loss has occurred. no conclusion can be drawn until the closing entries have been made. e) assets exceed liabilities. 1 | 43
Question 40 The book value of an asset is always equal to the asset’s true market value. a) True b) False 1 | 44
Chapter 5 Closing Entries and the Post-Closing Trial Balance
Question 41 Which of the following sequences of documents or records describes the proper sequence in the accounting cycle? a) Source documents, journal, ledger, work sheet, financial statements b) Source documents, work sheet, journal, ledger, financial statements c) Source documents, ledger, journal, work sheet, financial statements d) Work sheet, source documents, financial statements, ledger, journal e) Financial statements, journal, ledger, source documents, work sheet 1 | 46
Question 42 Both income statement and balance sheet accounts are closed at the end of a fiscal period. a) True b) False 1 | 47
Question 43 The owner's Drawing account for the current period is closed to a) b) c) d) e) the Cash account. the Income Summary account. the Income from Services account. the owner's Capital account. the Wages Expense account. 1 | 48
Question 44 The balance of Wages Payable will normally appear on the balance sheet. a) True b) False 1 | 49
Question 45 Closing entries are prepared a) b) c) d) e) before adjusting entries. during the month. the first day of the new accounting period. after adjusting entries. at the option of the company's accounting department. 1 | 50
Question 46 The post-closing trial balance is final proof that the total of the debit balances equals the total of the credit balances. a) True b) False 1 | 51
Question 47 Revenue and expenses would not appear on a(n) a) b) c) d) e) post-closing trial balance. adjusted trial balance. income statement. work sheet. unadjusted trial balance. 1 | 52
Question 48 The first step in the closing procedure is to close the expense accounts into the Income Summary account. a) True b) False 1 | 53
Question 49 The post-closing trial balance includes only the balances of real or permanent accounts. a) True b) False 1 | 54
- Slides: 54