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Accounting Q1 & Q2
Practice Questions
| Question | Answer |
|---|---|
| T/F The term "owner's equity" means the owner's investment | true |
| T/F When an asset is purchased for cash, the owner's equity account is decreased | false |
| T/F Equipment and supplies are considered assets | true |
| T/F Expenses have the effect of decreasing owner's equity | true |
| T/F The amounts owed by charge customers are recorded in the Accounts Receivable account | true |
| T/F Withdrawals by the owner decrease owner's equity | true |
| T/F When a business receives a payment from a charge customer, the revenue account is not affected | true |
| T/F An accountant keeps a separate record for each asset, liability, owner's equity, revenue, and expense account | true |
| A one-owner business is called a(n): | sole proprietorship |
| Debts owed by a business are called: | liabilities |
| A person or business to whom money is owed is called a(n): | creditor |
| The categories listed under the classifications Assets, Liabilities, Owner's Equity, Revenue, and Expenses are called: | accounts |
| An event affecting a business that can be expressed in terms of money and that must be recorded in the accounting records is called a(n): | transaction |
| The owner's investment or equity in an enterprise is called: | capital/owner's equity |
| The equation expressing the relationship of assets. liabilities, and owner's equity is called the: | accounting equation |
| The _______ is the official list of account titles to be used to record the transactions of a business | chart of accounts |
| _______ represents the amount a business charges a customer for a service performed | revenue |
| If the owner takes cash out of the business each month, this is called a(n): | withdrawal |
| The account used to record the amounts owed by charge customers is: | accounts receivable |
| _____ are the costs related to the earning of revenue | expenses |
| increase side of a liability | credit |
| decrease side of an asset | credit |
| increase side of drawing | debit |
| An account designed to accumulate totals to offset a related account | contra account |
| The "book of original entry" is the: | general journal |
| The amount by which total assets exceed total liabilities | capital |
| Which of the following is an asset? a. account payable b. drawing account c. prepaid insurance d. supplies expense e. accumulated depreciation, equipment | prepaid insurance |
| The book containing all the accounts of a business | general ledger |
| An error resulting in debits not being equal to credits would be found where? | trial balance |
| A debit: a. decreases cash b. decreases revenues c. increases owner's equity d. decreases drawing e. increases liabilities | decreases revenues |
| The amount of difference between the total debits and the total credits to an account is called a: a. ruling b. footing c. trial balance d. balance e. none of these | balance |
| The normal balance is a credit in a(n): a. asset account b. owner's equity account c. expense account d. drawing account e. none | owner's equity account |
| Examples of expenses are: a. wages b. rent c. advertising d. utilities e. all of these | all |
| The capital account: a. decreases with increased revenues b. decreases with an investment c. decreases with increased expenses d. has a normal debit balance e. always has a balance equal to the cash account | decreases with increased expenses |
| Ernst Elf pays his company's bill for two years of insurance coverage. The transaction: a. increases the drawing account and decreases an asset account b. includes a debit to the cash account c. decreases one asset account and increases another asset acct | decreases one asset account and increases another asset account |
| The trial balance should: a. only be completed if you think there's a problem b. list all the accts for the business even if they do not have a balance c. be submitted to the owner as a formal report d. always balance e. all of these | always balance |
| A purchase of equipment in account: a. decreases cash b. increases an asset c. decreases owner's equity d. decreases expenses e. decreases revenue | increases an asset |
| The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called: | double-entry accounting |
| Which of the following would appear on the balance sheet? a. supplies b. liabilities c. prepaid insurance d. accounts payable e.all of these | all |
| A credit would be: a. an increase in an asset account b. an increase in a revenue account c. an increase in an expense account d. a decrease in a liability account e. a decrease in a capital account | an increase in a revenue account |
| Payment of liability will: a. decrease total assets & total liabilities b. decrease total liabilities & total owner's equity c. decrease total assets & increase total liabilities d. increase total liabilities & owner's equity e. | decrease total assets & total liabilities |
| On a statement of owner's equity, if beginning capital is 80,000, net income is 60,000, & withdrawals are 40,000, then ending capital would be: a. 140,000 b. 120,000 c. 60,000 d. 100,000 e. 180,000 | 100,000 |
| A business firm received $900 cash from charge customers to apply on account. The effect of the transaction on the accounting equation is: a. increase asset, decrease liability b. increase asset, decrease capital c. increase asset, decrease asset | increase asset, decrease asset |
| Which of the following in NOT a proper form of the fundamental accounting equation: a. assets-liabilities=owner's equity b. assets-owner's equity=liabilities c. assets=liabilities+owner's equity d. assets+liabilities=owner's equity | assets+liabilities=owner's equity |
| Debits signify increases in: a. expenses b. owner's equity c. revenue d. all of these e. none of these | expenses |
| Which has debit balances? a. assets b. drawing c. expenses d. all of these e. none of these | all of these |
| A trial balance is a listing of all the: a. assets owned by a business b. accounts in the ledger that have balances c. debts owed by a business d. lawsuits of a business in progress | accounts in the ledger that have balances |
| A business paper that serves as a record of a transaction is called: a. trail balance b. ledger account c. source document d. journal | source document |
| The balance sheet shows: a. changes in cash over time b. all transactions engaged in by a business on a specific date c. types of changes in the owner's investment over time d. financial position of a business on a specific date | financial position of a business on a specific date |
| Recognizing revenue when earned, whether or not cash has been received yet is done under what method of accounting: a. cash basis b. modified cash basis c. accrual basis | accrual basis |
| The process of transferring entries in the journal to the ledger is called: a. debiting b. posting c. working d. crediting e. balancing | posting |
| Property of a relatively permanent nature used in the operation of a business and not intended for resale: a. current liability b. fixed asset c. owner's equity d. long term liability d. current asset | fixed asset |
| Person who agrees to perform a service for a fee and who is not subject to the control of those for whom the service is performed: a. employee b. bookkeeper c. manager d. independent stockholder | independent contractor |
| Prepaid insurance should be classified on the: a. balance sheet as current liability b. balance sheet as long-term liability c. balance sheet as current asset d. balance sheet as fixed asset e. income statement as expense | balance sheet as current asset |
| An account designed to accumulate totals to offset a related account: a. chart of account b. checking account c. revenue account d. contra account e. temporary account | contra account |
| The "book of original entry" is the: a. general journal b. general ledger c. worksheet d. chart of accounts | general journal |
| The amount by which total assets exceed total liabilities: a. net income b. trial balance c. account receivable d. temporary account e. capital | capital |
| Which of the following is an asset? a. account payable b. drawing account c. prepaid insurance d. supplies expense e. accumulated depreciation, equipment | prepaid insurance |
| The book containing all the accounts of a business: a. general journal b. general ledger c. worksheet d. book income | general ledger |
| An error resulting in debits not being equal to credits would be found where? a. chart of accounts b. income statement c. statement of owner's equity d. contra account e. trial balance | trial balance |
| The process of recording equal debits and credits for a single business transaction: a. depreciation b. posting c. double entry accounting d. cross-referencing e. cash basis | double entry accounting |
| a credit may signify: a. decrease in capital b. decrease in liabilities c. normal balance of an asset d. increase in revenue e. normal balance of expense | increase in revenue |
| Which of the following accounts would not get adjusted at the end of the fiscal period? a. accounts receivable b. supplies c. depreciation expense d. wages expense e. prepaid insurance | accounts receivable |
| Which of the following accounts would not get closed at the end of the fiscal period? a. drawing b. income from services c. wages expense d. equipment e. advertising expense | equipment |
| Which of the following would appear on an income statement? a. drawing b. income summary c. wages payable d. equipment e. advertising expense | advertising expense |
| Which of the following would not appear in the post-closing trial balance? a. capital b. acc. dep., equipment c. wages payable d. equipment e. advertising expense | advertising expense |
| The cost of a fixed asset less its accumulated depreciation: a. cost b. book value c. market value d. true value | book value |
| Which of the following occurs last in the accounting cycle: a. worksheet b. posting c. adjusting entries d. journalizing e. post-closing trial balance | post-closing trial balance |
| Property owned by a business: a. asset b. liability c. capital d revenue e. expense | asset |
| The type of account and normal balance of accumulated depreciation: a. contra, credit b. contra, debit c. asset, debit d. asset, credit e. expense, debit | contra, credit |
| A formal statement of the results of the operations of a business during an accounting period is called a(n): a. statement of changes b. balance sheet c. statement of condition d. income statement | income statement |
| In a multiple step income statement, operating expenses are subtracted from gross profit to compute: a. income from operations b. net income c. other income d. net loss | income from operations |
| Net sales minus cost of goods sold equals: a. operating income b. operating expenses c. other expenses d. gross profit | gross profit |
| Accumulated depreciation amounts are shown as deductions from the: a. cost of building & equipment accounts b. accounts receivable c. accounts payable d. prepaid insurance account | cost of building & equipment accounts |
| A formal statement of assets, liabilities & owner's equity at a specified date is known as the: | balance sheet |
| Cash & all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of a business are classified as: | current assets |
| Assets that are used for several years in the operation of a business are called: | property, plant & equipment (fixed assets) |
| Those obligations that are due within one year or the normal operating cycle of a business and will be paid with money provided by the current assets are called: | current liabilities |
| The ability of a business to meet its current obligations may be determined by the: a. current ratio b. inventory turnover c. working ratio d. accounts receivable turnover | current ratio |
| Increase/Decrease which accounts: Owner invested cash | increase an asset, increase owner's equity |
| Increase/Decrease which accounts: payment of rent | decrease an asset, increase an expense |
| Increase/Decrease which accounts: sale of service for cash | increase an asset, increase revenue |
| Increase/Decrease which accounts: investment of equipment by owner | increase an asset, increase owner's equity |
| Increase/Decrease which accounts: payment of insurance premium for two years | increase an asset, decrease an asset |
| Increase/Decrease which accounts: payment of wages | decrease an asset, increase an expense |
| Increase/Decrease which accounts: sales of services on account | increase an asset, increase revenue |
| Increase/Decrease which accounts: withdrawal of cash by owner | decrease an asset, decrease owner's equity |
| Increase/Decrease which accounts: purchase of supplies on account | increase an asset, increase liabilties |
| Increase/Decrease which accounts: collection from charge customer previously billed | increase an asset, decrease an asset |
| Increase/Decrease which accounts: payment made to creditor on account | decrease an asset, decrease liabilities |
| Debit & Credit which accounts: invested cash in a business enterprise | debit cash, credit capital |
| Debit & Credit which accounts: received cash for services provided | debit cash, credit revenue |
| Debit & Credit which accounts: paid cash for rent on the office | debit rent expense, credit cash |
| Debit & Credit which accounts: purchased office equipment on account | debit equipment, credit accounts payable |
| Debit & Credit which accounts: paid cash to a creditor for a debt previously owed | debit accounts payable, credit cash |
| Debit & Credit which accounts: paid the telephone bill for the month | debit phone expense, credit cash |
Created by:
leahmurphy
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