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| 1.
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The financial position of the business on a given date is reported on the |
| | A) | Income Statement |
| | B) | Balance Sheet |
| | C) | Statement of Changes In Owner's Equity |
| | D) | Statement of Cash Flows |
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| 2.
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The net profit or loss for a particular period of time is reported on the |
| | A) | Income Statement |
| | B) | Balance Sheet |
| | C) | Trial Balance |
| | D) | Statement of Changes In Owner's Equity |
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| 3.
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The investment of cash into the business results in a(an) |
| | A) | increase in cash and a decrease in capital |
| | B) | increase in cash and an increase in capital |
| | C) | decrease in cash and an increase in capital |
| | D) | increase in fees earned and an increase in capital |
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| 4.
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The purchase of supplies for cash will result in a(an) |
| | A) | increase in cash and a decrease in capital |
| | B) | increase in cash and an increase in supplies |
| | C) | increase in supplies and a decrease in cash |
| | D) | increase in equipment and an increase in capital |
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| 5.
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Services rendered for cash will result in a(an) |
| | A) | increase in cash and a decrease in capital |
| | B) | increase in cash and an increase in fees earned |
| | C) | decrease in cash and an increase in fees earned |
| | D) | increase in fees earned and an decrease in capital |
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| 6.
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Cash is received from a client for office rental space. |
| | A) | cash increases and rental fees earned decreases |
| | B) | cash increases and rental fees earned increases |
| | C) | cash decreases and capital increases |
| | D) | cash decreases and withdrawals increases |
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| 7.
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Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting principle or concept? |
| | A) | Continuing-concern concept |
| | B) | Business entity principle |
| | C) | Realization principle |
| | D) | Objectivity principle |
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| 8.
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Which of the following is a formal written promise to pay a definite sum of money on demand or at a fixed or determinable future date? |
| | A) | Account payable |
| | B) | Account receivable |
| | C) | Note payable |
| | D) | Prepaid insurance policy |
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| 9.
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Peter Atli decided to pay himself a salary of $3,000 per month for the work he performs for his business, a single proprietorship. Each time a cheque is recorded for $3,000, which account should be increased? |
| | A) | Salaries Expense |
| | B) | Capital |
| | C) | Peter Atli, Withdrawals |
| | D) | Owner Salary Expense |
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| 10.
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The personal telephone bill of Junior Sample was paid by issuing a cheque from the business chequing account. No business calls had been made from Junior's personal phone. What account must be charged for this transaction? |
| | A) | Junior, Capital |
| | B) | Cash |
| | C) | Junior, Withdrawals |
| | D) | Telephone Expense |
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| 11.
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Which of the following accounts is NOT a liability? |
| | A) | Accounts Payable |
| | B) | Accounts Receivable |
| | C) | Salaries Payable |
| | D) | Notes Payable |
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| 12.
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Assets total $50,000 and Liabilities total $10,000. The equity of the business must total |
| | A) | $4,000 |
| | B) | $40,000 |
| | C) | $400 |
| | D) | $40 |
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| 13.
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The resulting amount when total liabilities are subtracted from total assets is known as |
| | A) | owner's equity or net assets |
| | B) | net income or net loss |
| | C) | total expenses |
| | D) | total revenue |
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| 14.
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A broad rule adopted by the accounting profession as a guide in measuring, recording, and reporting the financial affairs and activities of a business is known as |
| | A) | an accounting concept |
| | B) | an accounting principle |
| | C) | the basic accounting equation |
| | D) | objectivity principle |
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| 15.
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Using a sales invoice as the basis for recording a sale of merchandise is an example of using which accounting principle or concept for recording transactions? |
| | A) | Recognition principle |
| | B) | Objectivity principle |
| | C) | Realization principle |
| | D) | Continuing-concern concept |
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| 16.
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Which of the following statements is true? |
| | A) | a salary paid to a partner is an expense to the partnership |
| | B) | a salary paid to a proprietor is an expense to the proprietorship |
| | C) | a salary paid to a shareholder is an expense of the corporation |
| | D) | the business entity principle does not apply to corporations |
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| 17.
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Keith Manich deposited $5,000 in a bank account he established for a pet store that he is going to own and operate as KM's Pets. Recording the deposit will |
| | A) | increase an asset, increase a liability |
| | B) | decrease an asset, decrease a liability |
| | C) | increase an asset, increase owner's equity |
| | D) | decrease an asset, decrease owner's equity |
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| 18.
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Better-Cars Selection, a used car dealer, has total assets and liabilities of $50,000 and $18,000, respectively. The firm constructed a shelter for its automobiles by promising to pay the building contractor, upon completion of the building, $500 per month for twenty-four months. Upon completion, owner's equity will: |
| | A) | increase by $12,000 |
| | B) | remain unchanged |
| | C) | decrease by $12,000 |
| | D) | increase by $500, each month |
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| 19.
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The owner of a computer services business was able to acquire a new computer, valued at $5,000, by establishing an account with the computer vendor, Com Pewters Unlimited. There was no down payment. Recording the transaction will |
| | A) | increase an asset, increase a liability |
| | B) | decrease an asset, decrease a liability |
| | C) | increase an asset, increase owner's equity |
| | D) | decrease an asset, decrease owner's equity |
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| 20.
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A sole proprietor recorded the payment of an account payable to an office supplies store. Recording the transaction will |
| | A) | increase an asset, increase a liability |
| | B) | decrease an asset, decrease a liability |
| | C) | increase an asset, increase owner's equity |
| | D) | decrease an asset, decrease owner's equity |
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| 21.
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If during the accounting period the assets increased by $5,000, and the owner's equity increased by $1,000, then the liabilities must have |
| | A) | increased by $6,000 |
| | B) | increased by $4,000 |
| | C) | decreased by $4,000 |
| | D) | decreased by $6,000 |
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| 22.
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If during the accounting period the assets increased by $7,000, and the owner's equity decreased by $3,000, then the liabilities must have |
| | A) | increased by $10,000 |
| | B) | increased by $4,000 |
| | C) | decreased by $4,000 |
| | D) | decreased by $10,000 |
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| 23.
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One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection procedures. When the firm pays the student her weekly wage, the transaction will |
| | A) | increase an asset, increase a liability |
| | B) | decrease an asset, decrease a liability |
| | C) | increase an asset, increase owner's equity |
| | D) | decrease an asset, decrease owner's equity |
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| 24.
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The total revenues for the month of July are $47,500 and the total expenses for the same period are $41,500. What is the net income or net loss? |
| | A) | Net Income $89,000 |
| | B) | Net Income $6,000 |
| | C) | Net Loss $6,000 |
| | D) | Net Loss $89,000 |
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| 25.
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The cash flow statement describes the sources and uses of cash for a reporting period. Based on which company's activities do they report the cash information? |
| | A) | operating activities |
| | B) | investing activities |
| | C) | financing activities |
| | D) | all of the above |
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| 26.
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A lawyer received a legal fee of $2,500 from a client on September 26 for legal services to be delivered starting October 1 and finishing Oct 31. When should the revenue be recognized? |
| | A) | September 26. |
| | B) | September 30. |
| | C) | October 1. |
| | D) | October 31. |
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| 27.
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A company purchased an automobile by paying $5,000 cash and signing a $20,000 notes payable. Recording the transaction |
| | A) | cash increases $5,000, automobile increases $25,000, and notes payable increases $20,000. |
| | B) | cash increases $5,000, automobile increases $20,000, and notes payable increases $25,000. |
| | C) | cash decreases $5,000, automobile increases $25,000, and notes payable increases $20,000. |
| | D) | cash decreases $5,000, automobile increases $25,000, and notes payable decreases $20,000. |
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| 28.
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Beginning owner's capital is $3,000. During the month, the owner invested another $1,500 in the company and the company also made a profit of $2,750. At the end of the month, the owner withdrew $1,200 for personal expenses. What is the ending owner's equity? |
| | A) | $6,050 |
| | B) | $3,050 |
| | C) | $2,950 |
| | D) | 8,450 |
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| 29.
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A company purchased a used car for $6,500. It is listed in the automobile magazine for $7,200. The owner thinks that she would be able to sell it for $6,800. Based on the cost principle, what is the amount that the company should record in the book? |
| | A) | $7,200 |
| | B) | $7,000 |
| | C) | $6,800 |
| | D) | $6,500 |
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| 30.
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The withdrawals by owner will result in a(an) |
| | A) | increase in the Withdrawal account and an increase in the Capital account |
| | B) | decrease in the Withdrawal account and a decrease in the Capital account |
| | C) | increase in the Cash account and a decrease in the Capital account |
| | D) | decrease in the Cash account and an increase in the Withdrawal account. |
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| 31.
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Nike sold a pair of shoes to a retailer for $100. The retailer sold the shoes to you for $125. It cost Nike $80 to make the shoe. It cost the retailer $105 total to buy and sell the shoe. Which answer below is not correct? |
| | A) | Nike will make $20 on the transaction |
| | B) | The retailer will make $20 on the transaction |
| | C) | They both will have the same revenue on the sale |
| | D) | They both will have the same net profit on the sale |
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| 32.
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If revenues for the accounting period total $6,000, and the expenses total $10,000, then the net income (loss) must total |
| | A) | $16,000 |
| | B) | $4,000 |
| | C) | ($4,000) |
| | D) | ($16,000) |
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| 33.
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If revenues for the accounting period total $5,000, and the expenses total $1,000, then the net income (loss) must total |
| | A) | $6,000 |
| | B) | $4,000 |
| | C) | ($6,000) |
| | D) | ($4,000) |
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