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| 1 | |
The accounting cycle consists of which of the following number of specific steps? |
| | A) | Three |
| | B) | Four |
| | C) | Five |
| | D) | Eight |
| | E) | Ten |
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| 2 | |
Which is the first step in the accounting cycle? |
| | A) | Preparing a trial balance |
| | B) | Journalizing transactions |
| | C) | Posting |
| | D) | Preparing financial statements |
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| 3 | |
The role of the accounting records includes which of the following? |
| | A) | Establishing accountability |
| | B) | Obtaining detailed information about a particular transaction |
| | C) | Evaluating efficiency and performance of various departments |
| | D) | All of the above |
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| 4 | |
The collection of all of the accounts is kept together in the: |
| | A) | journal, only. |
| | B) | ledger, only. |
| | C) | trial balance, only. |
| | D) | both the journal and the ledger. |
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| 5 | |
The simplest form of an account is called a |
| | A) | T account. |
| | B) | modified account. |
| | C) | ledger account. |
| | D) | none of the above. |
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| 6 | |
Which of the following is not true about the normal balance of the accounts or account categories shown below? |
| | A) | Assets normally have a debit balance. |
| | B) | Liabilities normally have a credit balance. |
| | C) | Owners' equity accounts normally have a credit balance. |
| | D) | Accounts receivable normally has a credit balance. |
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| 7 | |
Which of the following is a correct statement of the rules of debit and credit? |
| | A) | Debits increase assets and decrease liabilities. |
| | B) | Debits increase assets and increase owners' equity. |
| | C) | Credits decrease assets and decrease liabilities. |
| | D) | Credits increase assets and increase owners' equity. |
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| 8 | |
Which of the following is not true? |
| | A) | Increases in assets are recorded as debits. |
| | B) | Increases in liabilities are recorded as debits. |
| | C) | Decreases in owners' equity are recorded as debits. |
| | D) | Increases in expenses are recorded as debits. |
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| 9 | |
Which of the following provides a system of recording every business transaction with equal dollar amounts of both debit and credit entries? |
| | A) | Matching principle |
| | B) | Realization principle |
| | C) | Double-entry accounting |
| | D) | Accrual basis of accounting |
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| 10 | |
Consider the following:
| Assets | = | Liabilities + | Owners' Equity | | Debit to | Credit to | | Debit to | Credit to | Debit to | Credit to | | A | Increase | Decrease | | Decrease | Increase | Increase | Decrease | | B | Increase | Decrease | | Decrease | Increase | Decrease | Increase | | C | Decrease | Increase | | Increase | Decrease | Decrease | Increase | | D | Decrease | Increase | | Increase | Decrease | Increase | Decrease |
Which line of the schedule correctly reflects the Debit-Credit rules? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 11 | |
Economic events (transactions) that affect the accounting equation are initially recorded in which of the following? |
| | A) | Ledger |
| | B) | T account |
| | C) | Journal |
| | D) | Trial balance |
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| 12 | |
The process of transferring information from the journal to the ledger, in order to update the ledger, is called which of the following? |
| | A) | Posting |
| | B) | Recording |
| | C) | Journalizing |
| | D) | Accounting |
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| 13 | |
Recording a $100,000 investment by owners on January 1 for capital stock of the company will result in which of the following? |
| | A) | Increase an asset and decrease owner's equity |
| | B) | Increase an asset and increase a liability |
| | C) | Increase an asset and increase owners' equity |
| | D) | Increase an asset and decrease a liability |
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| 14 | |
The purchase of a building for $200,000 cash on January 1 will: |
| | A) | increase an asset and decrease owner's equity. |
| | B) | increase an asset and increase a liability. |
| | C) | increase an asset and increase owners' equity. |
| | D) | increase one asset and decrease another. |
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| 15 | |
The January 1 purchase of $50,000 of office equipment by issuing a check for $5,000 and a note payable for the balance will cause an overall effect of: |
| | A) | Increasing total assets and decreasing owner's equity |
| | B) | Increasing total assets and increasing liabilities |
| | C) | Increasing total assets and increasing owners' equity |
| | D) | Decreasing total assets and increasing liabilities |
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| 16 | |
If an asset is debited, which of the following might also have occurred? |
| | A) | A credit to owners' equity. |
| | B) | A credit to another asset. |
| | C) | A credit to a liability. |
| | D) | All of the above. |
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| 17 | |
On March 1 you paid the non-interest-bearing $45,000 note payable dated and issued on January 1. The payment of the note will result in which of the following? |
| | A) | Decrease an asset and decrease a liability |
| | B) | Increase an asset and increase a liability |
| | C) | Increase an asset and increase owners' equity |
| | D) | Decrease an asset and decrease owners' equity |
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| 18 | |
The collection of an account receivable of $3,000 on January 15 will result in which of the following? |
| | A) | A decrease an asset and decrease a liability |
| | B) | An increase one asset and decrease another |
| | C) | An increase an asset and increase owners' equity |
| | D) | A decrease an asset and decrease owners' equity |
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| 19 | |
A collection of an account receivable will result in which of the following? |
| | A) | An increase in revenue. |
| | B) | An increase in cash, only |
| | C) | A decrease in accounts receivable, only. |
| | D) | No increase in total assets, total liabilities, or total owners' equity. |
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| 20 | |
Which of the following is not true about net income? |
| | A) | The company can have a cash shortage and still have net income. |
| | B) | Net income represents an asset. |
| | C) | Net income is the result of revenues exceeding expenses. |
| | D) | Net income represents an increase in owners' equity. |
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| 21 | |
To provide the users of financial statements with timely information, net income is measured for relatively short accounting periods of equal length as called for by which of the following? |
| | A) | Matching principle |
| | B) | Realization principle |
| | C) | Time period principle |
| | D) | Accrual basis of accounting |
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| 22 | |
Distributions of assets to stockholders are called which of the following? |
| | A) | Dividends |
| | B) | Losses |
| | C) | Expenses |
| | D) | Contra-revenues |
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| 23 | |
The net total of all income, losses, and dividends over the entire lifetime of the business can be found in which of the following? |
| | A) | Expense accounts |
| | B) | Retained Earnings account |
| | C) | Revenue and expense accounts |
| | D) | Asset accounts |
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| 24 | |
The fiscal year of a company is which of the following? |
| | A) | Any consecutive 12-month period |
| | B) | One that ends on December 31 |
| | C) | One that ends on June 30 |
| | D) | The same as the calendar year |
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| 25 | |
Revenue can be described as which of the following? |
| | A) | Net income for the accounting period |
| | B) | Gross increase in owners' equity resulting from operation of the business |
| | C) | Sales of services less the expenses related to the sales |
| | D) | All of the above |
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| 26 | |
The generally accepted accounting principle that determines when revenue should be recorded in the accounting records is called which of the following? |
| | A) | Matching principle |
| | B) | Realization principle |
| | C) | Time period principle |
| | D) | Double-entry accounting |
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| 27 | |
The generally accepted accounting principle that determines when expenses should be recorded in the accounting records is called which of the following? |
| | A) | Matching principle |
| | B) | Realization principle |
| | C) | Time period principle |
| | D) | Accrual basis of accounting |
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| 28 | |
An advertising program was paid in advance on March 1 for delivery through newspaper advertisements beginning on April 1 and ending on April 15. The advertising program cost $5,000. When should the expense of the advertising program be recognized? |
| | A) | March 1 |
| | B) | April 1 |
| | C) | May 1 |
| | D) | April 15 |
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| 29 | |
Services were performed and delivered on January 15. The expenses related to performing the services were paid on January 31. The customer paid for the services on February 10. The fiscal year of the company ends December 31. When should the revenue be recognized? |
| | A) | January 15 |
| | B) | January 31 |
| | C) | February 10 |
| | D) | December 31 |
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| 30 | |
An advertising program that cost $45,000, and was paid for on April 1, the beginning of the six-month program, was charged to Advertising Expense on April 1. What principle or concept was being applied that permitted the cost of the program to be charged immediately to an expense? |
| | A) | Matching principle |
| | B) | Conservatism concept |
| | C) | Realization principle |
| | D) | Accrual basis of accounting |
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| 31 | |
The effect of events on the business is recognized as services are rendered or consumed rather than when cash is received or paid and is a result of using which of the following? |
| | A) | Matching principle |
| | B) | Realization principle |
| | C) | Time period principle |
| | D) | Accrual basis of accounting |
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| 32 | |
Which of the following is true about dividends? |
| | A) | Dividends are an expense to the company. |
| | B) | Dividends are deducted from revenue in the income statement. |
| | C) | Dividends are always equal to net income. |
| | D) | Dividends reduce both assets and owners' equity. |
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| 33 | |
Which of the following is true about expenses? |
| | A) | Expenses may result in a decrease of assets. |
| | B) | Expenses may result in an increase in liabilities. |
| | C) | Expenses reduce owners' equity. |
| | D) | All of the above are true. |
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| 34 | |
Consider the following:
| Event | Debit | Credit | | A | Owners' equity is increased | | X | | B | Revenue increases | | X | | C | Owners' equity is decreased | X | | | D | Expenses increase | X | |
Which of the lines in the schedule are correct? |
| | A) | Line A, only |
| | B) | Line B, only |
| | C) | Lines B and C, only |
| | D) | All of the lines are correct. |
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| 35 | |
The collection of an account receivable will do which of the following? |
| | A) | Increase total assets |
| | B) | Increase owners' equity |
| | C) | Increase revenues |
| | D) | Have no affect on total assets |
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| 36 | |
On March 1, the company delivered $3,000 of services to one of its customers. As a result, the affect on the accounting equation will be which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | An increase in assets and a decrease in liabilities |
| | C) | An increase in one asset and a decrease in another |
| | D) | No changes in any of the elements of the accounting equation |
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| 37 | |
On March 31, the company paid its employees at total of $8,000 for wages earned during the month of March. As a result, the affect on the accounting equation will be which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | A decrease in liabilities and a decrease in owner's equity |
| | C) | A decrease in assets and a decrease in liabilities |
| | D) | A decrease in assets and decrease in owners' equity |
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| 38 | |
On March 10, the company paid $8,000 for advertising contracted for the month of February. On the last day of February, the advertising expense was recognized. As a result of the payment of March 10, the effect on the accounting equation will be which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | A decrease in liabilities and a decrease in owner's equity |
| | C) | A decrease in an asset and a decrease in liabilities |
| | D) | None of the above |
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| 39 | |
On March 10, the company purchased $5,000 of office supplies that are anticipated to meet the company's office supplies needs for the next four months. As a result of recording the payment for the supplies, the affect on the accounting equation will be which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | A decrease in liabilities and a decrease in owner's equity |
| | C) | A decrease in an asset and a decrease in liabilities |
| | D) | None of the above |
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| 40 | |
On April 28, the company paid its utility statement of $1,450. As a result of recording the payment for utilities, the affect on the accounting equation will be which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | A decrease in liabilities and a decrease in owner's equity |
| | C) | A decrease in an asset and a decrease in liabilities |
| | D) | A decrease in assets and a decrease in owners' equity |
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| 41 | |
On December 31, a cash dividend of $0.50 for each of the 10,000 shares of capital stock was paid. A liability had not been established for the dividend. Paying the dividend will result in which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | A decrease in liabilities and a decrease in owner's equity |
| | C) | A decrease in an asset and a decrease in owners' equity |
| | D) | None of the above |
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| 42 | |
A trial balance with equal total credits and total debits is proof of which of the following? |
| | A) | No errors occurred when journalizing or posting |
| | B) | The equality of debit and credits |
| | C) | No errors occurred when posting |
| | D) | No errors occurred when journalizing (recording) transactions |
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| 43 | |
The debit balance of the trial balance is $456,000 and the credit balance of the trial balance is $465,000. This indicates which of the following? |
| | A) | An account was not posted |
| | B) | An account was posted twice |
| | C) | An account was posted for an incorrect amount |
| | D) | Any of the above might have occurred |
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| 44 | |
If, in fulfilling your duties as a bookkeeper or accountant, you are requested by a superior to record a nonexistent transaction that will reflect favorably on the financial position of the company, you should do which of the following? |
| | A) | Ask for a raise in exchange for the risk involved in the fraud being disclosed. |
| | B) | Not record the transaction, and report the request to a higher supervisor. |
| | C) | Record the transaction, adding a note about the circumstances. |
| | D) | Record the transaction as part of the normal journalizing routine. |
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| 45 | |
Knowing and understanding the accounting procedures, particularly the accounting cycle, has given you which of the following? |
| | A) | A complete knowledge of accounting |
| | B) | An understanding of an accounting process |
| | C) | The procedures to prepare some accounting information |
| | D) | (B) and (C) only |
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