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| 1 | |
Posting journal information to the ledger accounts is the first step in the accounting process. |
| | A) | True |
| | B) | False |
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| 2 | |
Source documents are used to identify and describe transactions and events entering the accounting process. |
| | A) | True |
| | B) | False |
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| 3 | |
Prepaid insurance, cash, accounts receivable, notes receivable, land, and unearned revenue are all classified as asset accounts. |
| | A) | True |
| | B) | False |
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| 4 | |
Prepaid insurance is an example of an asset that will be consumed in the operation of the business; and as it expires, it will become an expense for the time period in which it expires. |
| | A) | True |
| | B) | False |
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| 5 | |
A ledger is a record containing all accounts used by a business. |
| | A) | True |
| | B) | False |
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| 6 | |
Credit entries increase asset and expense accounts and decrease liability, equity, and revenue accounts. |
| | A) | True |
| | B) | False |
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| 7 | |
The left side of an account is always the debit side and always the increase side. |
| | A) | True |
| | B) | False |
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| 8 | |
The normal balance for asset, dividend, and expense accounts is a debit balance. The normal balance for liability, common stock, and revenue accounts is a credit balance. |
| | A) | True |
| | B) | False |
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| 9 | |
A compound journal entry includes exactly two accounts. |
| | A) | True |
| | B) | False |
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| 10 | |
When a business pays cash for supplies, one asset account is debited and another asset account is credited. |
| | A) | True |
| | B) | False |
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| 11 | |
When equipment is purchased on credit, a liability account will be debited. |
| | A) | True |
| | B) | False |
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| 12 | |
A low debt ratio indicates that the company may have some difficulty paying existing debt or borrowing additional cash. |
| | A) | True |
| | B) | False |
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| 13 | |
Transferring information from the journal to the ledger is known as posting. |
| | A) | True |
| | B) | False |
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| 14 | |
A trial balance with equal debit and credit totals is proof that no errors occurred in the journalizing or posting procedures used by the bookkeeper. |
| | A) | True |
| | B) | False |
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| 15 | |
All companies must use a calendar year (January 1 to December 31) for accounting reporting. |
| | A) | True |
| | B) | False |
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| 16 | |
What is the proper order of the following steps in the accounting process? I. Prepare and analyze the trial balance II. Record relevant transactions and events in a journal III. Analyze each transaction and event from source documents IV. Post journal information to ledger accounts
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| | A) | III, IV, I and II. |
| | B) | I, II, III and IV. |
| | C) | III, II, IV and I. |
| | D) | III, II, I and IV. |
| | E) | II, III, I and IV. |
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| 17 | |
A bill (or invoice) received from a vendor and supplier is an example of which of the following? |
| | A) | Financial statements |
| | B) | Accounts |
| | C) | Source documents |
| | D) | Journal entry |
| | E) | None of the above |
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| 18 | |
Which of the following is not a liability account? |
| | A) | Unearned revenue |
| | B) | Accounts receivable |
| | C) | Salaries payable |
| | D) | Notes payable |
| | E) | Mortgage payable |
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| 19 | |
Which of the following is a formal promise to pay a future amount and is classified depending on when it must be repaid? |
| | A) | Account payable |
| | B) | Account receivable |
| | C) | Note payable |
| | D) | Prepaid insurance |
| | E) | Both an account payable and an account receivable |
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| 20 | |
Which of the following type of accounts affect equity? |
| | A) | Common stock |
| | B) | Dividends |
| | C) | Retained earnings |
| | D) | A and B only |
| | E) | A, B, and C |
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| 21 | |
Which of the following would be used in the entry to record a transaction in which the customer pays in advance for products or services before they are earned? |
| | A) | Dividends |
| | B) | Prepaid account |
| | C) | Unearned revenue |
| | D) | Accounts payable |
| | E) | None of the above |
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| 22 | |
Which of the following is the term used to describe the list of accounts that a company uses and includes an identification number assigned to each account? |
| | A) | A ledger |
| | B) | A chart of accounts |
| | C) | A journal |
| | D) | A trial balance |
| | E) | A source document |
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| 23 | |
On March 15, Armstrong Corporation performed consulting services on account for a customer. Armstrong collected $5,000 on account from that customer on April 22. Which of the following general journal entries would be used to record the transaction that took place on April 22? |
| | A) | Debit assets for $5,000, credit equity for $5,000. |
| | B) | Debit cash for $5,000, credit consulting service revenue for $5,000. |
| | C) | Debit cash for $5,000, credit accounts receivable for $5,000. |
| | D) | Debit accounts receivable for $5,000, credit consulting service revenue for $5,000. |
| | E) | Debit accounts receivable for $5,000, credit cash for $5,000. |
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| 24 | |
Caroline Duffy contributed $10,000 in cash and equipment worth $3,000 to open a new business that she has incorporated. Which of the following general journal entries would be used to record this transaction? |
| | A) | Debit assets for $13,000, credit equity for $13,000. |
| | B) | Debit cash for $10,000, credit common stock for $10,000. |
| | C) | Debit cash and equipment for $13,000, credit common stock for $13,000. |
| | D) | Debit cash for $10,000, debit equipment for $3,000, credit common stock for $13,000. |
| | E) | Debit cash for $10,000, debit equipment for $3,000, credit dividends for $13,000. |
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| 25 | |
On January 31, Harrington Corporation, a consulting company, had accounts receivable in the amount of $10,000, During February, payments from customers on account totaled $5,000. At the end of February, accounts receivable in the amount of $12,000. What was the amount of consulting services provided to customers on credit during the month of February? |
| | A) | $2,000 |
| | B) | $3,000 |
| | C) | $7,000 |
| | D) | $27,000 |
| | E) | Cannot be determined |
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| 26 | |
Assets total $100,000, liabilities total $10,000, and equity totals $90,000. What is the debt ratio? |
| | A) | 0.10 |
| | B) | 0.20 |
| | C) | 0.50 |
| | D) | 0.75 |
| | E) | 0.90 |
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| 27 | |
Which column in journals and ledger accounts is used to cross reference journal and ledger entries? |
| | A) | Account balance column |
| | B) | Credit column |
| | C) | Debit column |
| | D) | Description column |
| | E) | Posting reference column |
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| 28 | |
The ordering of accounts in a trial balance is: |
| | A) | Alphabetical |
| | B) | From the highest dollar to the lowest dollar value |
| | C) | From the lowest dollar to the highest dollar value |
| | D) | In chart of account order |
| | E) | Random |
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| 29 | |
Beginning Retained Earnings totaled $12,000. Stockholder investment during the period totaled $50,000. The ending Retained Earnings balance is $32,000. If dividends of $10,000 were paid during the period, what was the net income (or net loss) of the business? |
| | A) | Net income, $20,000 |
| | B) | Net loss, $2,000 |
| | C) | Net income, $2,000 |
| | D) | Net income, $30,000 |
| | E) | None of the above |
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| 30 | |
Which of the following accounts would not appear on the income statement? |
| | A) | Professional fees earned |
| | B) | Unearned revenue |
| | C) | Dividends |
| | D) | Office supplies expense |
| | E) | Unearned revenue and dividends |
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