1) Anytime an owner removes any asset for personal use it is recorded as:

 

A) a withdrawal.

 

B) payment of a liability.

 

C) an investment.

 

D) an expense.

 

 

 

2) The increase or decrease in the owner’s equity is reported on the:

 

A) statement of owner’s equity.

 

B) income statement.

 

C) balance sheet.

 

D) all of these

 

 

 

3) The purpose of the accounting process is to provide financial information on:

 

A) large corporations.

 

B) small businesses.

 

C) individuals.

 

D) All of these answers are correct.

 

 

 

4) Which of the following is not a business organization form?

 

A) Corporation

 

B) Sole proprietorship

 

C) Operation

 

D) Partnership

 

 

 

5) Owner’s withdrawals:

 

A) increase expenses.

 

B) increase liabilities.

 

C) increase assets.

 

D) decrease owner’s equity.

 

 

 

6) Cater Right, with total assets of $50,000, borrows $15,000 from the bank.

 

Which of the following is a True statement upon borrowing the money?

 

A) Total assets are now $35,000.

 

B) Owner’s equity is $15,000 more.

 

C) Total assets are now $50,000.

 

D) Total assets are now $65,000.

 

 

 

7) Mark paid $500 rent for the month. Identify the accounts affected.

 

A) Cash and Rent Expenses increase.

 

B) Cash and Capital increase.

 

C) Cash decreases, and Rent Expense decreases.

 

D) Cash decreases, and Rent Expense increases.

 

 

 

 

 

8) If Suite Dream Toys’ revenues are less than its expenses during the account-

 

ing period:

 

A) the business will incur a loss.

 

B) owner’s withdrawals decrease owner’s equity.

 

C) owner withdrawals decrease net income.

 

D) net income causes liabilities to decrease.

 

 

 

9) The financial statement that shows revenue and expenses for a period of time

 

is the:

 

A) statement of owner’s equity.

 

B) balance sheet.

 

C) statement of liabilities and capital.

 

D) income statement.

 

 

 

10) The purchase of a truck with a down payment was recorded as a pure cash

 

purchase. This error would cause:

 

A) liabilities were understated.

 

B) assets were overstated.

 

C) owner’s equity was overstated.

 

D) None of the above are correct.

 

 

 

11) The business provided services to a credit customer.

 

A) Assets and owner’s equity increase.

 

B) Assets and revenue increase.

 

C) Liabilities and owner’s equity increase.

 

D) None of the above are correct.

 

 

 

12) Which of the following transactions would cause an asset to increase and the

 

owner’s equity to increase?

 

A) The business bought supplies on account.

 

B) The owner invested cash in the business.

 

C) The business incurred an expense on credit.

 

D) The owner withdrew cash from the business.

 

13) Which of the following would result if the business provided services to a

 

customer collecting cash?

 

A) Cash would increase and Revenue would decrease.

 

B) Since the cash was collected there is no need to record this.

 

C) Cash would increase and Capital would increase.

 

D) Cash would increase and Revenue would increase.

 

 

 

 

 

 

 

 

 

 

 

 

 

14) A formal account that has columns for date, explanation, post reference,

 

debit, and credit is called the:

 

A) T account.

 

B) ledger.

 

C) chart of accounts.

 

D) standard account form.

 

 

 

15) A credit may signify a(n):

 

A) decrease in revenues.

 

B) decrease in assets.

 

C) decrease in capital.

 

D) decrease in liabilities.

 

 

 

16) A listing of all the accounts from the ledger with their ending balances is

 

called a:

 

A) normal balance.

 

B) trial balance.

 

C) footing.

 

D) chart of accounts.

 

 

 

17) Accounts Payable had a normal starting balance of $600. There were debit

 

postings of $350 and credit postings of $200 during the month. The ending

 

balance is:

 

A) $950 credit.

 

B) $450 debit.

 

C) $450 credit.

 

D) $750 debit.

 

18) The beginning balance in Cash was $400. Additional cash of $800 was

 

received. Checks were written for $900. The cash balance is:

 

A) $400.

 

B) $300.

 

C) $700.

 

D) $900.

 

 

 

19) Given the following list of accounts with normal balances, what are the trial

 

balance totals of the debits and credits?

 

Cash $500

 

Accounts Receivable 100

 

Capital 300

 

Withdrawals 100

 

Service Fees 700

 

Rent Expense 300

 

A) $800 debit, $800 credit

 

B) $1,200 debit, $1,200 credit

 

C) $900 debit, $900 credit

 

D) $1,000 debit, $1,000 credit

 

20) A credit to an asset account was posted to an owner’s equity account. This

 

error would cause:

 

A) assets were overstated.

 

B) owner’s equity was overstated.

 

C) liabilities were overstated.

 

D) Both a and c are correct.

 

 

 

21) A debit to an asset account was posted to an expense account. This error

 

would cause:

 

A) assets were overstated

 

B) expenses were overstated.

 

C) liabilities were overstated.

 

D) None of the above are correct.

 

 

 

22) The owner withdrew cash from the business. To record this:

 

A) Capital is debited and an asset is credited.

 

B) an expense is debited and an asset is credited.

 

C) Withdrawals is debited and an asset is credited.

 

D) None of these are correct.

 

23) One asset would be debited and another credited if:

 

A) the business paid a creditor.

 

B) the business provided services to a cash customer

 

C) the business bought supplies paying cash.

 

D) the business provided services to a credit customer

 

 

 

24) Paid the rent for the next six months.

 

A) An asset would be debited and an expense credited.

 

B) An asset would be debited and a revenue credited.

 

C) Capital would be debited and a revenue credited.

 

D) An asset would be debited and an asset credited.

 

 

 

25) The journal described as the simplest form is a (an):

 

A) accounting journal.

 

B) general journal.

 

C) special journal.

 

D) interim journal.

 

 

 

26) The process of initially recording business transactions in a journal is:

 

A) posting.

 

B) sliding.

 

C) journalizing.

 

D) transposing.

 

 

 

 

 

27) In the month of June, Davis Computers paid three months’ rent in advance.

 

The journal entry to record this transaction is:

 

A) Rent Expense Cash

 

B) Cash Prepaid Rent

 

C) Cash Rent Expense

 

D) Prepaid Rent Cash

 

 

 

28) Antonio’s catered a reception. The total price was $1,200. The customer paid

 

$200 cash and charged the remainder. The journal entry to record this trans-

 

action is:

 

A) Cash 200

 

Accounts Receivable 200

 

B) Cash 200

 

Accounts Receivable 1,000

 

Catering Service Fees 1,200C) Cash 1,000

 

Accounts Receivable 200

 

Catering Service Fees 1,200

 

D) Accounts Receivable 1,200

 

Cash 200

 

Catering Service Fees 1,000

 

29) M. Sands, CPA, collected fees of $650 not previously billed or recorded. The

 

journal entry to record the collection would be:

 

A) Accounting Fees 650

 

Cash 650

 

B) Accounts Receivable 650

 

Cash 650

 

C) Cash 650

 

Accounting Fees 650

 

D) Cash 650

 

M. Sands, Capital 650

 

 

 

30) When a number is recorded as 856 instead of 865 it is called a:

 

A) slide.

 

B) rearrangement.

 

C) composition

 

D) transposition.

 

 

 

31) A $600 check written for supplies was journalized as $60. The entry to

 

correct this error is:

 

A) debit Supplies, $540; credit Cash, $540.

 

B) debit Supplies, $60; credit Cash, $60.

 

C) debit Cash, $540; credit Supplies, $540.

 

D) debit Cash, $60; credit Cash, $60.

 

 

 

 

 

32) Proof that the dollar amount of the debits equals the dollar amount of the

 

credits in the ledger means:

 

A) all accounts have their correct balances in the ledger.

 

B) all of the information from the journal was correctly transferred to the ledger.

 

C) only that the debit dollar amounts equal the credit dollar amounts.

 

D) only the ledger is accurate; the journal may be incorrect.

 

33) A debit to a revenue account was posted to an asset account. This would

 

cause:

 

A) revenue to be understated.

 

B) liabilities to be understated.

 

C) expense to be understated.

 

D) assets to be overstated.

 

 

 

34) The general journal entry to record an exchange of assets would most com-

 

monly include:

 

A) A debit to Cash and a credit to Fees Earned.

 

B) A debit to Fees Earned and a credit to Accounts Receivable.

 

C) A debit to Supplies and a credit to Accounts Payable.

 

D) A debit to Cash and a credit to Accounts Receivable.

 

 

 

35) If Cash has been debited, it is most likely that:

 

A) the business borrowed cash from the bank.

 

B) a charge customer made a payment.

 

C) the owner made an investment.

 

D) All of these are possible.

 

 

 

36) If you had purchased $500 of supplies during the month and at the end of

 

the month you had $300 on hand, the adjustment for Supplies would be:

 

A) $100.

 

B) $300.

 

C) $200.

 

D) $500.

 

 

 

37) If the adjustment for Supplies used during the period was not made:

 

A) expenses would be too high.

 

B) revenue would be too high.

 

C) expenses would be too low.

 

D) asset Office Supplies would be too low.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38) Andrew Antiques showed store supplies available during the year of $400. A

 

count of the supplies on hand as of May 31 is $150. The adjusting entry for

 

Store Supplies would include:

 

A) a debit to Store Supplies for $150.

 

B) a credit to Store Supplies Expense for $250.

 

C) a debit to Store Supplies Expense for $250.

 

D) a credit to Store Supplies Expense for $150.

 

39) Roy purchased a one-year insurance policy for $2,400. The adjusting entry

 

for one month would include a:

 

A) debit to Prepaid Insurance, $200.

 

B) credit to Cash, $200.

 

C) debit to Insurance Expense, $200.

 

D) None of these answers are correct.

 

 

 

40) The capital balance amount shown in the balance sheet column of the work-

 

sheet represents:

 

A) beginning capital plus net income.

 

B) beginning capital plus investments to capital.

 

C) beginning capital less withdrawals.

 

D) beginning capital plus net income less withdrawal.

 

 

 

41) When counting the supplies a file cabinet was forgotten and the adjustment

 

was made based on the incorrect count. This would:

 

A) overstate the period’s net income.

 

B) overstate the end of period assets.

 

C) understate the end of period assets.

 

D) None of these are correct.

 

 

 

42) The adjustment for accrued wages included the entire pay period, some of

 

which occurs next month. This would:

 

A) understate the end of period liabilities.

 

B) overstate the period’s net income.

 

C) overstate the end of period liabilities.

 

D) None of these are correct.

 

 

 

43) The purchase of equipment will require an adjustment of:

 

A) increasing the total assets and increasing the total expenses at the end of the

 

month.

 

B) decreasing the total assets and decreasing the total expenses at the end of

 

the month.

 

C) decreasing the total assets and increasing the total expenses at the end of

 

the month.

 

D) none of the above.

 

 

 

44) Which of the following would cause an asset to be debited and a liability

 

credited?

 

A) Recorded the adjustment for the expiration of the insurance policy

 

B) Recorded the adjustment for the expiration of rent

 

C) Purchased supplies on account

 

D) None of these would have that effect.

 

 

 

45) Which of the following would cause a liability to be credited and an expense

 

debited?

 

A) Recorded the adjustment for the accrual of wages

 

B) It is the end of the month and no utility bill has been received

 

C) Recorded an accrued expense

 

D) All of the above would have that effect.

 

 

 

46) The adjusting entries are journalized:

 

A) whenever time permits.

 

B) before preparing financial reports.

 

C) before the next accounting period starts.

 

D) at the beginning of the accounting period.

 

 

 

47) Which of the following accounts would be considered a permanent account?

 

A) Service Fees

 

B) Salaries Expense

 

C) Salaries Payable

 

D) Depreciation Expense

 

 

 

48) An important purpose of closing entries is to:

 

A) set nominal account balances to zero to begin the next period.

 

B) adjust the accounts in the ledger.

 

C) help in preparing financial statement.

 

D) set real account balances to zero to begin the next period.

 

 

 

49) Which of the following accounts will not be closed to Income Summary at the

 

end of the fiscal year?

 

A) Word Processing Fees

 

B) Smith, Withdrawals

 

C) Salaries Expense

 

D) Supplies Expense

 

50) Which of the following accounts will be directly closed to Capital at the end

 

of the fiscal year?

 

A) Depreciation Expense

 

B) Fees Revenue

 

C) Salaries Expense

 

D) Withdrawals

 

 

 

51) Which of the following accounts ordinarily appears in the post-closing trial

 

balance?

 

A) Accumulated Depreciation

 

B) Supplies Expense

 

C) Fees Revenue

 

D) Salaries Expense

 

 

 

52) The Income Summary account shows debits of $20,000 and credits of

 

$18,000. This is a result of a:

 

A) net loss of $38,000.

 

B) net income of $2,000.

 

C) net income of $38,000.

 

D) net loss of $2,000.

 

 

 

53) After closing the revenue, expense, and withdrawal accounts, the capital

 

increased by $2,000. Which of the following situations could have occured?

 

A) The owner made withdrawals.

 

B) The company had a net income of $5,000.

 

C) The owner invested an additional amount.

 

D) All of these answers are correct.

 

 

 

54) When the expenses are closed:

 

A) Owner’s Capital will be debited.

 

B) Income Summary will be credited.

 

C) Income Summary will be debited.

 

D) None of these are correct.

 

 

 

55) Closed the Fees Earned account.

 

A) Owner’s capital would decrease.

 

B) Owner’s capital would remain the same.

 

C) Owner’s capital would increase.

 

D) None of these are correct.

 

 

 

56) A restrictive endorsement on a check:

 

A) can be further endorsed by someone else.

 

B) permits the bank to use its best judgment.

 

C) is the safest endorsement for businesses.

 

D) None of these answers are correct.

 

 

 

57) Key points in working with a checkbook should include:

 

A) the stub will be used in recording transactions and future reference.

 

B) the number of the check is preprinted on the check.