61)
An income statement reports the revenues earned less the expenses incurred by a business over a
period of time.
A)
True
B)
False
62)
The balance sheet reports the financial position of a company at a point in time.
A)
True
B)
False
63)
The same four basic financial statements are prepared by both U.S. GAAP and IFRS.
A)
True
B)
False
64)
Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.
A)
True
B)
False
65)
The amount of net income is added on the statement of owner’s equity.
A)
True
B)
False
66)
The accounting process begins with:
A)
Analysis of business transactions and source documents.
B)
Presentation of financial information to decision-makers.
C)
Summarizing the recorded effect of business transactions.
D)
Preparing financial statements and other reports.
E)
Preparation of the trial balance.
67)
Which of the following statements is not true:
A)
Accounts receivable are increased by customer payments.
B)
Accounts receivable are held by a seller.
C)
Accounts receivable are classified as assets.
D)
Accounts receivable are increased by billings to customers.
E)
Accounts receivable arise from credit sales.
68)
A business’s source documents may include all of the following except:
A)
Sales tickets.
B)
Bank statements.
C)
Ledgers.
D)
Purchase orders.
E)
Checks.
69)
A business‘s source documents:
A)
Include the chart of accounts.
B)
Must be in electronic form.
C)
Include the ledger.
D)
Are prepared internally to ensure accuracy.
E)
Provide objective evidence that a transaction has taken place.
70)
A business’s record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense is known as a(n):
A)
Posting.
B)
Trial balance.
C)
Chart of accounts.
D)
Journal.
E)
Account.
71)
An account used to record the owner’s investments in a business is called a(n):
A)
Capital account.
B)
Expense account.
C)
Liability account.
D)
Withdrawals account.
E)
Revenue account.
72)
Identify the account used by businesses to record the transfer of assets from a business to its owner
for personal use:
A)
The owner’s withdrawals account.
B)
The owner’s capital account.
C)
A revenue account.
D)
An expense account.
E)
A liability account.
73)
Identify the statement below that is correct.
A)
When a future expense is paid in advance, the payment is normally recorded in a liability
account called Prepaid Expense.
B)
An account called Land is commonly used to record increases and decreases in both the land
and buildings owned by a business.
C)
Promises of future payment by the customer are called accounts receivable.
D)
Accrued liabilities include accounts receivable.
E)
Increases and decreases in cash are always recorded in the owner’s capital account.
74)
Unearned revenues are generally:
A)
Increases to owners’ capital.
B)
Recorded as an asset in the accounting records.
C)
Liabilities created when a customer pays in advance for products or services before the
revenue is earned.
D)
Revenues that have been earned but not yet collected in cash.
E)
Revenues that have been earned and received in cash.
75)
Unearned revenues refer to a(n):
A)
Expense incurred because a customer has paid in advance.
B)
Increase in revenues as a result of delivering products or services to a customer.
C)
Liability that is settled in the future when a company delivers its products or services.
D)
Decrease in an asset.
E)
Asset that will be used over time.
76)
Prepaid accounts (also called prepaid expenses) are generally:
A)
Decreases in equity.
B)
Payments made for products and services that never expire.
C)
Promises of payments by customers.
D)
Classified as liabilities on the balance sheet.
E)
Assets that represent prepayments of future expenses.
77)
A company’s formal promise to pay (in the form of a promissory note) a future amount is a(n):
A)
Account receivable.
B)
Unearned revenue.
C)
Note payable.
D)
Prepaid expense.
E)
Credit account.
78)
The record of all accounts and their balances used by a business is called a:
A)
Balance column journal.
B)
Ledger (or General Ledger).
C)
General Journal.
D)
Book of original entry.
E)
Journal.
79)
A company’s ledger is:
A)
A list of all accounts a company uses with an assigned identification number.
B)
A collection of documents that describe transactions and events entering the accounting
process.
C)
A record containing increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
D)
A journal in which transactions are first recorded.
E)
A record containing all accounts and their balances used by the company.
80)
A company’s list of accounts and the identification numbers assigned to each account is called a:
A)
General Journal.
B)
Source document.
C)
Trial balance.
D)
Chart of accounts.
E)
Journal.
81)
The numbering system used in a company’s chart of accounts:
A)
Typically begins with balance sheet accounts.
B)
Is the same for all companies.
C)
Is determined by generally accepted accounting principles.
D)
Typically begins with income statement accounts.
E)
Depends on the source documents used in the accounting process.
82)
A debit:
A)
Always decreases an account.
B)
Is the left-hand side of a T-account.
C)
Is not needed to record a transaction.
D)
Is the right-hand side of a T-account.
E)
Always increases an account.
83)
The right side of a T-account is a(n):
A)
Increase.
B)
Account balance.
C)
Decrease.
D)
Debit.
E)
Credit.
84)
Identify the statement below that is incorrect.
A)
The normal balance of owner’s withdrawals is a debit.
B)
The normal balance of the owner’s capital account is a credit.
C)
The normal balance of an expense account is a credit.
D)
The normal balance of accounts receivable is a debit.
E)
The normal balance of unearned revenues is a credit.
85)
A credit is used to record an increase in all of the following accounts except:
A)
Service Revenue
B)
Owner’s Capital
C)
Unearned Revenue
D)
Accounts Payable
E)
Wages Expense
86)
A debit is used to record an increase in all of the following accounts except:
A)
Accounts Payable
B)
Cash
C)
Supplies
D)
Prepaid Insurance
E)
Owner’s Withdrawals
87)
Identify the account below that is classified as a liability in a company’s chart of accounts:
A)
Cash
B)
Accounts Receivable
C)
Supplies
D)
Salaries Expense
E)
Unearned Revenue
88)
Identify the account below that is classified as an asset in a company’s chart of accounts:
A)
Accounts Payable
B)
Accounts Receivable
C)
Owner’s Capital
D)
Unearned Revenue
E)
Service Revenue
89)
Identify the account below that is classified as an asset account:
A)
Accounts Payable
B)
Unearned Revenue
C)
J. Jackson, Capital
D)
Service Revenue
E)
Supplies
90)
Identify the account below that is classified as a liability account:
A)
J. Jackson, Capital
B)
Equipment
C)
Accounts Payable
D)
Salaries Expense
E)
Cash
91)
Identify the account below that impacts the Equity of a business:
A)
Accounts Payable
B)
Utilities Expense
C)
Cash
D)
Accounts Receivable
E)
Unearned Revenue
92)
Which of the following is NOT an equity account:
A)
Owner, Capital
B)
Wages Expense
C)
Services Revenue
D)
Owner, Withdrawals
E)
Unearned Revenue
93)
Which of the following is NOT an asset account:
A)
Cash
B)
Land
C)
Services Revenue
D)
Equipment
E)
Buildings
94)
A business uses a credit to record:
A)
A decrease in an asset account.
B)
A decrease in a capital account.
C)
A decrease in a revenue account.
D)
A decrease in an unearned revenue account.
E)
An increase in an expense account.
95)
A simple tool that is widely used in accounting to represent a ledger account and to understand
how debits and credits affect an account balance is called a:
A)
Drawing account.
B)
Balance column sheet.
C)
Withdrawals account.
D)
Capital account.
E)
T-account.
96)
Identify the statement below that is correct.
A)
The left side of a T-account is the credit side.
B)
In certain circumstances the total amount debited need not equal the total amount credited for
a particular transaction.
C)
The left side of a T-account is the debit side.
D)
Debits decrease asset and expense accounts, and increase liability, equity, and revenue
accounts.
E)
Credits increase asset and expense accounts, and decrease liability, equity, and revenue
accounts.
97)
An account balance is:
A)
Assets = liabilities + equity.
B)
Always a credit.
C)
The difference between the total debits and total credits for an account including the
beginning balance.
D)
The total of the debit side of the account.
E)
The total of the credit side of the account.
98)
Select the account below that normally has a credit balance.
A)
Owner, Withdrawals.
B)
Cash.
C)
Sales Salaries Expense.
D)
Office Equipment.
E)
Wages Payable.
99)
A debit is used to record which of the following:
A)
A decrease in an expense account.
B)
An increase in the owner’s capital account.
C)
An increase in a revenue account.
D)
An increase in the owner’s withdrawals account.
E)
A decrease in an asset account.
100)
A credit entry:
A)
Is recorded on the left side of a T-account.
B)
Is always a decrease in an account.
C)
Increases asset and expense accounts, and decreases liability, owner’s capital, and revenue
accounts.
D)
Is always an increase in an account.
E)
Decreases asset and expense accounts, and increases liability, owner’s capital, and revenue
accounts.
101)
A double-entry accounting system is an accounting system:
A)
That may only be used if T-accounts are used.
B)
That insures that errors never occur.
C)
In which each transaction affects and is recorded in two or more accounts but that could
include two debits and no credits.
D)
That records the effects of transactions and other events in at least two accounts with equal
debits and credits.
E)
That records each transaction twice.
102)
Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it.
Pine’s general journal entry to record this transaction will include a
A)
Debit to Cash for $300.
B)
Debit to Accounts Payable for $300.
C)
Credit to Telephone Expense for $300.
D)
Debit to Telephone Expense for $300.
E)
Credit to Accounts Payable for $300.