Financial Accounting Quiz

Name: __________________________ Date: _____________

1.|An account is a part of the financial information system and is described by all except which one of the following?|
A)|An account has a debit and credit side.|
B)|An account is a source document.|
C)|An account consists of three parts.|
D)|An account has a title.|

2.|Which statement about an account is true?|
A)|In its simplest form, an account consists of two parts.|
B)|An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.|
C)|There are separate account for specific assets and liabilities but only one account for stockholders' equity items.|
D)|The left side of an account is the credit or decrease side.|

3.|Debits|
A)|increase both assets and liabilities.|
B)|decrease both assets and liabilities.|
C)|increase assets and decrease liabilities.|
D)|decrease assets and increase liabilities.|

4.|The normal balance of any account is the|
A)|left side.|
B)|right side.|
C)|side which increases that account.|
D)|side which decreases that account.|

5.|A company
that receives money in advance of performing a service|
A)|debits Cash and credits Unearned Service Revenue.|
B)|debits Unearned Service Revenue and credits Accounts Payable|
C)|debits Cash and credits Prepaid Insurance.|
D)|debits Cash and credits Accounts Receivable.|

6.|In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $600. The Cash account has a|
A)|$600 credit balance.|
B)|$1,400 debit balance.|
C)|$800 debit balance.|
D)|$800 credit balance.|

7.|Winrow Company showed the following balances at the end of its first year:Cash|$9,000|Prepaid insurance|500|Accounts receivable|2,500|Accounts payable|2,000|Notes payable|3,000|Common stock|5,000|Dividends|500|Revenues|15,000|Expenses|12,500| What did Winrow Company show as total credits on its trial balance?|
A)|$25,500|
B)|$25,000|
C)|$24,500|
D)|$26,000|

8.|On June 1, 2012, England Inc. reported a cash balance of $18,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June?|
A)|$2,000 credit balance.|
B)|$26,000 debit balance.|
C)|$2,000 debit balance.|
D)|$6,000 credit balance.|

9.|A journal provides|
A)|the balances for each account.|
B)|information about a transaction in several different places.|
C)|a list of all accounts used in the business.|
D)|a chronological record of transactions.|

10.|The name given to entering transaction data in the journal is|
A)|chronicling.|
B)|listing.|
C)|posting.|
D)|journalizing.|

11.|Which of the following journal entries is recorded correctly and in the basic format?|
A)|Salaries/Wages Expense|550|| Cash||1,500|Advertising Expense|950|||
B)|Salaries/Wages Expense|550||Advertising Expense|950|| Cash||1,600||
C)|Cash|1,500|| Salaries/Wages Expense||550| Advertising Expense||950||
D)|Salaries/Wages Expense|550||Advertising Expense|950|| Cash||1,500||

12.|When a service has been performed, but no cash has been received, which of the following statements is true?|
A)|No journal entry is made.|
B)|The entry includes a debit to accounts payable.|
C)|The entry includes a credit to unearned revenue.|
D)|The entry includes a debit to accounts receivable.|

13.|Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a|
A)|credit to Notes Payable.|
B)|debit to Cash.|
C)|credit to Notes Receivable.|
D)|credit to Equipment.|

14.|A ledger:|
A)|contains only asset and liability accounts.|
B)|is a collection of the entire group of accounts maintained by a company.|
C)|provides a chronological record of transactions.|
D)|should show accounts in alphabetical order.|

15.|The procedure of transferring journal entries to the ledger accounts is called|
A)|journalizing.|
B)|analyzing.|
C)|reporting.|
D)|posting.|

16.|A trial balance|
A)|is a list of accounts with their balances at a given point in time.|
B)|will not balance if a correct journal entry is posted twice.|
C)|will tell you if a transaction is not posted at all.|
D)|proves the factual accuracy of journalized transactions.|

17.|Adjusting entries are made to ensure that:|
A)|expense are recognized in the period in which they are incurred.|
B)|revenues are recorded in the period in which they are earned.|
C)|balance sheet and income statement accounts have correct balances at the end of an accounting period.|
D)|All of the above.|

18.|An adjusting entry:|
A)|affects two balance sheet accounts.|
B)|affects two income statement accounts.|
C)|affects a balance sheet account and an income statement account.|
D)|is always a compound entry.|

19.|Adjusting entries can be classified as:|
A)|postponements and advances.|
B)|accruals and deferrals.|
C)|deferrals and postponements.|
D)|accruals and advances.|

20.|Depreciation is the process of:|
A)|valuing an asset at its fair market value.|
B)|increasing the value of an asset over its useful life in a rational and systematic manner.|
C)|allocating the cost of an asset to expense over its useful life in a rational and systematic manner.|
D)|writing down an asset to its real value each accounting period.|

21.|Prepare adjusting entries for the following transactions. Omit explanations. 1. Unrecorded interest accrued on savings bonds is $200.2. Property taxes incurred but not paid or recorded amount to $900.3. Salaries incurred by year end but not yet paid or recorded amounted to $600.|

22.|Prepare adjusting entries for the following transactions. Omit explanations. 1. Depreciation on equipment is $1,340 for the accounting period.2. Interest owed on a loan but not paid or recorded is $275.3. There was no beginning balance of supplies and $550 of office supplies were purchased during the period. At the end of the period $150 of supplies were on hand.4. Prepaid rent had a $1,000 normal balance prior to adjustment. By year end $700 had expired.5. Accrued salaries at the end of the period amounted to $900.|

23.|Match the items below by entering the appropriate code letter in the space provided. |A.|Periodicity assumption|F.|Accrued revenues||B.|Cash basis|G.|Depreciation||C.|Revenue recognition principle|H.|Post-closing trial balance||D.|Prepaid expenses|I.|Accrued expenses||E.|Expense recognition principle|J.|Book value| _____|1.||Events recorded only in periods the company receives or pays cash|_____|2.||Expenses paid before they are incurred|_____|3.||Cost less accumulated depreciation|_____|4.||The economic life of a business can be divided into artificial time periods|_____|5.||Efforts are related to accomplishments|_____|6.||Includes only permanent—balance sheet—accounts|_____|7.||Revenue is recognized when earned|_____|8.||Revenues earned but not yet received|_____|9.||Expenses incurred but not yet paid|_____|10.||A cost allocation process||

24.|Journalize the following business transactions in general journal form.
Identify each transaction by number. You may omit explanations of the transactions.1. Stockholders invest $25,000 in cash in starting a real estate office operating as a corporation.2. Purchased $500 of supplies on credit.3. Purchased equipment for $15,000, paying $3,500 in cash and signed a 30-day, $11,500, note payable.4. Real estate commissions billed to clients amount to $4,000.5. Paid $700 in cash for the current month's rent.6. Paid $250 cash on account for office supplies purchased in transaction 2.7. Received a bill for $800 for advertising for the current month.8. Paid $2,500 cash for office salaries.9. Paid $1,200 cash dividends to stockholders.10. Received a check for $2,000 from a client in payment on account for commissions billed in transaction
4.|

Answer Key

1.|B|
2.|B|
3.|C|
4.|C|
5.|A|
6.|C|
7.|B|
8.|C|
9.|D|
10.|D|
11.|D|
12.|D|
13.|A|
14.|B|
15.|D|
16.|A|
17.|D|
18.|C|
19.|B|
20.|C|
21.|(5 min.)1.|Interest Receivable |200| |||Interest Revenue||200| 2.|Property Taxes Expense | 900||||Property Taxes Payable || 900| 5.|Salaries Expense |600||||Salaries Payable ||600||
22.|(10 min.)1.|Depreciation Expense ||1,340||||Accumulated Depreciation—Equipment ||1,340| 2.|Interest Expense ||275||||Interest Payable ||275| 3.|Supplies Expense ||400||||Supplies ||400||||($550 – $150)| 4.|Rent Expense ||700||||Prepaid Rent ||700|5.|Salaries Expense ||900||||Salaries Payable ||900||
23.|1.|B|6.||H|2.|D|7.||C|3.|J|8.||F|4.|A|9.||I|5.|E|10.||G||
24.|(15 min.)1.||Cash |25,000|||||Common Stock ||25,000|2.||Supplies |500|||||Accounts Payable ||500|3.||Equipment |15,000|||||Cash ||3,500||||Notes Payable ||11,500|4.||Accounts Receivable |4,000|||||Service Revenue ||4,000|5.||Rent Expense |700|||||Cash ||700|6.||Accounts Payable |250|||||Cash ||250|7.||Advertising Expense |800|||||Accounts Payable ||800|8.||Salaries and Wages Expense |2,500|||||Cash ||2,500|9.||Dividends |1,200|||||Cash ||1,200|10.||Cash |2,000|||||Accounts Receivable ||2,000||