1. The type of business organization that can continue indefinitely is known as a:
a. sole proprietorship
b. partnership
c. corporation
d. None of the above.
2. The purpose of the accounting process is to provide financial information about:
a. sole proprietorships
b. small businesses
c. large corporations
d. All of the above.
3. The cash purchase of a truck was recorded as a purchase on credit. Due to this error:
a. assets were overstated
b. liabilities were overstated
c. answers a and b are both correct
d. None of the above.
4. Which of the following would cause one asset to increase and another asset to decrease?
a. The owner invested cash in the business.
b. The business paid a creditor.
c. The business incurred an expense on credit.
d. The business bought supplies for cash.
5. Which accounts are affected when the company buys supplies on account?
a. assets and capital
b. liabilities and capital
c. assets and liabilities
d. None of the above.
6. Which accounts are affected when the company provides services to a cash customer?
a. assets and capital
b. liabilities and capital
c. assets and revenue
d. None of the above.
7. Which accounts are affected when the owner withdraws cash from the business?
a. assets and withdrawals
b. liabilities and capital
c. assets and liabilities
d. None of the above.
8. A chart of accounts:
a. is set up in alphabetical order
b. includes account balances
c. is a listing of all the accounts used by a company
d. All of the above.
9. Accounts payable had a normal starting balance of $800. There were debit postings of $600 and credit postings of $300 during the month. The ending balance is:
a. $500 debit
b. $1,000 debit
c. $500 credit
d. $1,000 credit
10. The beginning balance in the computers account was $2,000. The company purchased an additional $1000 worth of computers. The balance in the account is:
a. debit of $2,000
b. credit of $3,000
c. debit of $3,000
d. credit of $2,000
11. A list of all the accounts from the ledger with their ending balances is called a:
a. normal balance
b. trial balance
c. chart of accounts
d. footing
12. Which of the following is prepared first?
a. balance sheet
b. income statement
c. statement of owner's equity
d. trial balance
13. Which type of account would not be reported on the income statement?
a. revenue
b. expenses
c. liabilities
d. None of the above.
14. The left column of a financial statement is often used to:
a. subtotal numbers
b. show credits
c. show totals
d. show debits
15. The beginning capital account would appear on which financial statement?
a. statement of owner's equity
b. balance sheet
c. income statement
d. None of the above.
16. The income statement contains:
a. liabilities
b. revenues
c. assets
d. Both b and c are correct.
17. Net income or net loss for a period is calculated by which of the following formula?
a. total revenues - total withdrawals
b. total revenues - total expenses - total withdrawals
c. total revenues - total expenses
d. total revenues - total expenses + capital
18. The process that begins with recording business transactions and includes the completion of the financial statements is the:
a. calendar year
b. natural business years
c. fiscal year
d. accounting cycle
19. The twelve-month period a business chooses for its accounting period is a(n):
a. calendar year
b. accounting period
c. fiscal year
d. accounting cycle
20. If cash has been debited, it is likely that:
a. the owner made an investment
b. a charge customer made a payment
c. the business borrowed cash from the bank
d. All of the above.
21. If prepaid rent has been debited, it is likely that:
a. the rent was paid for three months in advance
b. a bill for the past month's rent was received
c. this month's rent was paid
d. All of the above.
22. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means:
a. all of the information from the journal was correctly transferred to the ledger
b. all accounts have their correct balances in the ledger
c. only the ledger is accurate; the journal may be incorrect
d. only that the debit dollar amounts equal the credit dollar amounts
23. In preparing the trial balance of the K&L's Bridal Service, the withdrawal account (which had a normal balance in the general ledger) was listed as a credit for $400. What will be the difference between the debit and credit sides of the trial balance?
a. $150
b. $200
c. $300
d. $800
24. The trial balance:
a. includes all accounts with a balance in the ledger
b. includes assets, liabilities, capital, withdrawals, revenues and expenses
c. ensures that debits equal credits
d. All of the above.
25) The proper format for a journal entry includes all of the following, except:
a. the total amounts of debits must equal the total amount of credits
b. skip a line between transactions
c. the credit portion of the transaction is always first
d. listed in chronological order