1) Corporations are separate entities that pay their own taxes.

a) TRUE

b) FALSE

2) Businesses that install internal controls can facilitate efficiency, profitability, and minimize fraud and theft.

a) TRUE

b) FALSE

3) Foundations of business accounting can be used in personal finance.

a)TRUE

b)FALSE

4) The balance sheet represents what you own (assets) and what you owed (liabilities), and is a temporary record.

a)TRUE

b)FALSE

5) The accounting equation: Assets = Liabilities + Net Worth.

a)TRUE

b)FALSE

6) Accrual accounting is recognizing revenue (decreases net worth) and expenses (increase net worth) in the time period in which they occur, regardless of when the payment is received or made.

a)TRUE

b)FALSE

7) Buying or selling assets for the value stated in the balance sheet has no impact on net worth.

a)TRUE

b)FALSE

8) Capital: gifts and lottery winnings are part of everyday revenues.

a)TRUE

b)FALSE

9) Sell all your assets and pay everything you owe, the remaining cash represents your net worth.

a)TRUE

b)FALSE

10) Your monthly payment to the bank is $1,000, of whch interest is $950 and principal is $50. After each payment is made, which of the following is true?

a)Net worth decreases by $950

b)Decrease cash by $1000, decrease net worth by $1000

c)Decrease cash by $950, increase debt by $50

d)Decrease cash by $1000, increase net worth by $50

11) You own a house valued at $100,000 with an outstanding mortgage of $70,000. You pay your first month's installment of $900 ($700 interest and $200 principal). The correct entry should be:

a)decrease cash by $900, decrease mortgage by $900

b)decrease cash by $900, decrease mortgage principal by $200, decrease net worth by $900

c)decrease cash by $900, decrease net worth by $900

d)decrease cash by $900, decrease mortgage principal by $200, increase interest expense by $700

12) Which of the following terms wouldnotbe used to classify the net worth of a business or government institution?

a)Owner's Equity

b)Stockholders' Equity

c)Accumulated Surplus (Deficit)

d)Net Income

13) How would buying an asset affect owner's equity?

a)Buying an asset increases owner's equity

b)Buying an asset decreases owner's equity

c)Buying an asset has no impact on owner's equity

d)It depends on the accounting policy chosen by the owner

14) A company prepays a 12-month insurance policy for $4,800 on December 31, 2018. The policy is in effect on January 1, 2018. How much will equity change by January 31, 2018 due to the insurance policy?

a)$4,800

b)$4,400

c)$400

d)None of the choices

15) When your business pays back loan principal:

a)the cash balance decreases and owner's equity decreases

b)the cash balance decreases and owner's equity increases

c)the cash balance decreases and there is no change to owner's equity

d)the cash balance decreases and expenses increase

16) One of the roles of a professional accountant would be:

a)to use information prepared by the bookkeeper to provide appropriate accounting adjustments

b)to prepare income statements only on a month to month basis

c)to do the bank reconciliations only

d)to only prepare payroll each month for the bookkeeper

17) The bookkeeper of ABC Gym receives advanced membership payments from customers and records it as revenue. Which of the following principles did the bookkeeper violate?

a)The consistency principle

b)The measurement principle

c)The disclosure principle

d)The revenue recognition principle

18) Members shall adhere to acknowledged principles and standards of professional practice. The preceding statement is:

a)a statement of ASPE

b)an aspect of triple bottom line reporting

c)a statement typical of the codes of ethics for accountants

d)a form of organization

19) When operating as a proprietary business, which of the following is true?

a)All debt in the business may or may not be the responsibility of the owner, depending on accounting policies

b)All business debt is considered the owner's debt

c)All business debt is not the responsibility of the owner because they are separate entities

d)It is common practice to keep the business and personal records together because the owner and the business are considered as one

20) Which one of the following accounts is increased by a debit entry?

a)Bank loan

b)Accounts Payable

c)Sales

d)Depreciation Expense

21) When recording a journal entry, which of the following helps determine the account number and account name to be used?

a)Journal entry numbers

b)Invoice numbers

c)Chart of accounts

d)Financial statement numbers

22) Entries are recorded in the journal:

a)Alphabetically

b)By date (chronologically)

c)In the order of account numbers used

d)Randomly

23) The document which records the activities and balances of each specific account is called a:

a)General journal

b)General Ledger

c)Financial statement

d)Trial balance

24) A trial balance proves that:

a)Each journal entry has been posted only once

b)All transactions have been recorded

c)Total debits equals total credits

d)There are no errors in the accounting records

25) Which fundamental characteristic of requires that information is free from material error and bias?

a)Relevance

b)Understandability

c)Comparability

d)Reliability