Accounting Questions

1.Which of the following is not a basic function of an accounting system?

Select one:

a. To interpret and record the effects of business transactions.

b. To classify the effects of similar transactions in a manner that permits determination of various totals and subtotals useful to management.

c. To ensure that a business organization will be managed profitably.

d. To summarize and communicate information to decision makers.

2.Financial statements are prepared:

Select one:

a. Only for publicly owned business organizations.

b. For corporations, but not for sole proprietorships or partnerships.

c. For the benet of both business managers and persons outside of the business organization.

d. In either monetary or nonmonetary terms, depending upon the need of the decision maker.

3.Investments held for re-sale in expectation of making a profit are:

Select one:

a. Long term assets.

b. Trading securities.

c. Not to be recorded in the book balance.

d. Non-current assets.

4.Net income is best described as:

Select one:

a. Cash receipts less cash payments made during a given accounting period.

b. Revenue earned during an accounting period, less expenses incurred during the period.

c. The increase in total assets over a given accounting period.

d. Revenue earned during an accounting period, less any cash payments made during the period.

5.The realization principle indicates that revenue usually should be recognized and recorded in the accounting records:

Select one:

a. When goods are sold or services are rendered to the customers.

b. When cash is collected from customers.

c. At the end of the accounting period.

d. Only when the revenue can be matched by an equal dollar amount of expenses.

6.The purpose of making closing entries is to:

Select one:

a. Reset the temporary accounts and update retained earnings.

b. Enable the accountant to prepare financial statements at the end of the accounting period.

c. Establish new balances in the balance sheet accounts.

d. Reduce the number of expense accounts.

7.From an accounting viewpoint, when is a business considered an entity separate from its owner(s)?

Select one:

a. Only when organized as a sole proprietorship.

b. Only when organized as a partnership.

c. Only when organized as a corporation.

d. In each of the above situations, the business is an accounting entity separate from the activities of the owner(s).

8.Which of the following items would not appear on the income statement?

Select one:

a. Net income.

b. Total revenue.

c. Dividends.

d. Cost of goods sold.

9.In a ledger, debit entries cause:

Select one:

a. Increases in owners' equity, decreases in liabilities, and increases in assets.

b. Decreases in liabilities, increases in assets, and decreases in owners' equity.

c. Decreases in assets, decreases in liabilities, and increases in owners' equity.

d. Decreases in assets, increases in liabilities, and increases in owners' equity.

10.The matching principle is best demonstrated by:

Select one:

a. Using debits to record decreases in owner's equity and credits to record increases.

b. The equation A = L + OE.

c. Recording the cost of a sale in the same period as the revenue.

d. Offsetting the cash receipts of the period with the cash payments made during the period.