1. Are assets on the balance sheet recorded at their estimated fair market value?

   1. Yes
   2. No
   3. Sometimes; it’s situational

2. Increasing an asset involves crediting the account.

   1. True
   2. False

3. Unearned revenues are recorded on a company’s balance sheet under which kind of account?

   1. Current asset
   2. Owners’ or stockholders’ equity
   3. Non-current asset
   4. Liability

4. What is the minimum number of accounts that accounting entries can have?

   1. One
   2. Four
   3. Five
   4. Two

5. The listing of all the financial accounts within a company’s general ledger is called the _____.

   1. Chart of accounts
   2. Journal entry
   3. Balance sheet
   4. P&L statement

6. Which is not classified as a current asset?

   1. Cash
   2. Product inventory
   3. Liquid assets
   4. Prepaid liabilities
   5. Property

7. Which formula is used to calculate operating income?

   1. Revenue + Direct Operating Cost = Operating Income
   2. Indirect Operating Cost - Revenue = Operating Income
   3. Gross Income - Operating Expenses = Operating Income
   4. Gross Profit - Indirect Operating Cost = Operating Income

8. Which of these statements about accrual accounting is true?

   1. Revenue is recorded only when payments are received, while expenses are recognized when they're incurred.
   2. All revenue from prepayments should be recognized when the payment is received, while expenses accrue over the life of the obligation.
   3. If the business has provided the goods or services and can reasonably expect to receive cash, it can recognize the revenue in that period.
   4. The matching principle dictates that expenses should be recognized when they are incurred, regardless of when revenue is recognized.

9. In a journal entry, a debit decreases which of the following accounts?

   1. Cash
   2. Accounts Payable
   3. Supplies Expense
   4. Both a and c

10. Which describes the double-declining balance depreciation method?

    1. Estimated salvage value is greater at the end of the assets’ useful life than with straight-line depreciation.
    2. It yields reports of higher income in the early years and lower income later on.
    3. This method decreases the useful life of the asset and disposal costs by half.
    4. The depreciation expense is larger in the first few years and gets smaller as time goes on.

11. Which one of these WILL NOT yield earnings before interest and taxes (EBIT)?

    1. Revenue - Cost of goods sold - Operating expenses
    2. Net income + Tax expense + Interest expense
    3. Sales + Taxes + Interest
    4. Gross profit - Operating expenses