Multiple Choice: Select the best answer

1. Among the chief advantages of forming a business as a corporation is that

A) Corporation can be formed any time with any number of

shareholders.

B) The corporation does not have to pay any dividends at year-end.

C) Shareholders are not personally liable for the losses incurred by the

corporation

D) Executives and officers get bonuses every year.

2. Accounts Receivable results from earning revenue when

A) Business has paid bills on account

B) Business has outstanding invoices to pay

C) Cash receipts occur

D) Cash is yet to be received

3. The journal entry to record the payment of personal telephone bill of $25 from

company's Bank account would include a:

A) debit to the Cash account for $25

B) credit to the expense account for $25

C) debit to the Withdrawals account for $25

D) debit to the expense account for $25

4. A financial statement that shows the changes observed and occurred in the Capital account

is:

A) Profit and Loss Statement

B) Statement of Operations

C) Cash Flow Statement

D) Statement of Owner's Equity

5. As per the rules of debit and credit, liabilities and capital accounts will always have:

A) Debit and debit balances

B) Credit and credit balances

C) Debit and credit balances

D) Credit and debit balances

6. Performing a service for customer and receiving cash immediately will:

A) Increase one asset and decrease another

B) increase an asset and increase owner's equity

C) Decrease an asset and decrease a liability

D) Increase an asset and increase a liability

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7. The liability created by receiving cash in advance of earning the revenue is?

A) Accrued expenses

B) Accrued revenue

C) Unearned revenue

D) Earned revenue

8. The process of transferring data from a Ledger to Journal is known as:

A) Journalizing

B) Recording

C) Posting

D) None of the above

9. Excess of total expenses over total revenues would be termed as:

A) Net Income

B) Net Loss

C) Owner's Equity

D) Break-even point

10. Where a transaction effects more than two accounts, such a transaction is called:

A) Stale transaction

B) Compound Entry

C) Double Entry

D) Multiple Entry

11) 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.

12) Revenue is traditionally recognized in the accounting records when

A) cash is received.

B) services are invoiced to the customer.

C) it is incurred.

D) None of the answers are correct.

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13) If you debit Prepaid Insurance, you most likely will

A) credit Fees Earned.

B) debit Cash.

C) credit Insurance Expense.

D) credit Cash.

14) The trial balance lists all the accounts

A) alphabetically.

B) in the same order as in the ledgers.

C) all debits first and then credits.

D) all credits first and then debits.

15) Accountants use the worksheet to organize and complete adjustments for all but one of the

following events:

A) Depreciation on equipment.

B) Sales from early in the next year.

C) Supplies on hand.

D) Rent paid in advance.

16) A contra-asset is

A) in reality a liability.

B) an asset with a debit balance.

C) an account with an opposite balance of a normal asset.

D) an account that increases the asset.

17) The adjustment that is made to allocate the cost of a building over its expected life is called

A) depreciation.

B) residual value.

C) accumulated depreciation.

D) None of these answers are correct.

18) Hope for the Homeless purchased kitchen equipment for $47,000 with a residual value of

$17,000 and a life expectancy of 5 years. Using straight-line depreciation, the amount of the

depreciation adjustment for the first year would be

A) $5,000.

B) $6,000.

C) $6,400.

D) $4,000.

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19) Each adjustment affects

A) the income statement.

B) the balance sheet.

C) the cash account.

D) both A and B are correct.

20) Ruel Records' weekly payroll of $500 is paid on Fridays. Assume that the last day of the

month falls on Tuesday. Which of the following adjusting journal entries is needed on that date?

A) Salaries Expense 500

Salaries Payable 500

B) Salaries Expense 300

Salaries Payable 300

C) Salaries Expense 200

Salaries Payable 200

D) Salaries Payable 300

Salaries Expense 300

21) Closing entries are prepared

A) to clear all temporary accounts to zero.

B) to update the Capital balance.

C) at the end of the accounting period.

D) All of the above are correct.

22) Which of the following accounts is NOT a temporary account?

A) Withdrawals

B) Fees Earned

C) Cash

D) Income Summary

23) Closing entries will affect

A) total assets.

B) Cash.

C) Owner's Capital.

D) total liabilities.

24) The correct order for closing accounts is

A) revenue, expenses, income summary, withdrawals.

B) revenue, income summary, expenses, withdrawals.

C) revenue, expenses, capital, withdrawals.

D) revenue, capital, expenses, withdrawals.

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25) M. Smuts showed a net income of $7,500. The entry to close the Income Summary account

would include a

A) debit to M. Smuts Capital, $7,500.

B) credit to M. Smuts Capital, $7,500.

C) debit to Income Summary, $7,500.

D) Both B and C are correct.

26) Which of the following accounts would appear on the post-closing trial balance?

A) Fees Earned

B) Wages Expense

C) Owner's Capital

D) Income Summary

27) Which of the following sequence of actions describes the proper order in the accounting

cycle?

A) Journalize, post, close, prepare financial statements, adjust, and analyze transactions.

B) Prepare financial statements, journalize, post, adjust, analyze transactions, close.

C) Source documents, journalize, post, adjust, prepare financial statements, close.

D) Post, close, prepare financial statements, adjust, analyze transactions, and journalize.

28) Which of the following would cause total assets to decrease and total expense to increase?

A) Recording the depreciation of equipment

B) Recording the consumption of supplies

C) Recording the expiration of prepaid rent

D) All of the above would have that effect.

29) It is the year end, but not the pay period end. How will this affect the balance sheet?

A) Assets will be increased.

B) Liabilities will be increased.

C) Owner's equity will be increased.

D) This has no effect on the period end balance sheet.

30) At the start of this year 18 months rent was paid. At the year's end, how will this affect the

balance sheet?

A) Assets will be decreased.

B) Liabilities will be increased.

C) Owner's equity will be increased.

D) This has no effect on the period end balance sheet.

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31) Assuming that purchases of supplies were debited to the Supplies on Hand asset account

when made, an adjustment for supplies would indicate

A) the amount bought.

B) the amount used up.

C) the amount on hand.

D) the amount on the trial balance.

32) Rent paid by your organization two months in advance is considered to be a(n)

A) liability.

B) asset.

C) contra asset.

D) revenue.

33) After the adjustment for depreciation has been made, the original cost of the equipment

A) increases with a credit.

B) decreases with a debit.

C) remains the same.

D) is adjusted to market value.

34) If a truck cost $13,000, has a residual value of $1,000, and has a useful life of 10 years, the

depreciation for a month would be

A) $1,200.

B) $108.33.

C) $1,300.

D) $100.

35) On March 1, Rosetti Company paid in advance $7,000 for seven months' rent. The March

31 adjusting entry for rent expense should include

A) debit Rent Expense, $2,500.

B) credit Prepaid Rent, $3,500.

C) debit Rent Expense, $2,000.

D) debit Rent Expense, $1,000.

36) The Income Summary account shows debits of $17,000 and credits of $12,000. This results

in a

A) net income of $29,000.

B) net loss of $29,000.

C) net income of $5,000.

D) net loss of $5,000.

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37) After closing the revenue, expense, and withdrawal accounts, the capital increased by

$3,000. Which of the following situations could have occurred?

A) The company had a net income.

B) The owner invested an additional amount.

C) The owner made a withdrawal.

D) All of these answers are correct.

38) The entry to close the expense account(s) was entered in reverseIncome Summary was

credited and the expense account(s) was/were debited. The result of this error is that

A) before closing it, Income Summary will have a credit balance.

B) before closing it, Income Summary will have a debit balance.

C) the assets will be overstated.

D) the liabilities will be overstated.

39) The entry to close the revenue account(s) was entered in reverseIncome Summary was

debited and the revenue account(s) was/were credited. The result of this error is that

A) before closing it, Income Summary will have a credit balance.

B) before closing it, Income Summary will have a debit balance.

C) the assets will be overstated.

D) the liabilities will be overstated.

40) The following normal account balances were found on the general ledger before closing

entries were prepared:

Revenue $700 Cash $500

Expenses $400 Accounts Receivable $350

Capital $7,500 Withdrawals $1,000

After closing entries are posted, what is the balance in the Revenue account?

A) $700

B) $0

C) $300

D) Closing entries do not affect Revenue.

41) The following normal account balances were found on the general ledger before closing

entries were prepared:

Revenue $700 Cash $500

Expenses $400 Accounts Receivable $350

Capital $7,500 Withdrawals $1,000

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After closing entries are posted, what is the balance in the Capital account?

A) $7,800

B) $7,500

C) $6,800

D) Closing entries do not affect the Capital account.

42) The following normal account balances were found on the general ledger before closing

entries were prepared:

Revenue $700 Cash $500

Expenses $400 Accounts Receivable $350

Capital $7,500 Withdrawals $1,000

After closing entries are posted, what is the balance in the Cash account?

A) $800

B) $0

C) $300

D) $500

43) The entry to close the Withdrawal account was entered in reversethe Withdrawal account

was debited and Capital credited. The result of this error is that

A) before closing it, Income Summary will have a credit balance.

B) before closing it, Income Summary will have a debit balance.

C) the end of period capital will be understated.

D) the end of period capital will be overstated.

44) The entry to close Income Summary (net loss) was entered in reverseIncome Summary

was debited and Capital was credited. This error will cause

A) Income Summary to have a credit balance.

B) Income Summary to have a debit balance.

C) the assets to be overstated.

D) the liabilities to be overstated.

45) Which of the following is a real account?

A) Cash

B) Fees Earned

C) Utilities Expense

D) Income Summary

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46) Conner Sales' total assets and total liabilities increased $500. The transaction could have

been

A) purchase of supplies for cash, $500.

B) purchase of supplies for $600 with a down payment of $100 and the remainder on account.

C) paid the rent for the month, $600.

D) None of these answers are correct.

47) As Withdrawals increase,

A) Owner's Equity decreases.

B) Owner's Equity increases.

C) Cash increases.

D) expense increases.

48) If the Owner's Equity account increases during the year, most likely

A) The company was awarded a large and profitable contract.

B) Expenses were unusually low for the year.

C) Revenue was higher than average for the year.

D) The owner made additional investment during the year.

49) Bailey's received its electric bill for December on December 31 but did not pay nor record it

in the general journal. This resulted in

A) understated assets.

B) overstated net income.

C) overstated liabilities.

D) understated capital.

50) The adjusted trial balance on the worksheet shows Accumulated Depreciation, $1,000, and

Depreciation Expense, $700. What was the balance in the Accumulated Depreciation account

before the adjustment?

A) $1,700

B) $300

C) $700

D) $1,000