TEN EXAM 1. Which one of the following items on a trial balance is properly identified as a Liability Account? (a) (6) (c) (d) Accounts Payable Accounts Receivable Rent Purchases 2. Journalize: set up a petty cash fund of $150.00 to cover petty cash expenditure." (a) (b) Dr. Dr. Dr. Dr. Expense; Profit and Loss; Petty Cash Fund; Cash; Cr. Cr. Cr. Cr. Cash Cash Cash Petty Cash Fund (d) 3. Journalize: "Purchased two typewriters for use in agency office from CD Company on account, $167.00" (a) (6) (c) (d) Dr. Dr. Dr. Dr. Equipment; Cash: Accounts Payable; CD Company Cr. Cr. Cr. Cr. CD Company Accounts Receivable Cash Equipment 4. An error in any journal or the ledger, if not detected until after the trial balance has been prepared, is corrected through an entry in the (a) (b) (C) (d) cash journal balance sheet ledger general journal 5. A debit entry in a subsidiary expense account indicates: (a) (b) (c) (d) an abatement a revenue an expense none of the above 6. The account which accumulates in summary form data shown in detail by a subsidiary record is known as a (a) (b) (C) (d) closing account periodic account record account control account 2 7. Accounts that show the sources of income and expense are (a) (b) (c) (d) nominal accounts transfer accounts net worth accounts real accounts 8. A trial balance will not indicate that an error has been made in (a) computing the balance of the account (b) entering an amount in the wrong account (c) carrying forward the balance of an account (d) entering an amount on the wrong side of an account The one of the following which is never properly considered a negotiable instrument is 9. (a) (b) (C) (d) an invoice a promissory note a bond an unrestrictedly endorsed check 10. A subsidiary ledger contains accounts which show (a) (b) (C) (d) details of contingent liabilities of undetermined amount totals of all asset accounts in the general ledger totals of all liability accounts in the general ledger details of an account in the general ledger 11. A bill warrant has been paid to a vendor, charging accounts as follows: 4501 4600 4700 $225.00 $50.00 $25.00 Upon review, it has been found that Account 4501 should have been charged only $100.00 and Account 4600 should have been charged the balance originally charged 4501. The correct journal voucher to correct the situations is: (a) (b) (c) (d) Debit 4501 $100; credit 4600 $100 Credit 4501 $100; debit 4600 $100 Debit 4501 $125; credit 4600 $125 Credit 4501 $125, debit 4600 $125 12. The fundamental value of double entry accounting, as compared with single entry, is that the former (a) (b) (C) lends itself much better to machine methods of bookkeeping allows less scope for fraud in that every number is entered twice is the only possible method of keeping accounts on an accrual basis shows the effect of a transaction on assets, liabilities, and capital (d) 13. The chief purpose of a Ledger Account is to (a) (b) enable the accountant to make debit and credit entries enable the recording, under an appropriate title or heading, of business transactions similar enough to come under the same account classifications balance an account; to determine whether the balance is an asset or liability, an operating charge, an operating credit, or capital ascertain whether there is a credit or debit balance (c) (d) a 14. After the financial statements have been prepared, the closing entries are recorded in the (a) (b) income statement profit and loss summary balance sheet general journal (d) 15. The use of subsidiary ledgers, in addition to the general ledger, is desirable to (a) (b) show the business conducted by one or more branch plants show in greater detail the information summarized in the general ledger furnishes additional information for the use of an outside auditor furnish information to be used in the determination of taxes (c) (d) 16. Government balance-sheet accounts usually fall into all of the following groups EXCEPT (a) (b) (c) (d) asset accounts cost accounts liability accounts surplus accounts 17. In municipal accounting, the most likely objective of the municipal authorities in establishing designated funds is to (a) (b) prevent the intermingling of cash received from various sources insure the use of assets solely for the particular purpose for which they are segregated simplify the task of reconciling the bank statement reserve a portion of the liquid assets as a reserve against reduction (c) (d) of evenec 18. To which of the following classes of errors should an auditor generally be most alerts? (a) Errors of principle, because he must give a copy of the adjusting entries to the client. After they are posted on the books the surplus will be adjusted and be in agreement with that shown on the auditor's report. (b) Errors of commission, because such errors usually affect the trial balance and are therefore not automatically corrected. (c) Errors of omission, because such errors usually do not affect the trail balance and are therefore not automatically detected. (d) Errors affecting surplus, because they affect the statement of surplus reconciliation, showing the surplus on the books after the adjustments have been agreed to by the client, plus or minus the adjustments with which the client is not in agreement. Under the accrual basis as generally recommended, the operating accounts consist of 19. (a) (b) (C) (d) receipts and disbursements asset and liability asset, liability, and equity revenue and expenditures 20. The term "encumbrances", as used in governmental accounting, refers to (a) (b) (C) the reservation of money to pay for an obligation when it becomes due debts or other legal obligations arising out of transactions any disbursement made from an appropriation in payment of a legal claim the amount of money disbursed from the appropriation of a fund (d) 21. If the ledger work on a double entry set of books of a solvent business is correct, the relationship between the debits and credits is such that the (a) (b) (C) (d) sum of the debits equals the sum of the credits sum of the debits is greater than the sum of the credits sum of the credits is greater than the sum of the debits difference between the sum of the debits and the sum of the credits increases as the business expands