Download Accounting Review Sheet

Accounting Review Sheet
True/False
Indicate whether the sentence or statement is true or false.
____
1. When a company pays insurance premiums in advance to an insurer, it records the payment as a liability
because the insurer owes future coverage.
____
2. A proprietorship is also known as a sole proprietorship.
____
3. Anything of value that is owned is a liability.
____
4. A business has two types of equities.
____
5. Individuals or other businesses to whom a business owes money have rights to the business's assets.
____
6. A record summarizing all the information pertaining to a single item in the accounting equation is an account.
____
7. The capital account is a liability account.
____
8. Double lines below a column total mean that the totals have been verified as correct.
____
9. Cash is increased by expenses.
____ 10. Detailed information about changes in owner's equity is needed by owners and managers to make sound
business decisions.
____ 11. Owner's equity is decreased by a sale on account.
____ 12. The accounts on the left side of the accounting equation include the liabilities and owner's equity.
____ 13. The balance sheet reports the balances of the asset, liability, and owner's equity accounts.
____ 14. When cash is paid for expenses, the business has less cash; therefore, the asset account Cash is decreased and
the owner's equity account is increased.
____ 15. A business cannot succeed if owner's equity decreases each time period.
____ 16. Before a transaction is recorded in the records of a business, it is analyzed to determine which accounts are
changed and how.
____ 17. Recording transactions in a journal is journalizing.
____ 18. Information for each transaction recorded in a journal is an entry.
____ 19. Each transaction is described by a source document that proves that the transaction did occur.
____ 20. A check is a business form ordering a bank to pay cash from a bank account.
____ 21. Debits must equal credits for each entry in a general journal.
____ 22. When there is only one blank line remaining at the bottom of a general journal page, the debit part of the next
entry is journalized on the one blank line and the remainder of the entry is journalized on the next journal
page.
____ 23. A check is an example of a source document when items are paid in cash.
____ 24. The month is written for each transaction on a general journal page.
____ 25. The second division in the chart of accounts is the owner's equity division.
____ 26. The month and year are written in the Date column of an account for each entry posted to that account.
____ 27. Each amount in the Debit and Credit columns in a general journal is posted to the account written in the
Account Title column.
____ 28. Blank endorsements should be used when sending checks through the mail.
____ 29. A check with a future date on it is a postdated check.
____ 30. Most banks will accept postdated checks.
____ 31. Banks usually refuse to accept altered checks.
____ 32. When a deposit is made in a bank account, the bank issues a receipt.
____ 33. An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.
____ 34. When the petty cash fund is replenished, the balance of the petty cash account increases.
____ 35. If any kind of error is made in preparing a check, a new check should be prepared and the old check should be
thrown away immediately.
____ 36. All fiscal periods are one year long.
____ 37. Most businesses use a fiscal period of one year because tax reports must be made at least once a year.
____ 38. Many businesses choose a one-year fiscal period that ends during a period of high business activity.
____ 39. A double line ruled across both Trial Balance columns shows that the two columns are to be totaled.
____ 40. A net loss results when total revenue is greater than total expenses.
____ 41. The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.
____ 42. Errors in general ledger accounts should never be erased.
____ 43. The net income calculated for the income statement and the net income on the work sheet must be the same.
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____ 44. The accounting equation is most often stated as ____.
a. assets = liabilities
c. assets = liabilities + owner's equity
b. cash = assets
d. liabilities + assets = owner's equity
____ 45. When supplies are bought on account, the business to whom money is owed is ____.
a. an asset account
c. an equity account
b. a liability account
d. a capital account
____ 46. A balance sheet is a financial statement that reports assets, liabilities, and owner's equity ____.
a. for a period of time
c. for the business and the owner together
b. on a specific date
d. at current selling values
____ 47. Assets are ____.
a. listed on the right side of the balance sheet
b. listed on the left side of the balance sheet
c. listed on both sides of the balance sheet
d. not listed on the balance sheet
____ 48. Liabilities are ____.
a. listed on the right side of the balance sheet
____ 49.
____ 50.
____ 51.
____ 52.
____ 53.
____ 54.
____ 55.
____ 56.
____ 57.
____ 58.
____ 59.
____ 60.
b. listed on the left side of the balance sheet
c. listed on both sides of the balance sheet
d. not listed on the balance sheet
Total assets are $19,500.00. Cash is paid for $1,500.00 of supplies. The total assets are now ____.
a. $19,500.00
c. $18,000.00
b. $21,000.00
d. $22,500.00
A business prepares a balance sheet to report information about ____.
a. expenses incurred during a given period of time
b. revenue received during a given period of time
c. the business's assets, liabilities, and owner's equity
d. profit the business has made for the year
A transaction that increases cash and decreases owner's equity is ____.
a. revenue
c. expense
b. withdrawal
d. none of the above
Recording an expense transaction in an accounting equation causes liabilities to ____.
a. remain unchanged
c. decrease
b. increase
d. none of the above
When cash is paid for an expense, ____.
a. assets increase; owner's equity increases
b. assets decrease; owner's equity decreases
c. assets decrease; owner's equity increases
d. none of the above
When cash is received from sales, ____.
a. assets increase; owner's equity decreases
b. assets increase; owner's equity increases
c. assets decrease; owner's equity decreases
d. none of the above
When the owner withdraws cash for personal use, ____.
a. liabilities increase and assets decrease
b. assets decrease and owner's equity increases
c. assets decrease and owner's equity decreases
d. liabilities decrease and assets decrease
The accounts shown on the left side of a balance sheet include ____.
a. prepaid insurance
c. advertising
b. rent
d. liabilities
The total of the balances of the accounts on the left and right sides of a balance sheet should ____.
a. be different
c. equal owner's equity
b. be equal
d. equal cash
If an amount is recorded on the side of a T account opposite the normal balance side, the account balance is
____.
a. increased
c. unaffected
b. decreased
d. correct
When a business pays for insurance, Prepaid Insurance is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
When a business pays cash on account, a liability account is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
____ 61. When cash is received from sales, the change in the owner's equity is usually ____.
a. recorded in a separate revenue account
b. recorded directly in the owner's capital account
c. recorded as interest revenue
d. always recorded on the debit side
____ 62. When the owner withdraws cash, the owner's drawing account is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
____ 63. An amount recorded on the left side of a T account is ____.
a. a debit
c. normal balance
b. a credit
d. none of the above
____ 64. The normal balance side of any liability account is ____.
a. the debit side
c. the left side
b. the credit side
d. none of the above
____ 65. Increases in a revenue account are shown on a T account's ____.
a. debit side
c. left side
b. credit side
d. none of the above
____ 66. When $1,500.00 cash is received on account, ____.
a. Sales is increased with a credit and Cash is increased with a credit
b. Accounts Receivable is increased with a debit and Cash is increased with a credit
c. Accounts Receivable is decreased with a credit and Cash is increased with a debit
d. Accounts Receivable is decreased with a debit and Cash is increased with a debit
____ 67. The recording of debit and credit parts of a transaction is ____.
a. double-entry accounting
c. accounting
b. single-entry accounting
d. none of the above
____ 68. Preparing a source document for each transaction is an application of the accounting concept ____.
a. Business Entity
c. Objective Evidence
b. Unit of Measurement
d. Going Concern
____ 69. On each general journal page, the year is written ____.
a. for each entry
c. only for the first entry
b. on the first line of each column
d. none of the above
____ 70. On each general journal page, the month is written ____.
a. for each entry
c. only for the first entry
b. on the first line of each column
d. none of the above
____ 71. A business has the following expense accounts: 510, Advertising Expense; 520, Miscellaneous Expense; 530,
Repair Expense. A new account titled Utilities Expense is added. The account number for this new account
is ____.
a. 515
b. 525
c. 540
d. 550
____ 72. The account number is placed in the Post. Ref. column of the journal to show ____.
a. to which account an amount has been posted
b. that the amounts are correct
c. to which journal page the amount has been transferred
d. none of the above
____ 73. A business form ordering a bank to pay cash from a bank account is ____.
a. a signature card
c. a check
b. a deposit slip
d. none of the above
____ 74. A check must be signed with ____.
a. the same signature as on the signature card
b. only the first and last name
c. a restrictive endorsement
d. black ink
____ 75. An endorsement on the back of a check consisting of the words "Pay to the order of" and a new check owner's
name is a ____.
a. blank endorsement
c. restrictive endorsement
b. special endorsement
d. signature endorsement
____ 76. An endorsement on the back of a check indicating that the check is to be accepted for deposit only is a ____.
a. blank endorsement
c. restrictive endorsement
b. special endorsement
d. deposit endorsement
____ 77. A form showing proof of a petty cash payment is a ____.
a. check
c. petty cash check stub
b. petty cash slip
d. journal
____ 78. The bank statement shows a checking account balance of $5,500.00. There are outstanding checks totaling
$600.00, an outstanding deposit of $400.00, and a bank service charge of $15.00. The checking account
balance should be ____.
a. $5,300.00
c. $5,285.00
b. $5,700.00
d. none of the above
____ 79. A columnar form used to summarize general ledger information needed to prepare financial statements is
____.
a. a balance sheet
c. a work sheet
b. a trial balance
d. an income statement
____ 80. On a trial balance, ____.
a. all general ledger account titles are listed
b. only general ledger accounts that have balances are listed
c. only accounts with debit balances are listed
d. only accounts with credit balances are listed
____ 81. Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period are ____.
a. found on a trial balance
b. recorded in a work sheet's Income Statement columns
c. reported on financial statements
d. adjustments
____ 82. Recording revenue from business activities and expenses associated with earning that revenue in the same
accounting period is an application of the accounting concept ____.
a. Matching Expenses with Revenue
c. Consistent Reporting
b. Accounting Period Cycle
d. Going Concern
____ 83. If a pair of work sheet columns do not balance and the difference between the totals is an amount that appears
elsewhere on the work sheet, the error is probably ____.
a. an error in addition
b. an amount that has been written in the wrong column
c. an amount that has not been extended
d. a slide
____ 84. An income statement reports a business's financial ____.
a. condition over a specific period of time
c. condition on a specific date
b. progress over a specific period of time
d. progress on a specific date
____ 85. A balance sheet reports a business's financial ____.
a. condition over a specific period of time
c. condition on a specific date
b. progress over a specific period of time
d. progress on a specific date
____ 86. The date on a monthly income statement prepared on July 31 is written as ____.
a. For Month Ended July 31, 20–
c. 20–, July 31
b. July 31, 20–
d. none of the above
____ 87. The formula for calculating the total expenses component percentage is ____.
a. total expenses divided by total sales equals total expenses component percentage
b. total sales divided by total expenses equals total expenses component percentage
c. total sales minus total expenses divided by net income equals total expenses component
percentage
d. none of the above
____ 88. The formula for calculating the net income component percentage is ____.
a. net income divided by total sales equals net income component percentage
b. total sales divided by total expenses equals net income component percentage
c. total sales minus total expenses divided by net income equals total net income percentage
d. none of the above
Accounting Review Sheet
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
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8.
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30.
31.
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33.
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35.
36.
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40.
41.
F
T
F
T
T
T
F
T
F
T
F
F
T
F
T
T
T
T
T
T
T
F
T
F
F
F
T
F
T
F
T
T
T
F
F
F
T
F
F
F
T
42. T
43. T
MULTIPLE CHOICE
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
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65.
66.
67.
68.
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70.
71.
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73.
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76.
77.
78.
79.
80.
81.
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83.
84.
C
B
B
B
A
A
C
D
A
B
B
C
A
B
B
A
C
A
A
A
B
B
C
A
C
C
C
C
A
C
A
B
C
B
A
C
A
D
A
C
B
85.
86.
87.
88.
C
A
A
A