QUIZ FINANCIAL ACCOUNTING (NGUYEN THI THU)

CHAPTER 1
1. Which of the following would not be considered an internal user of accounting data for the XYZ
Company
a. Production manager
b. Merchandise inventory clerk
c. President of the company
d. President of the employees’ labor union
2. Which of the following would not be considered internal users of accounting data for a company
a. The president of a company c. Creditors of a company
b. Salesmen of the company d. The controller of a company
3. ____________, which is one part of accounting, is the recording of transactions and events, either
manually or electronically
a. Processing c. Preparing
b. Record-keeping or Bookkeeping d. Communicating
4. Owner’s equity is best depicted by the following
a. Assets - Liabilities c. Assets = Liabilities
b. Liabilities + Assets d. Residual Equity + Assets
5. If total liabilities decreased by $25,000 and owner’s equity increased by $5,000 during a period of
time, then total assets must change by what amount and direction during that same period
a. $20,000 decrease c. $25,000 increase
b. $20,000 increase d. $30,000 increase
6. GAAP stands for
a. Generally Accepted Accounting Procedures
b. Generally Accepted Accounting Principles
c. Generally Accepted Auditing Principles
d. Generally Accepted Auditing Procedures
7. The _______ principle requires that financial information is supported by independent, unbiased
evidence
a. Business entity c. Accounting period
b. Objectivity d. Going-concern
8. The _______ assumption assumes business will continue operating indefinitely instead of being
closed or sold
a. Accounting period c. Going-concern
b. Business entity d. Monetary unit
9. Which of the following is not a step in the accounting process
 a. Economic entity c. Recording
b. Communication d. Identification
10. Deb Smith is the proprietor (owner) of Smitty’s, a retailer of athletic apparel. When recording the
financial transactions of Smitty’s, Deb does not record an entry for a car she purchased for
personal use. Deb took out a personal loan to pay for the car. What accounting concept guides
Deb’s behavior in this situation
a. Monetary unit assumption c. Economic entity assumption
b. Cash basis concept d. Pay back concept
11. According to the cost principle, it is necessary for managers to report an approximation of an
asset’s market value uppon purchase
a. True b. False
12. Bookkeeping is the recording of transactions and events and is only part of accounting
a. False b. True
13. Company assets total $150,000 and its liabilities total $30,000. What is the equity of this
company
a. $180,000 c. $100,000
b. $120,000 d. $150,000
14. The economic entity assumption requires that the activities
a. Of a sole proprietorship cannot be distinguished from the personal economic events of its
owners
b. Of an entity be kept separate from the activities of its owner
c. Must be reported to the Securities and Exchange Comum
d. Of different entities can be combined if all the entities are corporations
15. Which of the following events is not a business transaction
a. Incurred utility expenses for the month
b. Earned revenue for services provided
c. Hired employees
d. Investment of cash by the owner
16. Which one of the followong users of accounting information is considered to be an external user
of accounting information rather than an internal user of accounting information
a. Officers and directors c. Company managers
b. Internal auditors d. Company customers
17. Which of the following is not part of the accounting process
a. Communicating c. Financial decision making
b. Identifying d. Recording

CHAPTER 2
1. At December 1, 2019, JNN Travel Agency had an Accounts Payable balance of $40,000. During
the month, the company made purchases on account of $50,000 and made payments on account
of $20,000. At December 31,2019, the Accounts Payable balance is
a. $70,000 b. $82,000 c. $10,000 d. $90,000
2. A list of accounts and their balances at a given time is called a
a. Journal c. Posting
b. Trial balance d. Income statement
3. In the first month of operations, the total of the debit entries to the Cash account amounted to
$900 and the total of the credit entries to the Cash account amounted to $500. The Cash account
has a
a. $800 debit balance c. $400 debit balance
b. $500 credit balance d. $400 credit balance
4. The name given to entering transaction data in the journal is
a. Chronicling c. Posting
b. Journalizing d. Listing
5. The left side of an account is
a. The balance of the account c. A description of the account
b. The debit side d. Blank
6. The first step in the recording process is to
a. post to a journal
b. analyze each transaction for its effect on the accounts
c. prepare a trial balance
d. prepare financial statements
7. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
a. the mathematical equality of the accounting equation
b. no errors can be discovered
c. that all accounts reflect correct balances
d. no errors have been made
8. Amelia Company received its telephone bill on February 15, 2011 in the amount of $325. This
bill covered the period from January 1, 2011 through January 31, 2011. Amelia paid this bill
immediately. The company uses a calendar year accounting period and prepares its financial
statements only once a year at the end of the year. The general journal entry to record this
transaction includes:
a. A debit to Accounts Payable for $325
b. A debit to the Cash account for $325.
c. A credit to Accounts Payable for $325.
d. A debit to the Telephone Expense account for $325.
e. A credit to the Telephone Expense account for $325.
9. On January 14, Franco Industries purchased supplies of $500 on account. The entry to record the
purchase will include
a. a debit to Accounts Receivable and a credit to Supplies
 b. a debit to Supplies and a credit to Accounts Payable
c. a debit to Supplies and a credit to Cash
d. a debit to Supplies Expense and a credit to Accounts Receivable
10. The steps in preparing a trial balance include all of the following _except_
a. listing the account titles and their balances
b. transferring journal amounts to ledger accounts
c. proving the equality of the two columns
d. totaling the debit and credit columns
11. On April 2, 2019, Busan performed cash services of $4,500. The entry to record this transaction
would include
a. A debit to Service Revenue of $4,500
b. A debit to Cash of $4,500
c. A credit to Accounts Payable of $4,500
d. A debit to Service Revenue of $4,500
12. Which one of the following represents the expanded basic accounting equation?
a. Assets – Liabilities – Dividends = Share Capital + Revenues – Expenses
b. Assets + Dividends + Expenses = Liabilities + Share Capital + Revenues
c. Assets = Revenues + Expenses – Liabilities
d. Assets = Liabilities + Share Capital – Revenue – Expenses
13. At any given point in time, it is possible to describe general ledger accounts as having an
expected or "normal" balance: either a debit balance or a credit balance. This normal balance is
on the side of the account, that is, the debit side or credit side, which represents the "increase"
side of the account. In order, what is the normal balance for the Equipment account, the Owner's
Equity account, and the Sales Revenue account?
a. Credit, debit, credit. d. Debit, debit, credit.
b. Debit, credit, credit. e. Debit, debit, debit.
c. Credit, credit, debit.
14. For the basic accounting equation to stay in balance, each transaction recorded must
a. affect two or more accounts
b. affect the same number of asset and liability accounts
c. always affect exactly two accounts
d. affect two or less accounts
15. An account consists of
a. four sides c. two sides
b. three sides d. one side
16. Which of the following statements is _not _true
a. Expenses increase owner's equity
b. Expenses are a negative factor in the computation of net income
c. Expenses decrease owner's equity
d. Expenses have normal debit balances
17. A trial balance is a listing of
a. the totals from the journal pages
b. transactions in a journal
c. general ledger accounts and balances
d. the chart of accounts
18. Olivia, the proprietor, deposited $40,000 in the company's bank account. She received the money
as the result of a settlement of a class action lawsuit and decided to invest it in her business to
help with expansion. Recording the transaction on the company books will require which of the
following?
a. An asset to be debited, capital to be credited.
b. A liability to be debited, an asset to be credited.
c. An asset to be debited, a liability to be credited.
d. One asset to be debited, another asset to be credited.
19. The usual sequence of steps in the transaction recording process is

a. analyze � journal � ledger c. journal � ledger � analyze

b. journal � analyze � ledger d. ledger � journal � analyze
20. An account consists of
a. a title, a right side, and a debit balance
b. a title, a debit balance, and a credit balance
c. a title, a left side, and a debit balance
d. a title, a debit side, and a credit side
21. The procedure of transferring journal entries to the ledger accounts is called
a. Reporting c. posting
b. analyzing d. journalizing
22. A compound journal entry involves
a. three or more accounts c. four or more accounts
b. three accounts d. two accounts
23. JNK Company showed the following balances at the end of its first year: Cash $4,200, Prepaid
insurance $1,200, Accounts receivable $2,400, Accounts payable $3,000, Salaries and Wages
Expense: $4,400, Share Capital - Ordinary $6,000, Service Revenue $5,000, Salaries and Wages
Expense $1,800. What did JNK Company show as total credits on its trial balance?
a. $20,000 b. $14,000 c. $17,000 d. $18,000
24. On July 7, 2008, Reethink Enterprises performed cash services of $1,400. The entry to record this
transaction would include
a. a credit to Accounts Receivable of $1,400
b. a credit to Accounts Payable of $1,400
c. a debit to Cash of $1,400
d. a debit to Service Revenue of $1,400
25. Which of the following statements is true?
a. Journalizing entries occurs after posting entries.
b. Revenue accounts are increased by debit entries.
c. An account shows increases and decreases and an account balance.
d. Debit entries are entries involving the right-hand side on an account.
26. Customarily, a trial balance is prepared
a. at the end of an accounting period c. at the end of each day
b. after each journal entry is posted d. only at the inception of the business
27. A proprietorship employs one full-time accountant. This person is considered an employee. On
the desk in front of her are five different business documents. Which one of the following would
not be considered an original source document from the proprietorship's point of view?
a. A copy of the Statement of Financial Position at the end of the company's first year of
existence.
b. A bank receipt for $10,000 evidencing yesterday's cash receipts deposited in the bank
c. A cancelled check for $500 representing payment in full for the annual insurance premium
mentioned in item B above.
d. The invoice received by the proprietorship from Samsung Electronics when the
proprietorship purchased its first lot of inventory to be sold to its customers.
28. A company buys a one-year insurance policy on February 1, 2011, and immediately pays in cash
the $720 insurance premium. The company's bookkeeper records the transaction by crediting the
Cash account for $720 but debits Insurance Expense for $720, instead of debiting Prepaid
Insurance, which would be the correct entry. Based on this information, which statement
concerning the trial balance is correct if the company fails to correct this bookkeeping error?
a. The total trial balance debits equal the trial balance credits but one or more account balances
are incorrect
b. The total trial balance credits are lower than the total trial balance debits.
c. The total trial balance debits are higher than the total trial balance credits.
d. The trial balance is correct as it is.
e. The total trial balance debits do not equal the total trial balance credits.
29. A chart of accounts usually starts with
a. liability accounts c. expense accounts
b. revenue accounts d. asset accounts
30. After transaction information has been recorded in the journal, it is transferred to the
a. income statement c. book of original entry
b. trial balance d. ledger
31. On March 1, 2019, a company collects a $500 deposit from a customer for the installation of a
home-theater system. The installation is scheduled for May 5, 2019. How should the company
record this entry on March 1, 2019?
a. The Sales Revenue account is credited for $500.
b. The Cash account is credited for $500.
c. The Unearned Sales Revenue account is debited for $500.
d. The Unearned Sales Revenue account is credited for $500
32. At January 31, 2008, the balance in Prieto Inc.’s supplies account was $250. During February,
Prieto purchased supplies of $300 and used supplies of $400. At the end of February, the balance
in the supplies account should be
a. $950 debit c. $350 credit
b. $150 debit d. $250 debit
33. One of your company's business checks clears the bank at its correct amount of $500. The
transaction that underlies this check was the cash purchase of office supplies. The entry was
recorded as a debit to Insurance Expense for $50 and a credit to Cash for $50. The correcting
entry should include which of the following?
a. A debit to Accounts Receivable for $450.
 b. A credit to Cash for $50.
c. A credit to Supplies Expense for $500.
d. A credit to Cash for $450.
34. The Baker sole proprietorship started operations on January 1, 2011 and uses a calendar-year
accounting period. On February 7, 2011, the company purchases an automobile with an invoice
cost of $10,000. To settle this transaction, the company immediately pays $3,000 cash to the
automobile dealership and signs a three-month note payable for the $7,000 purchase price
balance. A partial general journal entry is given below. Which item accurately describes the
partial entry from Baker's viewpoint?
a. Cash is debited for $3,000 and Notes Payable is credited for $7,000.
b. Cash is credited for $3,000 and Notes Payable is credited for $7,000.
c. The asset account Vehicles is debited for $7,000 and Cash is credited for $3,000.
d. The asset account Vehicles is credited for $10,000 and Cash is credited for $3,000.
35. A company buys a new car on February 15, 2011, and immediately pays in cash the $25,000
purchase price. The company's bookkeeper fails to record the transaction at all. Based on this
information, which statement concerning the trial balance is correct if the company fails to
correct this bookkeeping error?
a. The total trial balance debits do not equal the total trial balance credits
b. The total trial balance debits are equal to the total trial balance credits, but one or more
accounts have incorrect balances.
c. The trial balance is correct as it is.
d. The total trial balance debits are higher than the total trial balance credits
36. Franklin Company provided consulting services and billed the client $2,500. As a result of this
event,
a. assets decreased by $2,500 c. assets remained unchanged
b. assets increased by $2,500 d. Share Capital decreased by $2,500
37. The right side of an account
a. is the credit side
b. reflects all transactions for the accounting period
c. shows all the balances of the accounts in the system
d. is the correct side
38. Identify the accounts to be debited and credited for transaction: Purchases building on account for
€300,000?
a. Building to be debited and Accounts Payable to be credited
b. Cash to be debited and Building to be credited
c. Building to be debited and Cash to be credited
d. Accounts Payable to be debited and Building to be credited
39. The usual sequence of steps in the recording process is to analyze each transaction, enter the
transaction in the
a. book of original entry, and transfer the information to the journal
b. journal, and transfer the information to the ledger accounts
c. book of accounts, and transfer the information to the journal
d. ledger, and transfer the information to the journal
40. After a business transaction has been analyzed and entered in the book of original entry, the next
step in the recording process is to transfer the information to
 a. the company's bank c. ledger accounts
b. owner's equity d. financial statements
41. An account is a part of the financial information system and is described by all except which one
of the following?
a. An account has a debit and credit side
b. An account is a source document
c. An account has a title
d. An account can have a balance
42. A list of accounts and their balances at a given time is called a
a. journal. c. posting
b. trial balance d. income statement
43. A debit is _not _the normal balance for which account listed below?
a. Dividends c. Accounts Receivable
b. Service Revenue d. Cash
44. Anderson Company purchased equipment for $1,800 cash. As a result of this event
a. total assets decreased by $1,800 c. total assets remained unchanged
b. total assets increased by $1,800 d. Share Capital decreased by $1,800
45. The double-entry system requires that each transaction must be recorded
a. first as a revenue and then as an expense
b. in a journal and in a ledger
c. in two sets of books
d. in at least two different accounts
46. Which one of the following is _not _a part of an account?
a. Credit side c. Title
b. Debit side d. Trial balance
47. A company which sells and services medical insurance policies received one payment of $14,000
cash from a customer for insurance coverage for the next two years. Recording the receipt of this
cash when it is received will require which of the following?
a. Withdrawals to be debited, an asset to be credited
b. An asset to be debited, capital to be credited
c. An asset to be debited, a liability to be credited
d. A liability to be debited, an asset to be credited
e. One asset to be debited, another asset to be credited

CHAPTER 3
1. Employees at B Corporation are paid $5,000 cash every Friday for working Monday through
Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary
expense should be recorded 2 days later on January 2?
a. $2,000 c. $5,000
b. None of them d. $3,000
2. Alpha Company collected $180,000 from customers in 2018. Of the amount collected, $20,000
was for services performed in 2017. In addition, Alpha performed services worth $80,000 in
2018, which will not be collected until 2019. Alpha also paid $140,000 for expenses in 2018. Of
the amount paid, $10,000 was for expenses incurred on account in 2017. In addition, Alpha
incurred $60,000 of expenses in 2018, which will not be paid until 2019. 2018 accrual basis net
income is
a. $40,000 b. $60,000 c. $70,000 d. $50,000
3. Under accrual basis accounting
a. Net income is calculated by matching cash outflows against cash inflows
b. Events that change a company’s financial statements are recognized in the period they occur
rather than in the period in which cash is paid or received
c. Cash must be received before revenue is recognized
d. The ledger accounts must be adjusted to reflect a cash basic of accounting before financial
statements are prepared under generally accepted accounting principles
4. Mart Company began operations in June 2019. At the end of the years, the company prepares
annual financial statements. On July 1, the company borrowed $30,000 from a bank on a 2 year
note. The annual interest rate is 12%. Mart Company should make the following adjusting entry
on December 31
a. Debit Interest Expense $1,800, Credit Cash $1,800
b. Debit Interest Payable $300, Credit Interest Expense $300
c. Debit Interest Expense $3,600, Credit Interest Payable $3,600
d. Debit Interest Expense $1,800, Credit Interest Payable $1,800
5. Maple Tree Inc, purchased a 12 month insurance policy on March 1, 2019 for $900. At March 31,
2019, the adjusting journal entry to record expiration of the asset will include a
a. Debit Insurance Expense and Credit Prepaid Insurance for $75
b. Debit Prepaid Insurance and Credit Cash for $900
c. Debit Insurance Expense and Credit Cash for $75
d. Debit Prepaid Insurance and Credit Insurance Expense for $100
6. Adjusting entries are
a. Made to statement of financial position accounts only
b. Not necessary if the accounting system is operating properly
c. Made whenever management desires to change an account balance
d. Usually required before financial statements are prepared
7. Can financial statements be prepared directly from the adjusted trial balance
a. No, the adjusted trial balance merely proves the equality of the total debit and total credit
balances in the ledger after adjustments are posted. It has not other purpose
b. Yes, adjusting entries have been recorded in the general journal and posted to the ledger
accounts
c. They can because that is the only reason that an adjusted trial balance is prepared
d. They cannot. The general ledger must be used
8. Financial statements are prepared directly from the
a. Ledger c. Trial balance
b. Adjusted trial balance d. General journal
9. Hardy Company purchased a computer for $4,800 on December 1. It is estimated that annual
depreciation on the computer will be $960. If financial statements are to be prepared on
December 31, the company should make the following adjusting entry
a. Debit Depreciation Expense $960, Credit Accumulated Depreciation $960
b. Debit Depreciation Expense $80, Credit Accumulated Depreciation $80
c. Debit Depreciation Expense $3,840, Credit Accumulated Depreciation $3,840
d. Debit Office Equipment $4,800, Credit Accumulated Depreciation $4,800
10. Ogletree Enterprises purchased an 18 month insurance policy on May 31, 2019 for $3,600. The
December 31,2019 balance sheet would report Prepaid Insurance of
a. $2,200 b. $1,400 c. $3,600 d. $0
11. Dorting Company purchased a computer system for $3,600 on January 1, 2019. The company
expects to use the computer system for 3 years. It has no salvage. Monthly depreciation expense
on the asset is
a. $0 b. $1,200 c. $3,600 d. $100
12. Monthly and quarterly time periods are called
a. Calendar periods c. Interim periods
b. Fiscal periods d. Quaterly periods
13. Boron Company has prepared the adjusted trial balance as of December 31, 2011. Even though
this adjusted trial balance is correct in every respect, there is still one account whose balance does
not represent the correc end of the period balance. Which account is it
a. Retained Earnings c. Accumulated Depreciation
b. Cash d. Accounts Receivable
14. Which of the following statements related to the adjusted trial balance is incorrect
a. It proves the quality of the total debit balances and the total credit balances in the ledger
b. It shows the balances of all accounts at the end of the accounting period
c. Financial statements can be prepared directly from the adjusted trial balance
d. It is prepared before adjusting entries have been made
15. Accrued revenues are
a. Earned and already received and recorded
b. Earned and recorded as liabilities before they are received
c. Received and recorded as liabilities before they are earned
d. Earned but not yet received or recorded
16. Lawton Company collected $8,400 in October of 2018 for 4 months of service which would take
place from October of 2018 through January of 2019. The revenue reported from this transaction
during 2018 would be
a. 0 b. $6,300 c. $8,400 d. $2,010
17. Accounts often need to be adjusted because
 a. Many transactions affect more than one time period
b. Management can’t decide what they want to report
c. There are always errors made in recording transactions
d. There are never enough accounts to record all the transactions
18. If an adjusting entry is not made for an accrued revenue
a. Assets will be overstated c. Revenues will be overstated
b. Owner’s equity will be understated d. Expenses will be understated
19. Sheepskin Company had the following transactions during 2008: Sales of $4,500 on account,
Collected $2,000 for services to be performed in 2009, Paid $625 cash in salaries, Purchased
airline tickets for $250 in December for a trip to take place in 2009. What is Sheepskin’s 2008 net
income using accrual basis accounting
a. $3,875 b. $3,625 c. $5,875 d. $5,625
20. Unearned revenues are
a. Received and recorded as liabilities before they are earned
b. Earned but not yet received or recorded
c. Earned and recorded as liabilities before they are received
d. Earned and already received and recorded
21. Expenses paid and recorded as assets before they are used are called
a. Interim expenses c. Prepaid expenses
b. Accrued expenses d. Unearned expenses
22. Which of the following is not a common time period chosen by businesses as their accounting
period
a. Monthly b. Daily c. Quarterly
23. Dee Hellings, Inc. performed $3,000 worth of services for a client during December but did not
get paid until the first week of February of the next year. No year end adjusting entry was
recorded on December 31. As a consequence of this oversight, which of the following occurred
a. Assets were overstated and revenues was overstated
b. Assets were overstated and revenues was understated
c. Assets were understated and revenues was overstated
d. Assets were understated and revenues was understated
24. N&N Company Purchased a one year fire insurance policy on October 1 for $3,600. At the end of
the years, the company prepares annual financial statements. N&N Company should make the
following adjusting entry on December 31
a. Debit Insurance Expense $300 Credit Prepaid Insurance $300
b. Debit Insurance Expense $900 Credit Prepaid Insurance $900
c. Debit Prepaid Insurance $3,600 Credit Insurance Expense for $3,600
d. Debit Prepaid Insurance $900 Credit Insurance Expense for $900
25. If the adjusting entry for depreciation is not made
a. Net income will be understated c. Assets will be understated
b. Expenses will be understated d. Owner’s equity will be understated
26. The matching principle matches
 a. Creditors with businesses c. Customers with businesses
b. Assets with liabilities d. Expenses with revenues
27. The adjusted trial balance is prepared
a. Before the trial balance
b. To prove the equality of total assets and total liabilities
c. After financial statements are prepared
d. After adjusting entries have been journalized and posted
28. Which of the statements below is not true
a. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger
b. An adjusted trial balance should show ledger account balances
c. An adjusted trial balance can be used to prepare financial statements
d. An adjusted trial balance is prepared before all transactions have been journalized
29. The notion that the life of a business is divisible into time periods of equal length is known as
which of the following
a. Time period assumption c. Revenue recognition principle
b. Continuing concern principle d. Monetary unit principle
30. The accounts of the business before an adjusting entry is made to record an accrued revenue
reflect an
a. Understated liability and an overstated owner’s capital
b. Understated expense and an overstated revenue
c. Overstated asset and an understated revenue
d. Understated asset and an understated revenue
31. At the end of the fiscal year, an adjusting entry was made for accrued salaries of $2,000. The
salaries for one week, $4,250 were paid on the first Friday of the new fiscal period. When the
weekly salaries are paid on the first Friday of the new accounting period, what will be the general
journal entry
a. Debit Salaries Expense $4,250, credit Cash $4,250
b. Debit Salaries Expense $2,000, credit Cash $2,000
c. Debit Salaries Expense $4,250, credit Salaries Payable $4,250
d. Debit Salaries Expense $2,250, dedit Salaries Payable $2,000, credit Cash $4,250
32. An adjusting entry
a. Affects 2 income statement accounts
b. Affects 2 statement of financial position accounts
c. Is always a compound entry
d. Affects a statement of financial position accounts and an income statement accounts
33. Clark Real Estate signed a four month note payable in the amount of $8,000 on September 1. The
note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of
September is
a. $80 b. $240 c. $60 d. $720
34. An NBA basketball team sells season tickets worth $48 million before the basketball season starts
late in the year. Assume this $48 million is debited to Cash and credited to Unearned Ticket
Revenue. By the end of the calendar year, which also happens to be the end of the team’s
accounting period, 25% of the games have been placed. What adjusting journal entry should be
made at the end of the year
 a. Unearned Ticket Revenue, debit, $12 million, Ticket Revenue, credit, $12 million
b. Ticket Revenue, debit, $12 million, Unearned Ticket Revenue, credit, $12 million
c. Ticket Revenue, debit, $12 million, Cash, credit, $12 million
d. Unearned Ticket Revenue, debit, $12 million, Cash, credit, $12 million
35. The basic difference between the cash basis of accounting and the accrual basis of accounting is
that each basis interprets differently which two accounting principles
a. The cost principle and the revenue recognition principle
b. The going concern principle and the cost principle
c. The matching principle and the revenue recognition principle
d. The monetary unit principle and the time period principle
36. At March 1, 2018, Candy Inc, had supplies on ahnd of $500. During the month, Candy purchased
supplies of $1,200 and used supplies of $1,500. The March 31, adjusting journal entry should
include
a. Credit to the supplies account for $1,500
b. Debit to the supplies account for $1,200
c. Credit to the supplies account for $500
d. Debit to the supplies account for $1,500
37. Which of the following statements related to the adjusted trial balance is incorrect
a. Financial statements can be prepared directly from the adjusted trial balance
b. It shows the balances of all accounts at the end of the accounting period
c. It is prepared before adjusting entries have been made
d. It proves the equality of the total debit balances and the total credit balances in the ledger
38. Although it is possible to find an exception to the following statement, the vast majority of
adjusting entries follow which pattern described below
a. Both of the accounts debited or credited are balance sheet accounts
b. Both of the accounts debited or credited are income statement accounts
c. One of the accounts debited or credited is an income statement account while the second
accounts debited or credited is a balance sheet account
d. Both of the accounts debited or credited are part of the statement of owner’s equity
39. Boron Company has prepared the adjusted trial balance as of December 31, 2011. Even though
this adjusted trial balance is correct in every respect, there is still one account whose balance does
not represent the correct end of the period balance. Which account is it
a. Retained earnings c. Accounts Receivable
b. Cash d. Accumulated Depreciation
40. A liability- revenue relationship exists with
a. Accrued expense adjusting entries c. Unearned revenue adjusting entries
b. Prepaid expense adjusting entries d. Accrued revenue adjusting entries
41. A funiture factory’s employees work overtime to finish an order that is sold on February 28. The
office sends a statement to the customer in early March and payment os received by mid- March.
The overtime wages should be expensed in
a. March
b. February
c. The period when the workers receive their checks
d. Either in February or March depending on when the pay period ends
42. Financial statements are prepared directly from the
a. Ledger c. Trial balance
b. Adjusted trial balance d. General journal
43. Manning Corporation issued a one year, 9%, $200,000 note on April 30, 2019. Interest expense
for the year ended December 31, 2019 was
a. $10,500 b. $18,000 c. $12,000 d. $13,500
44. Which of the following statements concerning accrual basis accounting is incorrect
a. Accrual basis accounting follows the matching principle
b. Accrual basis accounting recognizes expenses when thay are paid
c. Accrual basis accounting follows the revenue recognition principle
d. Accrual basis accounting is the method required by generally accepted accounting principles
45. In a service type business, revenue is considered earned
a. When the service is performed c. At the end of the month
b. At the end of the year d. When cash is received
46. Prepaid expenses are
a. Incurred but not yet paid or recorded
b. Incurred but already paid or recorded
c. Paid and recorded in an asset account before they are used or consumed
d. Paid and recorded in an asset account after they are used or consumed
47. Quirk Company purchased office supplies costing $6,000 and debited Office Supplies for the full
amount. At the end of the accounting period, a physical count of office supplies revealed $2,400
still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
a. Debit Office Supplies, $2,400, Credit Office Supplies Expense, $2,400
b. Debit Office Supplies Expense, $2,400, Credit Office Supplies, $2,400
c. Debit Office Supplies Expense, $3,600, Credit Office Supplies, $3,600
d. Debit Office Supplies, $3,600, Credit Office Supplies Expense, $3,600
48. Can financial statements be prepared directly from the adjusted trial balance
a. No, the adjusted trial balance merely proves the equality of the total debit and total credit
balances in the ledger after adjustments are posted. It has not other purpose
b. Yes, adjusting entries have been recorded in the general journal and posted to the ledger
accounts
c. They can because that is the only reason that an adjusted trial balance is prepared
d. They cannot. The general ledger must be used
49. If business pays rent in advance and debits a Prepaid Rent account, the company receiving the
rent payment will credit
a. Accrued rent revenue c. Unearned rent revenue
b. Prepaid rent d. Cash
50. Family Corporation performed consulting services for a client in December 2019. The client will
be billed $5,000. Family Corporation should make the following adjusting entry on December 31
a. Debit Services Revenue, $5,000, Credit Cash $5,000
b. Debit Services Revenue, $5,000, Credit Accounts Receivable $5,000
c. Debit Cash $5,000, Credit Services Revenue $5,000
 d. Debit Accounts Receivable, $5,000, Credit Services Revenue, $5,000

CHAPTER 4
1. The first required step in the accounting cycle is
a. Posting transactions
b. Analyzing transactions
c. Journalizing transactions in the book of original entry
d. Reversing entries
2. GNN Moto Company received a $590 cash from a customer for the balance due. The transaction
was erroneously recorded as a debit to Cash $990 and a credit to Service Revenue $990.
Assuming the incorrect entry is not reserved, the correcting entry is
a. Debit Cash, $590 and Accounts Receivable, $590, credit Service Revenue, $1,080
b. Debit Service Revenue, $990. credit Cash, $400 and Accounts Receivable, $590
c. Debit Cash, $400 and Service Revenue, $590, credit Accounts Receivable, $990
d. Debit Cash, $990, credit Accounts Receivable, $990
3. Closing entries are necessary for
a. Temporary accounts only
b. Permanent accounts only
c. Permanent or real accounts only
d. Both permanent and temporary accounts
4. A post-closing trial balance is prepared
a. Before closing entries have been journalized and posted
b. After closing entries have been journalized but before the entries are posted
c. After closing entries have been journalized and posted
d. Before closing entries have been journalized but after the entries are posted
5. Liabilities are generally classified on a statement of financial position as
a. Current liabilities and non current liabilities
b. Small liabilities and large liabilities
c. Present liabilities and future liabilities
d. Tangible liabilities and intangible liabilities
6. If Income Summary has a credit balance after revenues and expenses have been closed into it, the
closing entry for Income Summary will include a
a. Credit to the retained earnings account
b. Debit to the retained earnings account
c. Debit to the dividends account
d. Credit to the dividends account
7. If errors occur in the recording process, they
a. Should be corrected as adjustments at the end of the period
b. Cannot be corrected until next accounting period
c. Should be corrected as soon as they are discovered
d. Should be corrected when preparing closing entries
8. Office Equipment is classified in the statement of financial position as
a. A long term investment b. Property, plant and equipment
 c. A current asset d. An intangible asset
9. The closing entry process consists of closing
a. All permanent accounts c. All temporary accounts
b. Out the owner’s capital account d. All asset and liability accounts
10. All of the following statements about the post-closing trial balance are correct except it
a. Proves that all transactions have been recorded
b. Provides evidence that the journalizing and posting of closing entries have been properly
completed
c. Shows that the accounting equation is in balance
d. Contains only permanent accounts
11. A post-closing trial balance will show
a. Only permanent account balances
b. Zero balance for all accounts
c. The amount of net income (or loss) for the period
d. Only temporary account balances
12. Which of the following statements about the accounting cycle is false
a. Financial statements are prepared before preparing the adjusted trial balance
b. Journalizing the transactions is performed before preparing the unadjusted trial balance
c. Adjusting the accounts is done prior to preparing the adjusted trial balance
d. Preparing the post-closing trial balance is done after the temporary account have been closed
e. Posting is done after transactions have been analyzed
13. On September 23, Pitts Company received a $350 check from Mike Moluf for services to be
performed in the future. The bookkeeper for Pitts Company incorrectly debited Cash for $350 and
credited Accounts Receivable for $350. The amounts have been posted to the ledger. To correct
this entry, the bookkeeper should
a. Debit Account Receivable $350 and credit Cash $350
b. Debit Cash $350 and credit Unearned Service Revenue $350
c. Debit Account Receivable $350 and credit Service Revenue $350
d. Debit Account Receivable $350 and credit Unearned Service Revenue $350
14. All the following are property, plant and equipment except
a. Supplies c. Buildings
b. Machinery d. Land
15. The Income Summary
a. Appears on the statement of financial position
b. Appears on the income statement
c. Is a temporary account
d. Is a permanent account
16. The balance in the Income Summary account before it is closed will be equal to
a. Zero
b. The beginning balance in the owner’s capital account
c. The net income or loss on the income statement
d. The ending balance in the owner’s capital account
17. A current asset is
a. The last asset purchased by a business
 b. An asset that a company expects to convert to cash or use up within one year
c. An asset which is currently being used to produce a product or service
d. Usually found as a separate classification in the income statement
18. The final step in the accounting cycle is to prepare
a. Financial statement c. Adjusting entries
b. A post-closing trial balance
19. Income Summary has a credit balance of $8,000 in B&B Company after closing revenues and
expenses. The entry to close Income Summary is
a. Debit Expense, $8000, credit Income Summary $8,000
b. Debit Income Summary $8,000, credit Retained Earnings $8,000
c. Debit Revenue, $8000, credit Income Summary $8,000
d. Debit Retained Earnings $8,000, credit Income Summary $8,000
20. The balances that appear on the post-closing trial balance will match the
a. Income statement account balances after adjustments
b. Statement of financial position account balances after adjustment
c. Income statement account balances after closing entries
d. Statement of financial position account after closing entries
21. Which of the following accounts is a temporary account
a. Notes payable d. Lola Delong, Withdrawals
b. Land e. Capital, Lola Delong
c. Unearned Revenue
a. Adjusting entries
22. What are the main purposes of the post-closing trial balance except
a. To verify that only real accounts continue to have a balance in them and that the sum of all
the debit balances in the real accounts is equal to the sum of all the credit balances in the real
accounts
b. To verify that all the temporary or nominal accounts have zero balances
c. To make sure all transactions have been correctly recorded in the general journal
23. Which of the following is listed on the post-closing trial balance for a company
a. Income Summary d. Salaries Expense
b. Sales Revenue e. Depreciation Expense
c. Accumulated Depreciation
24. Speedy Bike Company received a $940 check from a customer for the balance due. The
transaction was erroneously recorded as a debit to Cash $490 and a credit to Service Revenue
$490. The correcting entry is
a. Debit Cash $940, credit Accounts Receivable $940
b. Debit Cash $450 and Service Revenue $490, credit Account Receivable $940
c. Debit Cash $450 and Account Receivable $490, credit Service Revenue $940
d. Debit Account Receivable $940, credit Cash $450 and Service Revenue $490
25. As described in the textbook, in what order should the temporary accounts be closed
a. Owner’s drawings, expenses, revenues, income summary
b. Revenues, expenses, income summary, dividends
c. Revenues, expenses, owner’s drawings, income summary
 d. Expenses, revenues, income summary, owner’s drawings
26. The assets should be listed on Cerner’s statement of financial position in the following order
a. Cash, prepaid insurance, supplies, accounts receivable
b. Cash, accounts receivable, prepaid insurance, supplies
c. Cash, accounts receivable, prepaid insurance, equipment
d. Equipment, supplies, prepaid insurance, accounts receivable, cash

CHAPTER 5
1. One June 7, N&N Company sold $2,600,000 of merchandise on account to JMM Company. The
cost of the merchandise sold was $2,350,000. The journal entries to record this transaction on
W.B Reind N&N Company’s books under a perpetual inventory system as following
a. Debit Accounts Receivable, $2,600,000; credit Sales Revenue $2,600,000 and debit Cost of
Goods Sold, $2,350,000; credit Inventory $2,350,000
b. Debit Cost of Goods Sold, $2,350,000; credit Inventory $2,350,000
c. Debit Accounts Receivable, $2,350,000; credit Sales Revenue $2,350,000 and debit Cost of
Goods Sold, $2,600,000; credit Inventory $2,600,000
d. Debit Accounts Receivable, $2,600,000; credit Sales Revenue $2,600,000
2. Net sales is sales less
a. Sales discounts and sales returns and allowances
b. Sales discounts
c. Sales returns and allowances
d. Sales returns
3. T&H Company reported the following balances at December 31,2018; Sales $300,000, Sales
Returns and Allowances $10,000, Sales Discounts $4,000, COGS $250,000. Net sales for the
month is
a. $300,000 c. $236,000
b. $290,000 d. $286,000
4. COGS is determined only at the end of the accounting period in
a. A periodic inventory system
b. Both a perpetual and a periodic inventory system
c. Neither a perpetual nor a periodic inventory system
d. A perpetual inventory system
5. The records for Uptown Pet Shop showed the following Sales Revenue, $225,000; Beginning
Merchandise Inventory, $40,000; purchases of Merchandise Inventory during the period,
$144,000 and COGS, $172,000. What is the amount of the ending Merchandise Inventory
a. $12,000 c. $144,000
b. $212,000 d. $15,000
6. The buyer received an invoice from the seller for merchandise with a list price of $700 and credit
term of 2/10, n/45. The term, 2/10, in the credit terms denotes which of the following
a. The discount percentage and the number of days in the discount period
b. Only the discount period
 c. The discount percentage and the number of days to the end of the month
7. In preparing closing entries for a merchandising company, the Income Summary account will be
credited for the balance of
a. Merchandise inventory c. Freight-out
b. Sales d. Sales discounts
8. In a perpetual inventory system, when a buyer returns defective merchandise to the seller, the
buyer credits which account
a. Sales Revenue c. Merchandise Inventory
b. Cash d. Sales Returns
9. Sales revenue less COGS is called
a. Gross profit c. Net profit
b. Marginal income d. Net income
10. A merchandising company using a perpetual system will make
a. The same number of adjusting entries as a service company does
b. One more adjusting entry than a service company does
c. Different types of adjusting entries compared to a service company
d. One less adjusting entry than a service company does
11. A retailer who uses a perpetual inventory system purchased $8,000 of merchandise on credit. The
credit terms were 2/10. n/30, FOB shipping point. The freight costs were $130. What was the
journal entry to record the purchase
a. Merchandise Inventory, debit, $7,870, Accounts Payable, credit, $7,870
b. Merchandise Inventory, debit, $8,130, Accounts Payable, credit, $8,130
c. Merchandise Inventory, debit, $8,130, Freight-In, debit, $130, Accounts Payable, credit,
$8,130
d. Merchandise Inventory, debit, $8,000, Accounts Payable, credit, $8,000
12. Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
a. COGS account c. Merchandise account
b. Supplies account d. Purchase account
13. A company understates its ending inventory by $5,000. It never discovers this error. The company
is a sole proprietorship. Which statement accurately describes the company’s permanent situation
a. Net income for the current year is understated and the owner’s equity account will
permanently remain understated since the error is never discovered
b. Net income for the current year is overstated. Net income for the next year will also be
overstated by $5,000 and the owner’s equity will never be correct since the error was not
discovered
c. Net income for the current year is understated. Net income for the next year will be
overstated by $5,000, but the balance in the owner’s equity account will be correct at the end
of year 2
d. Net income for the current year is overstated and the owner’s equity account will
permanently remain overstated since the error is never discovered
14. Which of the following accounts has a normal credit balance
a. Sales b. Selling Expense
 c. Sales Returns and Allowances d. Sales Discounts
15. After gross profit is calculated, operating expenses are deducted to determine
a. Gross margin c. Net margin
b. Net income d. Gross profit on sales
16. The adjusted trial balance of BNJ Enterprises shows the following data pertaining to sales at the
end of its fiscal year December 31,2018: Sales Revenue 600,000, Freight-out 2,000, Sales
Returns and Allowances 5,000, and Sales Discounts 2,000. The closing entries for sales as
following
a. Debit Sales Revenue, 600,000 and Sales Returns and Allowances 5,000, credit Income
Summary 605,000
b. Debit Sales Revenue, 600,000 and Freight-out 2,000, credit Income Summary 602,000
c. Debit Sales Revenue, 600,000 and Sales Returns and Allowances 5,000, and Sales Discounts
2,000, credit Income Summary 607,000
d. Debit Sales Revenue, 600,000, credit Income Summary 600,000
17. Sales revenues are usually considered earned when
a. Cash is received from credit sales
b. Goods have been transferred from the seller to the buyer
c. An order is received
d. Adjusting entries are made
18. Which of the following expressions in incorrect
a. Net income + operating expenses = gross profit
b. Sales – COGS – operating expenses = net income
c. Operating expenses – COGS = gross profit
d. Gross profit – operating expenses = net income
19. Income from operations will always result if
a. Gross profit exceeds operating expenses
b. Revenues exceed COGS
c. The COGS exceeds operating expenses
d. Revenues exceed operating expenses
20. A merchandising company using a perpetual system will make
a. One less adjusting entry than a service company does
b. The same number of adjusting entries as a service company does
c. One more adjusting entry than a service company does
d. Different types of adjusting entries compared to a service company
21. A sales invoice is a source document that
a. Serves only as a customer receipt
b. Provides support for goods purchased for resale
c. Provides evidence of incurred operating expenses
d. Provides evidence of credit sales
22. Gross profit for a merchandiser is net sales minus
a. Sales discounts c. Cost of goods available for sale
b. Operating expenses d. COGS
23. A company uses the perpetual inventory system and makes a purchase of inventory on open
account. Which of the following is the correct journal entry to record this purchase
 a. A debit to Merchandise Inventory and a credit to Accounts Payable
b. A debit to Merchandise Inventory and a credit to Cash
c. A debit to Office Supplies and a credit to Cash
d. A debit to Sales Returns and Allowances and a credit to COGS
24. Baden Shoe Store has a beginning merchandise inventory of $30,000. During the period,
purchases were $140,000, purchase return, $4,000, and freight-in $10,000. A physical count of
inventory at the end of the period revealed that $20,000 was still on hand. The cost of goods
available for sale was
a. $184,000 c. $176,000
b. $164,000 d. $156,000
25. Which of the following items would be included in the reporting of operating income if the entry
is a law firm
a. Interest Expense c. A loss of the sale of a building
b. Interest Revenue d. Wages Expense
26. In a perpetual inventory system, the COGS account is used
a. Only when a credit sale of merchandise occurs
b. Whenever there is a sale of merchandise or a return of merchandise sold
c. Only when a sale of merchandise occurs
d. Only when a cash sale of merchandise occurs
27. In a perpetual inventory system, COGS is recorded
a. With each sale c. On a monthly basis
b. On a daily basis d. On an annual basis
28. Company A is taking the end of the year physical inventory. Its accounting period ends on
December 31. Which of the following items would not be counted in the ending inventory count
a. Items owned by Company A were delivered to another company on consignment on
December 27. The items are still held by the other company on December 31
b. Unsold inventory that remains in Company A’s warehouse on December 31
c. Items sold on December 29 and shipped the same day where the purchaser is responsible for
paying the freight charge. The item arrived at its destination on January 3
d. Items Company A ordered from a supplier on December 15 were shipped on December 17
and received by Company A on December 28 where the seller paid the shipping charges
29. Byan Company purchased merchandise from Cates Company with freight terms of FOB shipping
point. The freight costs will be paid by the
a. Buyer and the seller c. Seller
b. Buyer d. Transportation company
30. Which of the following expenses would not generally be found in the General and Administrative
Expenses section of an income statement
a. Rent Expense c. Depreciation Expense
b. Advertising Expense d. Wages Expense
31. At the beginning of September, 2008, RFI Company reported Merchandise Inventory of $4,000.
a. $7,800
During b. made
the month, the company $11,800 c. At$600
purchases of $7,800. d. $8,600
September 31,2008 a physical
32. count
When of inventory reported
merchandise $3,200
is purchased foron hand.the
resale, COGS for theaccount
Inventory month would
is be debited for such
acquisition costs as the cost of the item itself and any freight charges for which the purchaser is
responsible. This procedure is an application of which accounting principle
a. Monetary unit principle c. Materiality principle
b. Going concern principle d. Historical cost principle
33. If the sales are 500,000, COGS is 430,000 and operating expenses are 50,000. The gross profit is
a. 70,000 b. 20,000 c. 440,000 d. 380,000
34. Income from operations is gross profit less
a. Operating expenses c. Selling expenses
b. Other expenses and losses d. Administrative expenses
35. Which of the following would not be classified as a contra account
a. Sales Returns and Allowances c. Accumulated Depreciation
b. Sales Discounts d. Sales

CHAPTER 6
1. Inventories affect
a. Both the statement of financial position and the income statement
b. Only the income statement
c. Only the statement of financial position
d. Neither the statement of financial position nor the income statement
2. During the current year, 2011, a company decides to carry a brand new item in its inventory. It
purchases 25 new items for $100 each for a total of $2,500. It sells 7 items during 2011 and has
18 items on hand at the end of the year. In 2012, it buys 6 more items for the same price and only
sells 7 items during the entire year. What is the computed amount of COGS for each year
a. $700 and $700 c. $2,500 and $2,500
b. $1,800 and $1,800 d. $700 and $1,800
3. A merchandising business discovers that its ending inventory is overstated by $5,000. If the
company does not correct this error, what will the effect be on the company’s COGS and Net
Income
a. COGS is overstated and Net Income is understated
b. COGS is understated and Net Income is overstated
c. COGS is understated and Net Income is understated
d. COGS is overstated and Net Income is overstated
4. In periods of rising prices, the inventory method which results in the inventory value on the
statement of financial position that is closest to current cost is the
a. Tax method c. FIFO method
b. LIFO method d. Average-cost method
5. In a perpetual inventory system
a. A new average is computed under the average cost method after each sale
b. Average costs are computed as a simple average of unit cost incurred
c. FIFO COGS will be the same as in a periodic inventory system
d. Specific identification is always used
6. If goods in transit are shipped FOB destination
a. The seller has legal title to the goods until they are delivered
b. No one has legal title to the goods until they are delivered
c. The transportation company has legal title to the goods while the goods are in transit
d. The buyer has legal title to the goods until they are delivered
7. A merchandising business discovers that its ending inventory is understated by $6,000. If the
company does not correct this error, what will the effect be on the company’s Total Expenses and
Net Income
a. Total expenses and net income are both overstated
b. Total expenses and net income are both understated
c. Total expenses are understated and net income is overstated
d. Total expenses are overstated and net income is understated
8. AC Co. completed its inventory count. It arrived at a total inventory value of $240,000. However,
you have been given the information as follow: the physical count of the inventory did not
include goods costing $20,000 that were shipped to JNJ, FOB shipping point on December 29
and were still in transit at year-end. Besides, AC sold goods costing $35,000 to BB Co. FOB
destination, on December 31. The goods were received at BB on January 2. They were not
included in AC’s physical inventory. The correct inventory amount of AC on December 31 is
a. $275,000 c. $240,000
b. $205,000 d. $295,000
9. A company purchased inventory as follows: 200 units at $10, 300 units at $12. The average unit
cost for inventory is
a. $10,00 b. $12,00 c. $11,00 d. $11,20
10. Sam’s Used Cars uses the specific identification method of costing inventory. During March, Sam
purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are
sold for $9,000 each. Sam determines that at March 31, the $9,750 car is still on hand. What is
Sam’s gross profit for March
a. $5,250 b. $750 c. $8,250 d. $4,500
11. Overstating ending inventory will overstate all of the following except
a. Owner’s equity c. Assets
b. COGS d. Net income
12. At October 1, 2019, ABC Company had beginning inventory consisting of 80 units with a unit
cost of $20. During October, the company purchased inventory as follow: October 2 purchased
120 units at $22, October 12 purchased 60 units at $23 and October 20 purchased 150 units at
$24. Vanida sold 100 units on October 8 and 200 units on October 28. Vanida uses a perpetual
inventory system. The COGS under the FIFO is
a. $7,050 b. $4,020 c. $6,040 d. $6,580
13. COGS is computed from the following equation
a. Beginning inventory – COGP + ending inventory
b. Beginning inventory + COGP – ending inventory
c. Sales + gross profit – ending inventory + beginning inventory
d. Sales – COGP + beginning inventory – ending inventory
14. Even though, the amount of COGS and the amount of ending inventory can vary dramatically
depending on which inventory cost flow assumption is used, which one of the following amounts
will always be the same, regardless of which inventory cost flow assumption is used
a. The amount of the beginning inventory
b. The amount of cost of goods available for sale
c. The amount of the ending inventory
d. The amount of computed gross profit
15. At March 1, 2019, XYZ Company had beginning inventory consisting of 80 units with a unit cost
of $120. During March, the company purchased inventory as follow: (1) 50 units at $115, (2) 100
units at $120, and (3) 120 units at $125. At the end of the month, XYZ had 180 units in ending
inventory, XYZ uses a periodic inventory system. The COGS under the FIFO is
a. $20,150 b. $24,400 c. $21,300 d. $22,200
16. Disclosures about inventory should include each of the following except the
a. Basis of accounting c. Major inventory classifications
b. Costing method d. Quantity of inventory
17. When the weighted average method of perpetual inventory tracking is used, at what point is the
new average cost calculated except
a. Only at the end of the year
b. After each new purchase of the same inventory item
c. After each sale of the given inventory item
18. Merchandise inventory is
a. Often reported as a miscellaneous expense on the income statement
b. Generally valued at the price for which the goods can be sold
c. Reported under the classification of Property, Plant, and Equipment on the balance sheet
d. Reported as a current asset on the statement of financial position
 QUIZ FINANCIAL ACCOUNTING
QUIZ 1
1. Collection of a $500 Accounts Receivable
a. increases an asset $500; decreases a liability $500
b. decreases a liability $500; increases owner's equity $500
c. decreases an asset $500; decreases a liability $500
d. increases an asset $500; decreases an asset $500
2. If total liabilities decreased by $15,000 and owner’s equity increased by $5,000 during a period of
time, then total assets must change by what amount and direction during that same period?
a. $15,000 decrease c. $10,000 increase
b. $20,000 increase d. $10,000 decrease
3. The primary accounting standard-setting body in the United States is the
a. Internal Revenue Service
b. Financial Accounting Standards Board
c. Securities and Exchange Commission
d. International Accounting Standards Board
4. A net loss will result during a time period when:
a. assets exceed liabilities c. revenues exceed expenses
b. assets exceed owner's equity d. expenses exceed revenues
5. If at the end of the accounting period, the company's liabilities total $19,000 and its equity totals
$40,000, then what must be the total of assets?
a. $21,000 b. $40,000 c. $59,000 d. $14,000
6. Total assets and total liabilities of a company are reported on which of the following?
a. Statement of financial position c. Retained Earnings Statement
b. Income statement d. Statement of cash flows
7. Which of the following financial statements refers to a specific date (point in time)?
a. Statement of cash flows c. Income statement
b. Statement of financial position d. Retained Earnings Statement
8. A CPA owns a large home and she has divided the second floor into two separate units: one used
as her personal residence and the other rented out to local college students as an apartment. On
the first floor, she has her own CPA firm where she meets with and provides accounting services
to clients. If she wishes to keep separate records for each of these three activities, the accounting
principle to which she is adhering is?
a. Fair value principle c. Cost principle
b. Business entity principle d. Monetary unit principle
9. Owner's equity is decreased by
a. expenses b. revenues
 c. liabilities d. assets
10. Purchasing equipment on account (payment to be made in the future) will have what effect on the
elements of the accounting equation?
a. Increase in equipment (assets) and an increase in liabilities
b. Increase in equipment (assets) and a decrease in liabilities
c. Increase in equipment (assets) and an increase in equity
d. Increase in equipment (assets) and a decrease in equity

QUIZ 2
1. A chart of accounts usually starts with
a. asset accounts c. liability accounts
b. expense accounts d. revenue accounts
2. Which of the following statements is true?
a. An account shows increases and decreases and an account balance
b. Journalizing entries occurs after posting entries
c. Revenue accounts are increased by debit entries
d. Debit entries are entries involving the right-hand side on an account
3. Meenen Company purchases equipment for $1,200 and supplies for $400 from Sanders Co. for
$1,600 cash. The entry for this transaction will include a
a. credit to Accounts Payable for Meenen
b. credit to Cash for Sanders
c. debit to Equipment $1,200 and a debit to Supplies $400 for Meenen
d. debit to Equipment $1,200 and a debit to Supplies Expense $400 for Sanders
4. The usual sequence of steps in the transaction recording process is
a. analyze → journal → ledger c. journal → analyze → ledger
b. ledger → journal → analyze d. journal → ledger → analyze
5. Which of the following is incorrect regarding a trial balance?
a. It proves that the debits equal the credits after posting
b. A trial balance uncovers errors in journalizing and posting
c. A trial balance is useful in the preparation of financial statements
d. It proves that the company has recorded all transactions
6. Able Company pays its employees twice a month, on the 7th and the 21st. On June 21, Able
Company paid employee salaries of $4,000. This transaction would
a. be recorded by a $4,000 debit to Salaries Payable and a $4,000 credit to Salaries Expense
b. decrease net income for the month by $4,000
c. increase owner’s equity by $4,000
d. decrease the balance in Salaries Expense by $4,000
7. Posting of journal entries should be done in
a. alphabetical order c. dollar amount order
b. chronological order d. account number order
8. In the first month of operations, the total of the debit entries to the cash account amounted to
$900 and the total of the credit entries to the cash account amounted to $500. The cash account
has aKhông
a. $400 credit balance c. $500 credit balance
b. $400 debit balance d. $800 debit balance
9. Which of the following statements is false?
a. Revenues are increased by debits
b. Revenues are a positive factor in the computation of net income
c. Revenues have normal credit balances
d. Revenues increase owner's equity
10. The procedure of transferring journal entries to the ledger accounts is called
a. reporting c. journalizing
b. posting d. analyzing
QUIZ 3
1. Financial statements are prepared directly from the:
a. trial balance. c. ledger.
b. adjusted trial balance d. general journal.
2. Which of the statements below is not true?
a. An adjusted trial balance should show ledger account balances.
b. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger.
c. An adjusted trial balance can be used to prepare financial statements.
d. An adjusted trial balance is prepared before all transactions have been journalized
3. The revenue recognition principle dictates that revenue be recognized in the accounting period
a. in which it is collected. c. after it is earned.
b. in which it is earned. d. before it is earned.
4. Employees at B Corporation are paid $5,000 cash every Friday for working Monday through
Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary
expense should be recorded two days later on January 2
a. $2,000 b. $5,000 c. None d. $3,000
5. At the end of the accounting period, the business had $5,000 of office supplies on hand. At the
beginning of the period, the amount of supplies on hand was $2,000. If the business purchased
$12,000 of office supplies during the year, what amount of office supplies were used during the
year?
a. $ 7,000 b. $14,000 c. $ 9,000 d. $10,500
6. Expenses paid and recorded as assets before they are used are called
a. accrued expenses. c. unearned expenses
b. prepaid expenses. d. interim expenses.
7. Clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The
note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of
September is
a. $80. b. $60. c. $720. d. $240.
8. Although it is possible to find an exception to the following statement, the vast majority of
adjusting entries follow which pattern described below?
a. One of the accounts debited or credited is an income statement account while the second
account debited or credited is a balance sheet account.
b. Both of the accounts debited or credited are balance sheet accounts.
c. Both of the accounts debited or credited are balance sheet accounts.
d. Both of the accounts debited or credited are part of the statement of owner's equity.
9. If the adjusting entry for depreciation is not made,
a. expenses will be understated. c. assets will be understated.
b. net income will be understated. d. owner's equity will be understated.
 10. At the end of the fiscal year, an adjusting entry was made for accrued salaries of $2,000. The
salaries for one week, $4,250, were paid on the first Friday of the new fiscal period. When the
weekly salaries are paid on the first Friday of the new accounting period, what will be the general
journal entry?
a. Salaries Expense, debit, $4,250; Salaries Payable, credit, $4,250
b. Salaries Expense, debit, $4,250; Cash, credit, $4,250
c. Salary Expense, debit, $2,000; Cash, credit, $2,000
d. Salary Expense, debit, $2,250; Salaries Payable, debit, $2,000; Cash, credit, $4,250
11. A tenant rented space in your company’s office building on October 1 at $1,800 per month,
paying seven months’ rent in advance. The bookkeeper recognized a current liability of $12,600.
How much of this amount remains unearned as of December 31?
a. $0 b. $5,400 c. $12,600 d. $7,200
12. A company purchased a 2 year fire insurance policy on May 1, 2011. It paid the $2,400 premium
in cash on the same date and recorded the entry with a debit to Prepaid Insurance for $2,400. The
company has adopted a 12-month accounting period ending on January 31 of each year. If the
company uses the accrual basis of accounting, how much insurance expense will be recorded for
the periods ended January 31, 2012 and January 31, 2013, respectively?
a. $0 and $2,400 c. $900 and $1,200
b. $1,800 and $2,400 d. $2,400 and $0

QUIZ 4
1. What are the main purposes of the post-closing trial balance?
a. To verify that only real accounts continue to have a balance in them and that the sum of all
the debit balances in the real accounts is equal to the sum of all the credit balances in the real
accounts.
b. Both are incorrect
c. To verify that all the temporary or nominal accounts have zero balances.
d. Both are correct
2. Intangible assets are
a. listed under current assets on the balance sheet.
b. not listed on the balance sheet because they do not have physical substance.
c. noncurrent resources.
d. listed as a long-term investment on the balance sheet.
3. Which one of the following statements concerning the accounting cycle is incorrect?
a. The accounting cycle includes only one optional step.
b. The accounting cycle includes journalizing transactions and posting to ledger accounts.
c. The steps in the accounting cycle are performed in sequence.
d. The steps in the accounting cycle are repeated in each accounting period.
4. As described in the textbook, in what order should the temporary accounts be closed?
a. (1) dividends, (2) expenses, (3) revenues, and (4) income summary.
b. (1) expenses, (2) revenues, (3) income summary, and (4) dividends.
c. (1) revenues, (2) expenses, (3) income summary, and (4) dividends.
d. (1) revenues, (2) expenses, (3) dividends, and (4) income summary.
5. The typical accounting worksheet has five sets of columns with each set having a debit column
on the left and a credit column on the right. In moving from left to right across the worksheet,
which of the following lists describes the proper order for four of these sets of columns?
a. Adjustments, Adjusted Trial Balance, Income Statement, and Balance Sheet.
b. Adjustments, Adjusted Trial Balance, Balance Sheet, and Income Statement.
c. Adjusted Trial Balance, Adjustments, Income Statement, and Balance Sheet.
d. Adjustments, Adjusted Trial Balance, Unadjusted Trial Balance, and Income Statement.
6. Which of the following accounts are not closed off at balance date?
a. revenue c. dividend declared
b. accounts payable d. income summary
7. An error has occurred in the closing entry process if
a. the owner's drawing account is closed to the owner's capital account.
b. the owner's capital account is credited for the amount of net income.
c. the balance sheet accounts have zero balances.
d. revenue and expense accounts have zero balances.
8. Speedy Bike Company received a $940 check from a customer for the balance due. The
transaction was erroneously recorded as a debit to Cash $490 and a credit to Service Revenue
$490. The correcting entry is:
a. debit Accounts Receivable, $940; credit Cash, $450 and Service Revenue, $490.
b. debit Cash, $940; credit Accounts Receivable, $940.
c. debit Cash, $450 and Accounts Receivable, $490; credit Service Revenue, $940.
d. debit Cash, $450 and Service Revenue, $490; credit Accounts Receivable, $940.
9. Which of the following sets of accounts are both considered to be temporary accounts which must
be closed at the end of the accounting period?
a. Owner's Drawings and Accounts Payable
b. Cash and Notes Payable
c. Cash and Service Revenue
d. Depreciation Expense and Interest Revenue
10. Income Summary has a credit balance of $12,000 in J. Sawyer Co. after closing revenues and
expenses. The entry to close Income Summary is:
a. credit Income Summary $12,000, debit J. Sawyer, Capital $12,000.
b. debit Income Summary $12,000, credit J. Sawyer, Drawing $12,000.
c. credit Income Summary $12,000, debit J. Sawyer, Drawing $12,000.
d. debit Income Summary $12,000, credit J. Sawyer, Capital $12,000.
11. Closing entries are made:
a. in order to terminate the business as an operating entity
b. so that all assets, liabilities, and owner's capital accounts will have zero balances when the
next accounting period starts
c. so that financial statements can be prepared
d. in order to transfer net income (or loss) and dividends to the owner's capital account
12. The subtotals of the Income Statement debit and credit columns of the work sheet are $17,300
and $29.800, respectively. If the subtotal of the Balance Sheet Debit column is $12,800, what
should be the subtotal of the Balance Sheet Credit column?
a. $15,300 b. $10,300 c. $25,300 d. $2,500
QUIZ 5
1. The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300; Sales Discounts 6,600; Sales 176,000; Cost of Goods Sold 84,700. Net sales
is:
a. $169,400. c. $155,100.
b. $182,600. d. $176,000.
2. During the quarter, Happy Shop’s inventory decreased by $22,000. If the company’s cost of
goods sold for the quarter was $330,000, purchases must have been
a. $286,000. c. $308,000.
b. $352,000. d. Unable to determine.
3. Cole Company has sales revenue of $52,000, cost of goods sold of $35,000 and operating
expenses of $12,000 for the year ended December 31. Cole's gross profit is
a. $17,000. c. $5,000.
b. All are incorrect. d. $40,000.
4. Which of the following expressions is correct?
a. Sales – cost of goods sold – operating expenses = net income
b. Gross profit + operating expenses = net income
c. Operating expenses – cost of goods sold = gross profit
d. Net income - operating expenses = gross profit
5. Happy Home firm purchased inventory from Mary firm. The shipping costs were $500 and the
terms of the shipment were FOB shipping point. Happy Home firm would have the following
entry regarding the shipping charges:
a. There is no entry on Happy Home's books for this transaction.
b. Dr. Inventory 500; Cr. Cash 500
c. Dr. Freight-out 400; Cr. Cash 500
d. Dr. Freight Expense 400; Cr. Cash 500
6. On November 10, 2021, Happy Home firm had credit sales transactions of $5,700 from
merchandise having cost $3,800. The entries to record the day's credit transactions include a
a. Debit of $5,700 to Inventory. c. Credit of $3,800 to COGS
b. Debit of $3,800 to Inventory. d. Credit of $5,700 to Sales.
7. Woolworth firm made a purchase of merchandise on credit from Fairy firm on October 3, for
$6,000, terms 2/10, n/45. On October 30, Woolworth firm makes the appropriate payment to
Fairy firm. The entry on October 30 for Woolworth firm is
a. Dr. Accounts Payable 6,000; Cr. Purchase Returns and Allowances 120 and Cash 5,880
b. Dr. Accounts Payable 6,000; Cr. Cash 6,000
c. Dr. Accounts Payable 6,000; Cr. inventory 120 and Cash 5,880
d. Dr. Accounts Payable 5,880; Cr. Cash 5,880
8. During the current year, 2020, a company decides to carry a brand new item in its inventory. It
purchases 25 new items for $100 each for a total of $2,500. It sells 18 items during 2020 and has
7 items on hand at the end of the year. In 2021, it buys 6 more items for the same price and only
 sells 7 items during the entire year. What is the computed amount of Cost of Goods Sold for each
year?
a. $1,800 and $700 c. $2,500 and $700
b. $700 and $700 d. $700 and $1,800
9. The records for Uptown Pet Shop showed the following: Sales Revenue, $225,000; Beginning
Merchandise Inventory, $43,000; purchases of Merchandise Inventory during the period,
$144,000; and, Cost of Goods Sold, $172,000. What is the amount of the ending Merchandise
Inventory?
a. $212,000 c. $144,000
b. $15,000 d. $12,000
10. The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300; Sales Discounts 6,600; Sales 165,000; Cost of Goods Sold 73,700. Gross
profit is:
a. $91,300 b. $70,400 c. $77,000 d. $84,700
11. When merchandise is purchased for resale, the Inventory account would be debited for such
acquisition costs as the cost of the item itself and any freight charges for which the purchaser is
responsible. This procedure is an application of which accounting principle?
a. Going-concern principle c. Historical cost principle
b. Materiality principle d. Monetary unit principle.
12. The following is financial information: Operating Expenses $ 49,500; Sales Returns and
Allowances 14,300; Sales Discounts 6,600; Sales 176,000; Cost of Goods Sold 84,700. Net
income is:
a. $20,900. c. $41,800.
b. $126,500. d. $70,400.
13. During the quarter, Happy Shop’s inventory increased by $15,000. If the company’s purchases for
the quarter were $530,000, cost of sales must have been
a. $560,000. c. $545,000.
b. $515,000. d. Unable to determine.

QUIZ 6
1. M&M Company uses the perpetual inventory system and the moving-average method to value
inventories. On July 1, there were 10,000 units valued at $40,000 in the beginning inventory. On
July 10, 20,000 units were purchased for $8 per unit. On July 15, 24,000 units were sold for $16
per unit. The amount charged to cost of goods sold on July 15 was
a. $160,000. c. $40,000.
b. $144,000. d. $192,000.
2. ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
method (perpetual system). ABC’s gross profit for the month of July is
a. $3,750. b. $2,250. c. $4,500. d. $2,300.
3. Two companies report the same cost of goods available for sale but each employs a different
inventory costing method. If the price of goods has increased during the period, then the company
using
a. Average-cost will have the lowest cost of goods sold.
b. FIFO will have the highest cost of goods sold.
c. FIFO will have the highest ending inventory.
d. Average-cost will have the highest ending inventory.
4. Which of the following items will increase inventoriable costs for the buyer of goods?
a. Freight charges paid by the purchaser
b. Purchase discounts taken by the purchaser
c. Freight charges paid by the seller
d. Purchase returns and allowances granted by the seller
5. ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
method (perpetual system). The value of ABC’s COGS in July 2021 is
a. not determinable. c. $3,700.
b. $3,750. d. $3,800.
6. Vinfa uses the specific identification method of costing inventory. During June, Vinfa purchased
three cars for $6,000, $7,500, and $9,750, respectively. During June, two cars are sold for $9,000
each. Vinfa determines that at June 30, the $9,750 car is still on hand. What is Vinfa’s gross profit
for June?
a. $8,250. b. $4,500. c. $5,250. d. $750.
7. ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the average
cost method (perpetual system). ABC’s gross profit for the month of July is
a. $3,750. b. $6,000. c. $2,250. d. $4,500.
8. ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the average
cost method (perpetual system). The average cost per unit for July is
a. $8.00. b. $7.00. c. $7.60. d. $7.50.
9. ABC Company had beginning inventory consisting of 100 units with a unit cost of $7 on July 1,
2021. During July, ABC purchased inventory as follows: 200 units at $7 on July 5th, then 300
 units at $8 on July 25th. ABC sold 500 units on July 28th for $12 per unit. ABC uses the FIFO
a. $700.
method b. value
(perpetual system). The $750.of ABC’s inventoryc.at July
$1,200.
31, 2021 is d. $800.
10. Shoes Company's goods in transit at December 31 include: purchases made: (1) FOB destination,
(2) FOB shipping point; and sales made: (3) FOB destination, (4) FOB shipping point. Which
items should be included in Shoes's inventory at December 31?
a. (1) and (3) c. (2) and (3)
b. (1) and (4) d. (2) and (4)