Financial Accounting & Reporting Quiz

What is the primary purpose of a journal in accounting?

• To prepare tax returns

• To classify accounts

• To record business transactions

• To summarize financial statements

Which type of journal is used to record sales on account?

• Purchases Journal

• Sales Journal

• Cash Receipts Journal

• General Journal

What is the normal balance of an asset account?

• Both

• Neither

• Debit

• Credit

What does the concept of duality in accounting refer to?

• Using only cash transactions

• Each transaction having a two-fold effect

• Balancing the books

• Recording transactions in one account

Which of the following accounts has a normal credit balance?

• Expenses

• Liabilities

• Accounts Receivable

• Cash

What is the purpose of a subsidiary ledger?

• To record all transactions

• To provide a breakdown of controlling accounts

• To summarize financial statements

• To prepare tax returns

In the double-entry system, what must be true for every transaction?

• Transactions can be recorded in one account

• Only cash transactions are recorded

• Debits must equal credits

• There must be at least three accounts involved

What is the carrying amount of an asset?

• The balance of the asset account only

• The total historical cost

• The sum of all liabilities

• The sum of the asset and its related contra account

Which of the following is a contra account?

• Accounts Receivable

• Inventory

• Allowance for Bad Debts

• Cash

What is the result of selling equipment for less than its carrying amount?

• No effect

• Gain

• Loss

• Revenue