Accounting Cycle Quiz (with notes)

What is the third step in the accounting cycle?

• Adjustments

• Trial Balance

• Financial Statements

• Closing Trial Balance

What is the purpose of an account in financial statements?

• To accumulate information about changes in specific financial statement items

• To calculate taxes

• To manage employee records

• To track inventory levels

What is the left side of an account called?

• Credit side

• Debit side

• Asset side

• Liability side

What is the main function of an account in financial statements?

• To accumulate information

• To distribute profits

• To calculate interest

• To manage payroll

Which of the following is a correct pairing in an account?

• Left side - Credit

• Right side - Credit

• Left side - Asset

• Right side - Liability

What is an amount recorded on the left side of an account called?

• Credit

• Balance

• Debit

• Expense

Generally, what type of balance is owner's equity?

• Debit balance

• Credit balance

• Neutral balance

• Fluctuating balance

In accounting terms, what does a debit entry typically indicate for owner's equity?

• An increase

• A decrease

• No change

• A neutral effect

Which of the following is a fundamental principle of double-entry accounting?

• Every transaction affects only one account

• Every transaction affects two or more accounts

• Transactions do not need to balance

• Only credit transactions are recorded

What is the result of a transaction that increases both assets and liabilities?

• The accounting equation remains balanced

• The accounting equation becomes unbalanced

• Only liabilities increase

• Only assets increase