Accounting Principles Quiz

Prepaid Insurance is what type of account?

• Asset

• Liability

• Expense

• Equity

GAAP stands for:

• Generally American Accounting People

• Generally Accepted American Principles

• Generally Accepted Accounting Principles

• Generally Altered Accounting Principles

Which type of accounting is GAAP approved?

• Accrual Based

• Cash Based

In this type of accounting, revenue and expenses are recorded when cash is paid or collected:

• Accrual Based

• Cash Based

Under accrual methods, which account will need to be adjusted on the worksheet?

• Supplies

• Cash

• Owner’s Equity

• Sales

What is the correct adjusting entry for accrual accounting?

• Debit Cash, Credit Prepaid Insurance

• Debit Prepaid Insurance, Credit Cash

• Debit Insurance Expense, Credit Prepaid Insurance

• Debit Insurance liability, Credit Cash

How would you calculate the amount you should adjust prepaid insurance in a 12-month accounting cycle, assuming you prepaid for the year?

• Amount paid divided by 12

• Amount paid multiplied by 6

• Call the insurance company to determine exchange rates

• Amount paid divided by 12 minus prepaid liability

The balance sheet includes expense and revenue accounts.

• True

• False

The income statement includes Owner’s equity accounts.

• True

• False

What happens when we find adjustments that need to be made on the worksheet?

• We make adjustment entries in the journal and then the ledger

• We immediately record to the general ledger without journaling

• We do not make adjustments at all.

• We only adjust the accounts on the financial statement.