WorksheetsFinancial Accounting Introduction and Accounting Equation
Total questions: 20
Worksheet time: 10mins
Which of the following is not a step in the accounting
process?
Identification
Verification
Recording
Communication
Which of the following statements about users of accounting information is incorrect?
Management is an internal user.
Taxing authorities are external users.
Present creditors are external users.
Regulatory authorities are internal users.
The historical cost principle states that:
assets should be initially recorded at cost and adjusted when the fair value changes.
activities of an entity are to be kept separate and distinct from its owner.
assets should be recorded at their cost.
only transaction data capable of being expressed in terms of money be included in the accounting records.
The three types of business entities are:
proprietorships, small businesses, and partnerships
proprietorships, partnerships, and corporations.
proprietorships, partnerships, and large businesses.
financial, manufacturing, and service companies.
Net income will result during a time period when:
assets exceed liabilities.
assets exceed revenues.
expenses exceed revenues.
revenues exceed expenses.
As of December 31, 2014, Kent Company has assets of $3,500 and owner’s equity of $2,000. What are the liabilities for Kent Company as of December 31, 2014?
$1,500.
$1,000.
$2,500.
$2,000.
Performing services on account will have the following effects on the components of the basic accounting equation:
increase assets and decrease owner’s equity.
increase assets and increase owner’s equity.
increase assets and increase liabilities.
increase liabilities and increase owner’s equity.
Which of the following events is not recorded in the accounting records?
Equipment is purchased on account.
An employee is terminated.
A cash investment is made into the business.
The owner withdraws cash for personal use.
During 2014, Lim Company’s assets decreased $50,000 and its liabilities decreased $90,000. Its owner’s equity therefore:
increased $40,000.
decreased $140,000.
decreased $40,000.
increased $140,000.
Which of the following statements is false?
A statement of cash flows summarizes information
about the cash inflows (receipts) and outflows (payments) for a specific period of time.
A balance sheet reports the assets, liabilities, and owner’s equity at a specific date.
An income statement presents the revenues, expenses, changes in owner’s equity, and resulting net income or net loss for a specific period of time.
An owner’s equity statement summarizes the changes in owner’s equity for a specific period of time.
Which of the following statements about an account is true?
In its simplest form, an account consists of two parts.
An account is an individual accounting record of increases and decreases in specific asset, liability, and owner’s equity items.
There are separate accounts for specific assets and liabilities but only one account for owner’s equity items.
The left side of an account is the credit or decrease side.
A revenue account:
is increased by debits.
is decreased by credits.
has a normal balance of a debit.
is increased by credits.
Debits:
increase both assets and liabilities.
decrease both assets and liabilities.
increase assets and decrease liabilities.
decrease assets and increase liabilities.
Accounts that normally have debit balances are:
assets, expenses, and revenues.
assets, expenses, and owner’s capital.
assets, liabilities, and owner’s drawings.
assets, owner’s drawings, and expenses.
The expanded accounting equation is:
Assets + Liabilities = Owner’s Capital + Owner’s Drawings + Revenues + Expenses
Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues - Expenses
Assets = Liabilities - Owner’s Capital - Owner’s Drawings - Revenues - Expenses
Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses
Which of the following statements about a journal is false?
It is not a book of original entry.
It provides a chronological record of transactions.
It helps to locate errors because the debit and credit amounts for each entry can be readily compared.
It discloses in one place the complete effect of a transaction.
The purchase of supplies on account should result in:
a debit to Supplies Expense and a credit to Cash.
a debit to Supplies Expense and a credit to Accounts Payable.
a debit to Supplies Expense and a credit to Accounts Payable.
a debit to Supplies and a credit to Accounts Receivable.
A ledger:
contains only asset and liability accounts.
should show accounts in alphabetical order.
is a collection of the entire group of accounts maintained by a company.
is a book of original entry.
A trial balance:
is a list of accounts with their balances at a given time.
proves the mathematical accuracy of journalized transactions.
will not balance if a correct journal entry is posted twice.
proves that all transactions have been recorded.
A trial balance will not balance if:
a correct journal entry is posted twice.
the purchase of supplies on account is debited to Supplies and credited to Cash.
a $100 cash drawing by the owner is debited to Owner’s Drawings for $1000 and credited to Cash for $100.
a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.
