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WorksheetsAcct test 1
Total questions: 87
Worksheet time: 44mins
An advantage of the corporate form of business is that
it has limited life.
its owner’s personal resources are at stake.
it is simple to establish.
its ownership is easily transferrable via the sale of shares of stock
Which of the following has the advantage of enabling a business to raise funds most easily?
Entity
Sole proprietorship
Corporation
Partnership
The right to receive money in the future is called a(n)
account payable.
account receivable.
liability.
revenue.
Resources owned by a business are referred to as
stockholders’ equity.
liabilities.
assets.
revenues.
Debts and obligations of a business are referred to as
assets.
equities.
liabilities.
expenses.
Which of the following is an asset?
Mortgage payable
Investments
Common stock
Retained earnings
Liabilities
are future economic benefits.
are debts and obligations.
possess service potential.
are things of value owned by a business.
Payments to stockholders are called
expenses.
liabilities.
dividends.
assets.
Net income will result during a time period when
assets exceed liabilities.
assets exceed revenues.
expenses exceed revenues.
revenues exceed expenses.
Which of the following financial statements is concerned with the company at a point in time?
Balance sheet
Income statement
Retained earnings statement
Statement of cash flows
Net income results when
Assets > Liabilities.
Revenues = Expenses.
Revenues > Expenses.
Revenues < Expenses.
Which of the following is not a satisfactory statement of the accounting equation?
Assets = Stockholders’ Equity – Liabilities
Assets = Liabilities + Stockholders’ Equity
Assets - Liabilities = Stockholders’ Equity
Assets - Stockholders’ Equity = Liabilities
Which of the following is not usually classified properly as a current asset?
Supplies
Short-term debt investments
A fund to be used to purchase a building within the next year
A receivable from the sale of an asset to be collected in two years
It is not true that current assets are resources that are expected to be
realized in cash within one year.
sold within one year.
consumed within one year.
acquired within one year.
Financial information is comparable if
companies use the same accounting principles to prepare it.
a company uses the same accounting practices from one period to the next.
the benefits of preparing it outweigh the cost.
it is capable of making a difference in an investing decision.
A company using the same accounting principles from year to year is an application of
timeliness.
consistency.
full disclosure.
materiality.
The assumption that requires that only those things that can be expressed in money are included in the accounting records is the
economic entity assumption.
monetary unit assumption.
going concern assumption.
periodicity assumption.
The periodicity assumption states that the economic life of a business can be divided into
equal time periods.
cyclical time periods.
artificial time periods.
perpetual time periods.
Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records?
monetary unit assumption.
historical cost principle.
periodicity assumption.
full disclosure principle.
A company uses the same accounting principles from year to year.
Understandability
Consistency
Relevance
Verifiable
Information that is free from material error.
Faithful Representation
Verifiable
Relevance
Understandably
Information presented in a clear and concise fashion.
Faithful Representation
Verifiable
Relevance
Understandability
Information that makes a difference in a decision.
Verifiable
Consistency
Relevance
Faithful representation
Information accurately depicts what really happened
Understandability
Consistency
Verifiable
Faithful representation
In its simplest form, an account consists of all of the following except
right (credit) side.
account title.
left side.
explanation column.
Which accounts normally have debit balances?
Assets, expenses, and revenues
Assets, expense, and retained earnings
Assets, liabilities, and dividends
Assets, expenses, and dividends
Which accounts normally have credit balances?
Revenues, liabilities, and dividends
Revenues, liabilities, and assets
Revenues, liabilities, and retained earnings
Revenues, liabilities, and expenses
The best interpretation of the word “credit” is the
offset side of an account.
increase side of an account.
right side of an account.
decrease side of an account.
Which of the following accounts is increased with a credit?
Supplies Expense
Supplies
Sales Revenue
Dividends
An account will have a credit balance if the
credits exceed the debits.
first transaction entered was a credit.
debits exceed the credits.
last transaction entered was a credit.
A list of accounts and their respective debit and credit balances at a given time is called a(n)
Journal
Posting
Trial Balance
Income Statement
At December 31, 2025, before any year-end adjustments, A1 Supply Company's Prepaid Insurance account had a balance of $5,800. It was determined that $2,600 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
2,600
3,200
5,800
2,800
Depreciation is the process of
valuing an asset at its fair value.
increasing the value of an asset over the periods in which it is used.
allocating the cost of an asset to the periods in which it is used.
writing down an asset to its real value each accounting period.
The closing entry process consists of closing
all asset and liability accounts.
out the Retained Earnings account.
all permanent accounts.
all temporary accounts.
Which account will have a zero balance after closing entries have been journalized and posted?
Service Revenue
Supplies
Prepaid Insurance
Accumulated Depreciation
Which types of accounts will appear in the post closing trial balance
Permanent accounts.
Temporary accounts.
Accounts shown in the income statement columns of a worksheet.
None of these answer choices are correct.
Measures of the ability of the company to survive over a long period of time.
Materiality
Current ratio
Economic entity assumption
Solvency ratios
Current assets divided by current liabilities.
Current ratio
Solvency ratios
Liquidity ratios
Earnings per share
Information that has a bearing on a decision.
Materiality
Relevance
Consistency
Faithful representation
Economic events can be identified with a particular unit of accountability.
Economic entity assumption
Comparability
Materiality
Intangible assets
An item important enough to influence the decision of an investor or creditor.
Relevance
Comparability
Materiality
Faithful Representation
Same accounting principles and methods used from year to year within a company.
Faithful representation
Intangible assets
Comparability
Consistency
Information that accurately depicts what really happened.
Materiality
Faithful Representation
Relevance
Solvency Ratios
Noncurrent resources that do not have physical substance.
Working Capital
Economic Entity Assumption
Intangible Assets
Relevance
(Net income – preferred stock dividends) divided by weighted-average common shares outstanding.
Economic Entity Assumption
Liquidity Ratios
Earnings Per Share
Current Ratio
Different companies using the same accounting principles.
Comparability
Consistency
Materiality
Faithful Representation
Measures of the short-term ability of the enterprise to pay its maturing obligations.
Earnings Per Share
Current Ratio
Intangible Assets
Liquidity Ratios
The excess of current assets over current liabilities.
Current Ratio
Working Capital
Solvency Ratios
Intangible Assets
Accountants have developed two principles to use as guidelines in determining the amount of revenues and expenses to be reported in a given period. These principles are the
Cash basis accounting principle and revenue recognition principle.
Revenue recognition principle and the periodicity principle.
Cash basis accounting principle and the expense recognition accounting principle.
Expense recognition principle and revenue recognition principle.
Which of the following is NOT true concerning cash basis accounting?
Does not follow GAAP.
Records revenue when cash is received.
Matches expenses with the revenues they help to produce.
Records expenses when cash is paid.
Unearned revenues are
deferrals but not liabilities.
liabilities but not deferrals.
temporary accounts.
both deferrals and liabilities.
All of the following are examples of prepaid expenses EXCEPT...
Prepaid rent
Prepaid insurance
Supplies
Unearned revenues
Depreciation is
The wearing away of any asset
The process of an asset becoming obsolete
A valuation process
The process of allocating the cost of an asset to expense over its useful life
Accumulated depreciation is a
contra asset account
contra revenue account
unearned revenue account
expense account
Which of the following companies would probably not have unearned revenue
American Airlines
Simon and Schuster
Papa Johns
Allstate Insurance
Adjusting entries for accruals
decrease both a balance sheet account and an income statement account
will increase a balance sheet and increase an income statement amount
are not required under GAAP
are required in order to record revenues for services performed and expenses incurred in the current accounting period that have not been recognized through daily entries and thus are not yet reflected in the accounts
An assumption that the economic life of a business can be divided into artificial timer periods is the...
Cash basis assumption
Accrual assumption
Calendar year assumption
Periodicity assumption
All of the following are characteristics of a sole proprietorship EXCEPT
a business owned by one person
owner has control of the business
a separate legal entity
small owner-operated business
All of the following are characteristics of a corporation except
a separate legal entity
ownership evidenced by shares of stock
produce many more times revenue than sole proprietorships and partnerships in the United States
owners have unlimited liability
The term used to describe the primary ownership interest in a corporation is:
Stock
Retrained Earnings
Financing Activity
Dividends
Resources owned by a business and used in carrying out its operating activities are:
liabilities
stockholders equity
revenues
assets
Purchasing resources needed to operate the business is called a(n)
financing activity
operating activity
revenue activity
investing activity
Debt securities sold to investors and due to be repaid at a particular date some years in the future are called:
bonds payable
accounts payable
wages payable
notes payable
The term used to describe the total assets a business receives for the sale of its goods
cash
revenue
inventory
accounts receivable
The financial statement which presents a picture at a a point in time of what a business owns and what is owes is a(n)
income statement
retained earnings statement
balance sheet
statement of cash flows
Net income shown on the income statement is added to the beginning of retained earnings in the:
Income statement
Retained earnings statement
Balance sheet
Statement of cash flows
To report the success or failure if the company's operations during the period is the purpose of the:
income statement
retained earnings statement
balance sheet
statement of cash flows
Earnings per share is:
a measure of liquidity
most meaningful when used to analyze the performance of different companies
a measure of the net income earned on each share of common stock
determines the amount of dividends that a company pays
Which of the following is NOT necessary in order for accounting information to provide faithful representation?
conservative
free from error
complete
neutral
Consistency of information means that:
the information would influence a decision
different companies use the same accounting principles
the amounts involved are material
a company uses the same accounting principles and methods from year to year
Comparability of information results when:
the information would influence a decision
different companies use the same accounting principles
the amounts involved are material
a company uses the same accounting principles and methods from year to year
The periodicity assumption
indicates that the company will stay in operation long enough to carry out its existing goals
requires that financial statements be prepared each month
states that the life of a business can be divided into artificial time periods
is an example of constraint
Current liabilities include:
obligations to be paid within the coming year
accounts payable
wages payable
all of the above
working capital is
current assets - current liabilities
current assets / current liabilities
income / average assets
net income / net sales
All of the following are current assets EXCEPT
accounts receivable
cash
patents
marketable securities
The current ratio is a:
solvency ratio
profitability ratio
liquidity ratio
none of these
The monetary unit assumption
means that certain important information is not reported in the financial statements
relies on the monetary unit remaining relatively stable in value
requires that only those things that can be expressed in money are included in accounting records
all of these
The process of identifying the specific effects of economic events on the accounting equation is referred to as:
posting
transaction analysis
journalizing
balancing
When cash has been received before a service is performed, which account gets increased?
cash and service revenue
cash and prepaid accounts receivable
cash and unearned revenue
unearned revenue and service revenue
Dividends are
recorded on an income statement
recorded as assets
increased with a credit
decreases on the retained earnings statement
items such as a sales slip, a check, a bill, or a cash register document are all examples of
balance sheet accounts
income statement accounts
source documents
cost of goods sold
The process of entering transaction data into the journal is called
posting
journalizing
balancing
none of these
Which of the following is not a contribution of the general journal to the recording process
the determination of net income
it discloses in one place the complete effect of a transaction
it provides a chronological record of transactions
it helps to prevent or locate errors because the credit and debit amounts for each entry can be readily compared
The basic steps in the recording process, in order, are:
analyze the transaction, enter the transaction in the journal, and transfer the information into the general ledger
enter the transaction in the journal, analyze the transaction, and transfer the information to the general ledger
analyze the transaction, enter the transaction in the financial statements, and enter the transaction in the journal
none of these
All of the following accounts have CREDIT balances with the exception of
accounts payable
notes payable
unearned advertising fees
dividends
All of the following would have DEBIT balances except for:
cash
wages expense
unearned advertising fees
prepaid insurance
Which of the following mistakes will a trial balance most likely detect
a transaction is not journalized
a debit balance is recorded as a credit balance
a journal entry is posted twice
incorrect accounts are used in journalizing or posting
