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WorksheetsAccounting Test Review- Mack
Total questions: 119
Worksheet time: 1hrs 2mins
What is GAAP?
Generally Accepted Accounting Principles
Guided Accounting Acceptance Program
Accounting is...
Accounting is the process of recording, analyzing, and reporting a company's financial transactions.
Accounting is understanding how banks work and how to get loans and run a business.
What is a Business Entity?
A non-profit organization.
An organization that uses the accounting equation to make money.
An organization created by one or more individuals to conduct business, trade, or engage in similar activities.
Going Concern
An accounting term for a company that has the resources to continue making enough money to stay afloat in foreseeable future.
An accounting term that discusses any concern that a business has in making money.
What is an Accounting Period?
A time span that covers certain accounting functions can either be a calendar or fiscal year.
It is the time a purchase is made until you make notes in the journal for debits and credits.
What is Revenue Recognition?
Its revenue that is recognized when the product is delivered or when the services has been performed.
Its revenue when the customer pays the business money for a product.
The business entity concept is an accounting principle that separates and business from its owners and other organizations. For example, Mr. Mack is the owner of Safer Ride LLC, but there is a separation between he and his business.
True
False
The Accounting Cycle:
1) Analyze business transactions to determine Debits and Credits
2) Journalize transactions in the general journal
3) Post Debits and Credits from the general journal to the ledger.
4) Prepare a trial balance to prove debits and credits are equal
5) Prepare the following financial statements:
Income Statement (Profits and Loss)
Balance Sheet (show balance and debits and credits)
6) Journalize and post-closing entries.
7) Prepare post-closing trial balance.
BUSINESS STRUCTURES
The Legal Framework of a company that defines how it operates.
LLC
Sole Proprietorship
Partnership
Corporation
How a business structures is departments.
CEO
Upper Management
Management
Team Lead
Employee
What are the three primary types of business
1) Small Business
2) Large Corporation
3) Fortune 500 Company
1) Service
2) Merchandising
3) Manufacturing
What is the Accounting Equation?
Assets = Liabilities + Owner Equity
Assets = Dividends + Liabilities
Liabilities = Assets + Owner Equity
Assets are...
Something you owe
Something you own
Liabilities are...
Something you owe
Something you own
Owners Equity/Equity
Gain from an asset/liability. (An owner's financial claim to assets.)
Money you invest in other businesses.
Which is true?
Accountants should always be able to show that they are supposed to be smart.
The accounting equation should always be in balance because dual aspect of accounting for income and expense will result in equal increases or decreases to assets or liabilities.
What is double-entry accounting?
A bookkeeping method that records every financial transaction in at least two accounts.
An accounting term that requires you to deposit at least two checks into a businesses bank account.
Which is true?
Debits are always on the left.
Credits are always on the left.
Credits are always on the right.
True
False
DEBITS
ADE going up!
LER going up!
CREDITS
ADE going up!
LER going up!
ADE
DEBIT: Assets, Dividends/Drawings, Expenses
CREDIT: Assets, Dividends/Drawings, Equity
LER
DEBIT: Liabilities, Expenses, Revenue
CREDIT: Liabilities, Equity, Revenue
If ADE goes down is a Debit or Credit?
Debit
Credit
If LER goes down is a Debit or Credit?
Debit
Credit
T- Account
T stands for Total Account on Income Statement
Visual representation of a company's financial transactions that uses double-entry bookkeeping.
Mr. T of Accounting
Source Documents
Documents that only accountants have to deal with.
All the documents in accounting.
Receipts, bills, invoices, statements & checks. (Anything that documents a transaction.)
The purpose of the General Journal
The purpose of a general journal is to record a business's business mistakes, successes, failures and personal notes to remember. These journals help accountants record their feelings so they never make mistakes again.
The purpose of a general journal is to record a business's financial transactions, including debits and credits, in order to accurately reflect the company's financial position.
It's like a diary that you can look back on and reminisce.
The purpose of the General Ledger
Organize a company's documents and notes on how to make more money.
Organize a company's financial transactions, and use that information to create financial statements and reports.
Purpose of Trial Balance
An internal financial report that lists closing balances of all a company’s general ledger accounts.
An internal financial report that shows which employees are still making the company money.
INCOME STATEMENT
It shows if a company is paying their bills on time.
Shows a company’s revenues and expenses. It shows a company’s profits and loss.
Shows if employees are making the company money and who they should fire.
Balance Sheet
Financial statement that reports a company’s earnings from revenue..
Financial statement that reports a company’s assets, liabilities and equity.
Gross Income
How much you make after deductions
How much you make before any deductions.
Net Income
How much you make before you subtract costs.
How much you make after you subtracting cost.
Withdrawal/Drawing
Money the owner takes from the business for non-business purposes.
Money that employee make.
Debits and Credits in Accounting
Double Entry Accounting
Banking Mostly
6. Which of the following presents the first three steps in the accounting cycle in the correct order?
Post, analyze, and journalize
Analyze, post, and journalize
Analyze, journalize, and post
Post, journalize, and analyze
__________ are any debts or obligations owed by the company.
Assets
Liabilities
Profits
Revenues
A(n) __________ is a summary of a company’s profit or loss during any one given period of time.
Balance sheet
Fixed asset statement
Income statement
Subledger
"For Deposits Only"
Special Endoresment
Restrictive Endoresment
Fraud Triangle
Is a theory that explains why people commit fraud by identifying three risk factors that must all be present:
Pressure
Opportunity
Rationalization
A theory that states fraud is committed because a business making money isn't really affected by small acts of fraud.
How do you write an income statement in February?
You put the date that you are doing the income statement. For example if you are doing it on February 4th, then you would date it February 4, 2024
For an Februrary income statement, the date would typically be written as "For the month ended February 28, 20XX" - indicating that the statement covers the entire month of August, ending on the last day of the month.
Cash increase
debit
credit
Capital increase
debit
credit
Accounts payable increase
debit
credit
Supplies increase
debit
credit
Cash decrease
debit
credit
Accounts receivable increase
debit
credit
Accounts receivable increase
debit
credit
Supplies decrease
debit
credit
Sales increase
debit
credit
Capital decrease
debit
credit
Accounts payable decrease
debit
credit
Prepaid Insurance decrease
debit
credit
Accounts receivable decrease
debit
credit
Any asset increase
debit
credit
Any liability increase
debit
credit
Any owner's equity increase
debit
credit
Draw Account Increase
Credit
Debit
When Accounts Payable Decreases why is it a debit instead of a credit?
Because liability decreases
Because liability increases
Should a $25 entry to a cash account be a debit or credit?
Debit
Credit
The balance of an asset account is always a debit.
The balance of a liability or capital account is always a credit.
True
False
BUSINESS A
Cash Account $4,500, Owner's Equity Account $21,000
INCREASE: Debit Cash $3,000
INCREASE: Credit Owner's Equity $5,000
After the Transaction what are the account balances?
$1,500 Cash ; $16,000 Owner's Equity
$1,500 Cash; $26,000 Owner's Equity
$7,500 Cash; $26,000 Owner's Equity
$7,500 Cash; $16,000 Owner's Equity
Accounting Equation:
Assets = Liabilities + Equity
True
False
Permanent Account
Revenue (income), Expenses & Withdrawal/Drawings (Short-Term starts new periods with a zero balance)
Assets, Liabilities and Capital (Long-Term Transactions)
Temporary Account
Revenue (income), Expenses & Withdrawal/Drawings (Short-Term starts new periods with a zero balance)
Assets, Liabilities and Capital (Long-Term Transactions)
Cash Control Documents & Systems: refer to the forms and procedures used by a business to accurately track and manage cash receipts and disbursements, minimizing the risk of theft, fraud, and errors, typically including elements like daily cash reports, deposit slips, transaction logs, bank reconciliations, and a clear segregation of duties among employees responsible for cash handling.
True
False
When the owner puts money into the business, capital & cash are affected. Which one would be the debit?
Cash
Capital
When the owner puts money into the business, capital & cash are affected. Which one would be the credit?
Cash
Capital
To start the business you borrow $2,000 from the bank. Which two accounts are affected?
Cash &
Notes Payable
Cash &
Expense
Cash &
Accounts Receivable
Cash &
Equipment
What is being proved with a Balance Sheet?
That a company is making money.
That debits and credits are equal in the general ledger.
It is important to regularly check your debit and credit totals in the journal because...
It let you know how much money you owe to other businesses and when to send out payment.
It proves the equality between debits and credits and their totals and will inform you if there are any errors.
An NSF check is...
A Note Sale Fund check is a check that gives the issuer additional time before money is taken out of their account.
Non-sufficient funds check, is a check that a bank will not honor because the check writer's account balance is insufficient to cover the check amount
A check that has been written, but has not been given to the bank for payment is...
Cashiers Check
NSF Check
Outstanding Check
Post Closing Trial Balance shows that the accounts that have balances in the General Ledger are equal.
True
False
The increase side of a liability account is the___________.
Left Side (Debit)
Right Side (Credit)
Utilities is classified as ________ account?
Asset
Revenue
Expense
Liability
The increase side of a asset account is the___________.
Left Side (Debit)
Right Side (Credit)
A decrease in the Capital account, an entry would go on the _________ side.
Left Side (Debit)
Right Side (Credit)
A increase in the Capital account, an entry would go on the _________ side.
Left Side (Debit)
Right Side (Credit)
When you OWE money to an organization or person, it is called a ____________.
Liability
Expense
Revenue
Asset
The chart of accounts is a list of all the accounts currently having balances in the general ledger.
True
False
The digits of the account numbers assigned to general ledger accounts often have significance. An example might be with an account number beginning with a "1" might represent an asset account and a "3" might represent a liability account.
True
False
In accounting, ever transaction will affect how many accounts?
One
Two
Two or more
What is the Chart of Accounts?
This is a chart that businesses can use to see which employees came to work and did their accounting work.
A list of all the things the business is doing correctly in managing their finances. This lets the business know what they do good and what they need to improve on.
A list of all the financial accounts in a business, that includes their account numbers and names. This is a chart a business can refer to when filling out the general ledger.
This financial statement reports the revenues and expenses for a period of time. Monthly, Quarterly, Yearly
Balance Sheet
Income Statement
General Ledger
Journal
What financial statement reports assets, liabilities and owner's equity at a specific date in time?
Balance Sheet
Income Statement
General Ledger
Journal
When you subtract all your expenses from the revenue you made this equals...
Accounting Equation
Gross Income
Net Income
Assets increase on the_________ side of the T-Account and this is a__________.
Left, Debit
Right, Credit
Liabilities increase on the_________ side of the T-Account and this is a__________.
Left, Debit
Right, Credit
A form for recording transactions in chronological order is called a what?
journalizing
entry
journal
accounting
Recording transactions in a journal is called what?
accounting
journal
entry
journalizing
Information for each transaction recorded in a journal is called...
accounting
entry
journal
journalizing
The recording of debit and credit parts of a transaction is called...
double-entry accounting
entry
journal
journalizing
A business paper from which information is obtained for a journal entry. What is this called?
journal
document
source document
accounting document
After writing the date in a general journal, what account title is written first?
one that is credited
one that is debited
The credited title account does not have to be indented.
true
false
An income statement shows a business's revenue, expenses, gains, and losses.
True
False
A balance sheet is a financial statement that shows a company's assets, liabilities and equity. This statement is true, what other two things are true about the balance sheet? (select two)
The purpose of a balance sheet is to provide a snapshot of a company's financial position at a specific point in time, showing its (assets), what it owes (liabilities), and the ownership interest of owners (equity).
The balance sheet shows that a business balances their priorities and thus it ensures greater wealth and that their financials will always be in balance.
The balance sheet is a checklist to ensure that a business owners focus is balanced between work and home.
The balance sheet is a direct representation of the accounting equation.
Why are the steps of the accounting cycle important?
It makes a company wealthy because these steps will guide them to financial success because it leads to structure and ensures a company is compliant with its records.
It provides a structured, systematic, framework that ensures the accuracy, consistency, and compliance of a company's financial records.
It provides a framework to do math correctly so that you can make more money.
It makes it easier to do accounting so that someone who doesn't understanding accounting well can understand it better.
Which financial statement shows a company's financial position at a specific point in time?
Statement of Retained Earnings
Cash Flow Statement
Balance Sheet
Income Statement
Which of the following is considered a liability?
Accounts Receivable
Inventory
Prepaid Expenses
Accounts Payable
What does the acronym 'GAAP' stand for in accounting?
General Accounting and Auditing Principles
Generally Accepted Accounting Principles
Global Accounting Assessment Program
Government Approved Accounting Procedures
Which of the following best describes Owner's Equity?
The amount of money owed to suppliers
The owner's claim on the assets of the business
The total value of company assets
The company's total revenue
Which document is typically used to verify a business expense?
Invoice
Memo
Letter of intent
Business card
Double-entry accounting requires that every transaction affects:
Only liability accounts
Only asset accounts
At least two accounts
Only one account
Which financial statement shows a company's assets, liabilities, and owner's equity at a specific point in time?
Statement of Cash Flows
Balance Sheet
Income Statement
Which of the following is considered an asset?
Owner's Equity
Accounts Receivable
Accounts Payable
What does the term 'journalizing' refer to in accounting?
Posting entries to the ledger
Analyzing financial statements
Recording transactions in the journal
Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?
Cash Flow Statement
Balance Sheet
Income Statement
Statement of Owner's Equity
What is the main purpose of adjusting entries in the accounting cycle?
To record transactions in the general journal
To ensure revenues and expenses are recorded in the correct period
To prepare the trial balance
To close temporary accounts
Which of the following is considered an asset?
Service Revenue
Owner's Capital
Inventory
Accounts Payable
Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?
Balance Sheet
Income Statement
Cash Flow Statement
When expenses increase, which side of the account is affected?
Credit
Debit
Which of the following is considered a source document in accounting?
Annual Report
Profit and Loss Statement
Invoice
Which of the following is a key advantage of forming an LLC compared to a sole proprietorship?
Unlimited liability for business debts
Limited liability protection for owners
Business profits are taxed twice
Only one owner is allowed
In a partnership, how are profits typically distributed among partners?
Profits are not distributed in partnerships
Equally, unless otherwise agreed
Only to the partner who invested the most
All profits go to the managing partner
Which business type is simplest to set up and has the least government regulation?
Corporation
Partnership
LLC
Sole Proprietorship
Something that guides the ethical behavior of a company and its employees is called......
Endorsment
Code of Conduct
Rules
Regulation
A bank account from which payments can be ordered by a depositor.
Retirement
401k
Checking Account
IRA
