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WorksheetsAccounting Principles and Concepts
Total questions: 110
Worksheet time: 55mins
When merchandise is assumed to be sold in the order in which the purchases were made, the company is using the
last-in, first-out method
first-in, first-out method
first-in, last-out method
weighted average cost method
The assets and liabilities of a company are $88,014 and $45,231, respectively. Owner's equity should equal
$45,231
$88,014
$133,245
$42,783
Paying 6 months of rental payments to the landlord is an example of a(n)
accrued expense
unearned revenue
accrued revenue
prepaid expense
A purchase of supplies on credit has what effect on the accounting equation?
increases assets; increases liabilities
increases liabilities; decreases owner's equity
increases assets; increases owner's equity
decreases assets; decreases liabilities
When there are two closing entries, the first one is to close revenues and expenses to _________, and the second one is to close _________ to Owner’s Capital.
Owner's Drawing; Owner's Capital
Owner's Capital; Owner's Drawing
Cash; Owner's Drawing
none of these choices
The receipt of cash from a credit customer on account has what effect on the accounting equation?
increases liabilities; decreases owner's equity
decreases assets; decreases liabilities
increases assets; increases liabilities
increases assets; decreases assets
Payment for a 6-month trade magazine subscription is an example of a(n)
prepaid expense
unearned revenue
accrued revenue
accrued expense
Pierce Company sold merchandise on account to Stanton Company, terms FOB shipping point, n/30, for $17,000. Pierce prepaid the $200 shipping charge. Which of the following entries does Pierce make to journalize this sale?
debit Accounts Receivable—Stanton Company for $17,000; credit Sales for $17,000 and debit Accounts Receivable—Stanton Company for $200; credit Cash for $200
debit Accounts Receivable—Stanton Company for $17,200; credit Sales for $17,200
debit Accounts Receivable—Stanton Company for $17,000; credit Sales for $17,000
debit Accounts Receivable—Stanton Company for $17,000; credit Sales for $17,000 and debit Delivery Expense for $200; credit Cash for $200
Which of these terms applies to the excess of sales over cost of goods sold?
operations
gross sales
gross profit
net income
Prepaid Insurance belongs with which of the following account groups?
assets
expenses
liabilities
revenues
When the perpetual inventory system is used, the inventory sold is shown on the income statement as
purchases returns and allowances
net purchases
cost of goods sold
purchases
Which of the following statements regarding a double-entry accounting system is not true?
The sum of all debits is always equal to the sum of all credits in each journal entry.
The accounting equation remains in balance.
Each business transaction will have two debits.
Every transaction affects at least two accounts.
Which of the following statements is a formal presentation of the accounting equation?
income statement
statement of cash flows
balance sheet
statement of owner's equity
The account type and normal balance of Unearned Revenue is
liability, credit
revenue, credit
asset, debit
expense, debit
Which of the following accounts has a normal credit balance?
Supplies Expense
Yura Wun, Capital
Copyrights
Accounts Receivable
Receiving 6 months of rental payments from a tenant is an example of a(n)
prepaid expense
unearned revenue
accrued expense
accrued revenue
The inventory cost flow method that reports the earliest costs in ending inventory is
specific identification
weighted average cost
LIFO
FIFO
Which of the following accounts will not be closed at the end of the fiscal year?
Fees Earned
Insurance Expense
Prepaid Insurance
Utilities Expense
The balance in the prepaid rent account before adjustment at the end of the year is $13,800, which represents 4 months' rent paid on December 1. The adjusting entry required on December 31 is
debit Rent Expense, $10,350, credit Prepaid Rent, $3,450
debit Prepaid Rent, $3,450, credit Rent Expense, $3,450
debit Prepaid Rent, $10,350, credit Rent Expense, $3,450
debit Rent Expense, $3,450, credit Prepaid Rent, $3,450
Which of the following statements should be prepared first?
income statement
balance sheet
statement of cash flows
statement of owner's equity
Unearned fees appear on the
balance sheet as a current liability
balance sheet in the "Owner's Equity" section
income statement as revenue
balance sheet in the "Current assets" section
Unearned Rent belongs with which of the following account groups?
liabilities
owner's equity
assets
revenues
Generally, the revenue account for a retail business is entitled
Gross Sales
Gross Profit
Fees Earned
Sales
Ending inventory is made up of the oldest purchases when a company uses the
last-in, first-out method
first-in, first-out method
weighted average cost method
retail method
Which of the following inventory cost flow methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?
FIFO
specific identification
weighted average cost
LIFO
Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $19,900. What is the amount of sales discount allowable?
$195
$203
$398
$142
Inventory is classified on the balance sheet as a
long-term liability
current liability
long-term asset
current asset
Which of the following companies would be more likely to use the specific identification inventory cost flow method?
Walmart
Best Buy
Gordon’s Jewelers
Lowe’s
Closing entries are dated in the journal as of
the date they are actually journalized, although they are generally prepared after the end of the accounting period
the first day of the subsequent accounting period
the first day of the accounting period, although they are actually journalized well after the beginning of the accounting period
the last day of the accounting period
In accordance with the debit and credit rules, which of the following is true?
Credits increase assets.
Debits increase assets.
Credits increase both assets and liabilities.
Debits increase both assets and owner's capital.
The inventory cost flow method that assigns the most recent costs to cost of goods sold is
LIFO
specific identification
weighted average cost
FIFO
The payment of cash to a creditor on account has what effect on the accounting equation?
decreases assets; decreases liabilities
increases assets; decreases assets
increases assets; increases liabilities
increases liabilities; decreases owner's equity
The purchase of equipment for cash has what effect on the accounting equation?
increases liabilities; decreases owner's equity
increases assets; decreases assets
decreases assets; decreases liabilities
decreases assets; decreases owner's equity
President's salaries, depreciation of office furniture, and office supplies are
selling expenses
inventory expenses
miscellaneous expenses
administrative expenses
Which of the following accounts will be credited to close it?
Fees Earned
Depreciation Expense
Accumulated Depreciation
Rent Revenue
The classification and normal balance of the owner's drawing account is
an expense with a debit balance
a liability with a credit balance
an expense with a credit balance
owner's equity with a debit balance
Which of the following groups are considered to be internal users of accounting information?
employees and managers
government entities and banks
employees and customers
customers and vendors
Which of the following accounts has a normal debit balance?
Accounts Payable
Interest Revenue
Accounts Receivable
Jay Tesarkee, Capital
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited
when an account is determined to be worthless
whenever a predetermined amount of credit sales have been made
when a credit sale is past due
at the end of each accounting period
A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)
addition to the balance per the company's records
addition to the balance per the bank statement
deduction from the balance per the bank statement
deduction from the balance per the company's records
No allowance account is used with the direct write-off method.
true
false
Credit memos from the bank
show the bank has collected a note receivable for the customer
show that a company has deposited a customer's NSF check
are used to show a bank service charge
decrease a bank customer's account
A $7,200, 60-day, 10% note, dated April 15, is received from a customer on account. The face value of the note is
$7,920
$720
$7,200
$7,320
If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded cash overages for the period.
true
false
The direct write-off method of accounting for uncollectible accounts
is often used by small companies and companies with few receivables
emphasizes cash realizable value
emphasizes the matching of expenses with revenues
emphasizes balance sheet relationships
If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?
Uncollectible Accounts Expense
Allowance for Doubtful Accounts
Interest Expense
Accounts Receivable
Two methods of accounting for uncollectible accounts are the
allowance method and the accrual method
allowance method and the net realizable method
direct write-off method and the allowance method
direct write-off method and the accrual method
A $145 petty cash fund has petty cash on hand of $17 and receipts of $142. The journal entry to replenish the fund would include a
credit to Petty Cash for $142
credit to Cash for $145
debit to Cash for $17
credit to Cash Short and Over for $14
If the balance in Cash Short and Over at the end of a period is a credit, it should be reported in the "Other revenue" section on the income statement.
true
false
What is the type of account and normal balance of Allowance for Doubtful Accounts?
asset, debit
asset, credit
contra asset, credit
contra asset, debit
Question Content Area
Journal entries based on the bank reconciliation are required in the company's accounts for
book errors
deposits in transit
bank errors
outstanding checks
A customer's check received in settlement of an account receivable is considered cash.
true
false
A $149 petty cash fund has petty cash on hand of $20 and receipts of $124. The journal entry to replenish the fund would include a
credit to Petty Cash for $124.
debit to Cash Short and Over for $5.
credit to Cash for $149.
debit to Cash for $20.
GAAP requires companies with a large amount of receivables to use the allowance method.
true
false
In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement.
true
false
The cash account in the company's ledger is a(n)
liability with a normal credit balance
asset with a normal credit balance
liability with a normal debit balance
asset with a normal debit balance
Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records.
true
false
Allowance for Doubtful Accounts is a liability account.
true
false
The direct write-off method records bad debt expense when an account is determined to be uncollectible.
true
false
The cost of repairing damage to a machine during installation is debited to a fixed asset account.
true
false
Which of the following statements regarding depreciation is true?
Regardless of the depreciation method, the amount of total depreciation expense during the life of the asset will be the same.
If using the straight-line method, the amount of depreciation expense during the first year is higher than that of the double-declining-balance method.
If using the units-of-activity method, it is possible to depreciate more than the depreciable cost.
If using the double-declining-balance method, the total amount of depreciation expense during the life of the asset will be the highest.
The acquisition costs of property, plant, and equipment should include all normal, reasonable and necessary costs to get the asset in place and ready for use.
true
false
Which of the following will have no effect on an employee’s take-home pay?
marital status
number of exemptions claimed
social security tax
unemployment tax
The entry to journalize the issuance of a note for the purpose of converting an existing account payable would be
debit Cash and credit Notes Payable
debit Cash and credit Accounts Payable
debit Accounts Payable and credit Notes Payable
debit Accounts Payable and credit Cash
An aid in internal control over payroll that indicates employee attendance is
a voucher system
a special payroll bank account
fringe benefits
a time card
All property, plant, and equipment assets are depreciated over time.
true
false
Amounts withheld from each employee for social security and Medicare vary by state.
true
false
Taxes deducted from an employee's earnings to finance social security and Medicare benefits are called FICA taxes.
true
false
Xtra Company purchased a business from Argus for $96,000 above the fair value of its net assets. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?
cannot determine without more information
$7,000
Goodwill is not amortized.
$8,000
FICA tax is a payroll tax that is paid only by employers.
true
false
The normal balance of the accumulated depreciation account is a debit.
true
false
The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is
depletion
allocation
amortization
depreciation
The natural resources of some companies include
metal ores, copyrights, and supplies
minerals, trademarks, and land
timber, metal ores, and minerals
timber, equipment, and patents
Which of the following taxes would be deducted in determining an employee's net pay?
SUTA taxes
FUTA taxes
FICA taxes
all of these choices
Federal unemployment taxes are paid by the employer and the employee.
true
false
The accumulated depletion of a natural resource is reported on the
balance sheet as a deduction from the cost of the resource
balance sheet as an addition to the cost of the resource
income statement as an increase in revenue
income statement as a deduction from revenues
Which of the following should be included in the acquisition cost of a piece of equipment?
transportation costs
testing costs prior to placing the equipment into production
installation costs
all of these choices
Deferred revenue is revenue that is
earned but the cash has not been received
not earned but the cash has been received
not earned and the cash has not been received
earned and the cash has been received
Once the adjusted trial balance is in balance, the accounts flow into the financial statements.
true
false
Adjusting entries affect at least one
revenue account and the owner's drawing account
income statement account and one balance sheet account
revenue account and one owner's equity account
asset and one owner's equity account
Using accrual accounting, expenses are recorded and reported only
if they are paid after they are incurred
when they are incurred and paid at the same time
if they are paid before they are incurred
when they are incurred, whether or not cash is paid
Generally accepted accounting principles require that companies use which basis of accounting?
deferral basis
accrual basis
cash basis
account basis
Which of the following is an example of accrued revenue?
snow removal services that have been provided and paid on the same day
snow removal services that have been provided but have not been billed or paid
an agreement that has been signed for snow removal services for the next 3 months
snow removal services that have been paid for 3 months in advance
Which account would normally not require an adjusting entry?
Cash
Wages Expense
Accumulated Depreciation
Accounts Receivable
Prepaid Insurance is an example of a current asset.
true
false
The matching principle supports matching expenses with the related revenues.
true
false
Prepaid expenses are eventually expected to become
expenses when their future economic value expires or is used up
expenses in the period when they are paid
revenues when the liability is no longer owed
revenues when services are performed
There is really no benefit in preparing financial statements in any particular order.
true
false
The income statement should be prepared
after the balance sheet and before the statement of owner's equity
before the statement of owner's equity and balance sheet
after the statement of owner's equity and before the balance sheet
after the statement of owner's equity and balance sheet
Generally accepted accounting principles require the accrual basis of accounting.
true
false
Prior to the adjusting process, accrued revenue has
not been earned but recorded as revenue
been earned and cash received
not been recorded as revenue but cash has been received
been earned and not recorded as revenue
Adjusting entries affect only expense and asset accounts.
true
false
Using accrual accounting, revenues are recorded
when a service has been performed or products have been delivered to customers without regard to when cash is received
when cash is received without regard to when the services are performed or products have been delivered to customers
when cash is received at the time services are performed or products have been delivered to customers
only if cash is received after the services are performed or products have been delivered to customers
Prepaid expenses are an example of an expense.
true
false
Which type of accountant typically practices as an individual or as a member of a public accounting firm?
Certified Internal Auditor
Certified Public Accountant
Certified Management Accountant
Certified Payroll Professional
Which of the following accounts has a normal debit balance?
Jay Tesarkee, Capital
Interest Revenue
Accounts Receivable
Accounts Payable
Accounts payable are accounts that you expect will be paid to you.
true
false
For accounting purposes, a business entity should be considered separate from its owners if the entity is
a partnership
a proprietorship
a corporation
all of these choices
Unearned revenues are an example of a liability.
true
false
The primary financial statements of a proprietorship are the income statement, the statement of owners’ equity, the cash budget, and the balance sheet.
true
false
About 90% of the businesses in the United States are organized as corporations.
true
false
An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a
partnership
proprietorship
governmental unit
corporation
The balance sheet represents the accounting equation.
true
false
Unearned Rent belongs with which of the following account groups?
assets
liabilities
revenues
owner's equity
A drawing account represents the amount of withdrawals made by the owner.
true
false
All of the following are general-purpose financial statements except a(n)
income statement
statement of owner's equity
cash budget
balance sheet
Proprietorships have one owner and provide only services to their customers.
true
false
Which of the following accounts has a normal credit balance?
Supplies Expense
Copyrights
Yura Wun, Capital
Accounts Receivable
The role of accounting is to provide many different users with financial information to make economic decisions.
true
false
The assets and liabilities of a company are $88,878 and $45,456, respectively. Owner's equity should equal
$45,456
$43,422
$134,334
$88,878
