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Contact #:
Accounting Basic
1. The financial statement that reports the revenues and expenses for a period of time such as a year or a
month is the
Balance Sheet
Income Statement
Statement Of Cash Flows
2. The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a
specific date is the
Balance Sheet
Income Statement
Statement of Cash Flows
3. Under the accrual basis of accounting, revenues are reported in the accounting period when the
Cash Is Received
Service Or Goods Have Been Delivered
4. Under the accrual basis of accounting, expenses are reported in the accounting period when the
Cash Is Paid
Expense Matches The Revenues Or Is Used Up
5
Revenues minus expenses equals __________
.
6. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the
Balance sheet and are referred to as __________
.
7. Assets are usually reported on the balance sheet at which amount?
Cost
Current Market Value
Expected Selling Price
8. Obligations (amounts owed) are reported on the balance sheet and are referred to as __________
.
9.
Liabilities often have the word __________ in their account title.
10. Unearned Revenues is what type of account?
Asset
Liability
Stockholders' (Owner's) Equity
11. Accounting entries involve a minimum of how many accounts?
One
Two
Three
12. The listing of all of the accounts available for use in a company's accounting system is known as the
__________
.
13. Assets minus liabilities equals __________
.
14. Which term is associated with "left" or "left-side"?
Debit
Credit
15. Which term is associated with "right" or "right-side"?
Debit
Credit
16. When cash is received, the account Cash will be
Debited
Credited
17. When a company pays a bill, the account Cash will be
Debited
Credited
18. What will usually cause an asset account to increase?
Debit
Credit
19. What will usually cause the liability account Accounts Payable to increase?
Debit
Credit
20. Entries to expenses such as Rent Expense are usually
Debits
Credits
21. Entries to revenues accounts such as Service Revenues are usually
Debits
Credits
Debits and Credits
Use the following information for questions 1 and 2:
A company receives $500 of cash as an additional investment in the company by its owner, Mary Smith.
The company's Cash account is increased and Mary Smith, Capital is increased.
1. Should the $500 entry to the Cash account be a debit?
Yes
No
2. Should the $500 entry to Mary Smith, Capital be a debit?
Yes
No
Use the following information for questions 3 through 6:
A company using the accrual method of accounting performed services on account in August. The services
were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the
company in September.
3. Assuming that the company prepares monthly income statements, what will be the account debited for
$2,000 in August?
Cash
Accounts Receivable
Service Revenue
4. Which account should the company credit for $2,000 in August?
Cash
Accounts Receivable
Service Revenue
5. In September when the company receives the $2,000 from the customer, which account should the
company debit?
Cash
Accounts Receivable
Service Revenue
6. In September when the company receives the $2,000 from the customer, which account should the
company credit?
Cash
Accounts Receivable
Service Revenue
increase
7. To
the balance in the following accounts, would you debit the account or would you
credit the account?

Accounts Payable
Debit
Credit

Cash
Debit
Credit

Land
Debit
Credit

Notes Payable
Debit
Credit


Accounts Receivable
Mary Smith, Capital
Debit
Debit
Credit
Credit














Supplies
Debit
Credit
Supplies Expense
Debit
Credit
Prepaid Insurance
Debit
Credit
Service Revenue
Debit
Credit
Mary Smith, Drawing
Debit
Credit
Equipment
Debit
Credit
Unearned Revenue
Debit
Credit
decrease
8. To
the balance in the following accounts, would you debit the account or would you
credit the account?

Accounts Payable
Debit
Credit























Cash
Debit
Credit
Land
Debit
Credit
Notes Payable
Debit
Credit
Accounts Receivable
Debit
Credit
Mary Smith, Capital
Debit
Credit
Supplies
Debit
Credit
Supplies Expense
Debit
Credit
Prepaid Insurance
Debit
Credit
Service Revenue
Debit
Credit
Mary Smith, Drawing
Debit
Credit
Equipment
Unearned Revenue
Debit
Debit
Credit
Credit
9. What is the
normal balance for the following accounts?

Accounts Payable
Debit
Credit









Cash
Debit
Credit
Land
Debit
Credit
Notes Payable
Debit
Credit
Accounts Receivable
Debit
Credit
Mary Smith, Capital
Debit
Credit















Supplies
Debit
Credit
Supplies Expense
Debit
Credit
Prepaid Insurance
Debit
Credit
Service Revenue
Debit
Credit
Mary Smith, Drawing
Debit
Credit
Equipment
Debit
Credit
Unearned Revenue
Debit
Credit
10. Generally when an expense is involved in a transaction, an expense will be
Debited
Credited
11. Generally when revenues are involved in a transaction, a revenue account will be
Debited
Credited
12. The accountant's word to indicate that an entry will be recorded on the left-side of an account is
Debit
Credit
13. A contra-asset account such as Accumulated Depreciation will likely have which balance?
Debit
Credit
14. A contra-liability account such as Discount on Notes Payable will likely have which balance?
Debit
Credit
Chart of Accounts
1.
The chart of accounts is a listing of the accounts presently having balances in the general ledger.
True
False
2.
Some accounting software will classify some accounts as "income" accounts, while accountants might
refer to these accounts as "revenue" accounts.
True
False
3.
The digits of the account numbers assigned to general ledger accounts often have significance. For
example, an account number beginning with a "1" might signify that the account is an asset account, a
"6" might signify an operating expense, etc.
True
False
4. The accounts shown in the chart of accounts can be broadly classified into two categories: balance
sheet accounts and __________ accounts.
5.
Every transaction will affect how many accounts?
Only One
Only Two
Two Or More
6. In addition to the standard chart of accounts for a specific industry, you will likely want to expand and/or
modify the chart of accounts to fit your business. One tool that would be helpful in determining the accounts
for your company would be your company's __________ chart.
Bookkeeping
1. The two main methods of bookkeeping and accounting are 1) the cash method, and 2) the
__________ method.
2.__________-entry bookkeeping means that every transaction will affect two or more accounts.
3.
A __________ amount will appear on the left side of a T-account.
Debit
Credit
4. A listing of the balances in the accounts in order to determine whether debits are equal to credits is a
__________ Balance.
5. The listing of accounts that are available for posting transactions is the __________ of accounts.
6.
When a check is written, a cash account should be __________.
Debited
Credited
7.
Liability accounts will normally have __________ balances.
Debit
Credit
8.
Revenue accounts will normally have __________ balances.
Debit
Credit
9. The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________
.
10.
The book of original entry is the definition of a __________.
Journal
Ledger
11. When a sale is made on credit, the seller will debit the asset account Accounts __________
.
12. Asset, __________, and stockholders' equity accounts are known as balance sheet accounts.
13.
Large corporations should report revenues on their income statements when the __________.
Cash Is Received
Revenues Are Earned
15. The difference between the balance in a company's cash account and its bank statement is
documented in the __________ of the bank statement.
16
.
Accrued expenses are likely to pertain to transactions that have __________ been paid.
Already
Not Yet
17.
Deferred revenues likely involve cash amounts that have __________ been received.
Already
Not Yet
17 .A _________ entry typically removes an accrual-type adjusting entry that had been recorded in the
preceding accounting period.
18. Cash and Accounts Receivable are two examples of accounts that are reported on the classified
balance sheet under the heading __________ assets.
19.
A supplier of goods or services is known as a __________.
Debtor
Vendor
20. The separation of duties is part of the internal __________ for safeguarding assets.
Accounting Equation
1. The basic accounting equation is Assets = Liabilities + __________
.
two (or more) effects
on the accounting equation of the business or company.
For each of the transactions in items 2 through 13, indicate the
2. The owner invests personal cash in the business.

Assets
Increase

No Effect
Decrease
No Effect
Liabilities
Increase

Decrease
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
3. The owner withdraws cash from the business for personal use.

Assets
Increase

No Effect
Decrease
No Effect
Liabilities
Increase

Decrease
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
4. The company receives cash from a bank loan.

Assets
Increase

No Effect
Liabilities
Increase

Decrease
Decrease
No Effect
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
5. The company repays the bank that had lent money to the company.
Assets
Increase
Decrease
No Effect
Decrease
No Effect
Liabilities
Increase
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
6. The company purchases equipment with its cash.
Assets
Increase
Decrease
No Effect
Decrease
No Effect
Liabilities
Increase
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
7. The owner contributes his/her personal truck to the business.
Assets
Increase
Decrease
No Effect
Decrease
No Effect
Liabilities
Increase
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
8. The company purchases a significant amount of supplies on credit.
Assets
Increase
Decrease
Liabilities
Increase
Decrease
No Effect
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
No Effect
9. The company purchases land by paying half in cash and signing a note payable for the other half.
Assets
Increase
Decrease
No Effect
Liabilities
Increase
Decrease
No Effect
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
Information for Items 10 through 13
Company X provides consulting services to Client Q in May. Company X bills Client Q in May for the
$5,000. The sales invoice shows that the amount will be due in
June..In May, Company X records the transaction by a debit to Accounts
Receivable for $5,000 and a credit to Service Revenues for
$5,000. What is the effect of this entry upon the accounting equation for Company X?
agreed upon amount of
Assets
Increase
Decrease
No Effect
Liabilities
Increase
Decrease
No Effect
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
10. In June, Company X receives the $5,000. What is the effect on the accounting
which accounts are affected at Company X?
equation and
Assets
Increase
Decrease
No Effect
Liabilities
Increase
Decrease
No Effect
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
11.
What is the effect on Client Q's accounting equation in May when Client Q records the
debit to Consultant Expense for $5,000 and a credit
to Accounts Payable for $5,000?
transaction as a
Assets
Increase
Decrease
No Effect
Decrease
No Effect
Liabilities
Increase
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
12. What is the effect on Client Q's accounting equation in June when Client Q remits the $5,000? Also,
which accounts will be involved?
Assets
Increase
Decrease
No Effect
Decrease
No Effect
Liabilities
Increase
Owner's (or Stockholders') Equity
Increase
Decrease
No Effect
14.
Which of the following will cause owner's equity to increase?
Expenses
Owner Draws
Revenue
15.
Which of the following will cause owner's equity to decrease?
Net Income
Net Loss
Revenue
16.
The accounting equation should remain in balance because every transaction affects how many
accounts?
Only One
Only Two
Two Or More
17. A corporation's net income is eventually recorded in the following stockholders' equity
account:__________
.
18. A corporation's quarterly __________ will cause a reduction in the corporation's retained earnings,
which in turn reduces the corporation's stockholders' equity. However, this will not reduce the corporation's
net income.
19. The financial statement with a structure that is similar to the accounting equation is the __________
.
20. The financial statement that reports the portion of change in owner's equity resulting from revenues and
expenses during a specified time interval is the __________.
Accounting Principles
1.
The personal assets of the owner of a company will not appear on the company's balance sheet
because of which principle/guideline?
Cost
Economic Entity
Monetary Unit
2.
Which principle/guideline requires a company's balance sheet to report its land at the amount the
company paid to acquire the land, even if the land could be sold today at a significantly higher amount?
Cost
Economic Entity
Monetary Unit
3.
Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar
over time?
Cost
Economic Entity
Monetary Unit
4.
Which principle/guideline requires the company's financial statements to have footnotes containing
information that is important to users of the financial statements?
Conservatism
Economic Entity
Full Disclosure
5.
Which principle/guideline justifies a company violating an accounting principle because the amounts are
immaterial?
Conservatism
Full Disclosure
Materiality
6.
Which principle/guideline is associated with the assumption that the company will continue on long
enough to carry out its objectives and commitments?
Economic Entity
Going Concern
Time Period
7.
A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000.
Which accounting principle/guideline justifies not reporting the amounts to the penny?
Full Disclosure
Materiality
Monetary Unit
8.
Accountants might recognize losses but not gains in certain situations. For example, the company
might write-down the cost of inventory, but will not write-up the cost of inventory. Which
principle/guideline is associated with this action?
Conservatism
Materiality
Monetary Unit
9.
Which principle/guideline directs a company to show all the expenses related to its revenues of a
specified period even if the expenses were not paid in that period?
Cost
Matching
Monetary Unit
10.
When the accountant has to choose between two acceptable alternatives, the accountant should select
the alternative that will report less profit, less asset amount, or a greater liability amount. This is based
upon which principle/guideline?
Conservatism
Cost
Materiality
11.
Public utilities' balance sheets list the plant assets before the current assets. This is acceptable under
which accounting principle/guideline?
Conservatism
Cost
Industry Practices
12.
A large company purchases a $250 digital camera and expenses it immediately instead of recording it
as an asset and depreciating it over its useful life. This practice may be acceptable because of which
principle/guideline?
Cost
Matching
Materiality
13.
A corporation pays its annual property tax bill of approximately $12,000 in one payment each
December 28. During the year, the corporation's monthly income statements report Property Tax
Expense of $1,000. This is an example of which accounting principle/guideline?
Conservatism
Matching
Monetary Unit
14.
A company sold merchandise of $8,000 to a customer in December. The company's sales terms
require the customer to pay the company in 30 days. The company's income statement reported the
sale in December. This is proper under which accounting principle/guideline?
Full Disclosure
Monetary Unit
Revenue Recognition
15.
Accrual accounting is based on this principle/guideline.
Cost
Full Disclosure
Matching
16.
The creative chief executive of a corporation who is personally responsible for numerous inventions and
innovations is not reported as an asset on the corporation's balance sheet. The accounting
principle/guideline that prevents the corporation for reporting this person as an asset is
Conservatism
Cost
Going Concerns
17.
An asset with a cost of $120,000 is depreciated over its useful life of 10 years rather than expensing the
entire amount when it is purchased. This complies with which principle/guideline?
Cost
Full Disclosure
Matching
18.
Near the end of the current year, a company required a customer to pay $200,000 as a deposit for work
that is to begin in the following year. At the end of the current year the company reported the $200,000
as a liability on its balance sheet. Which accounting principle/guideline prevented the company from
reporting the $200,000 on its income statement for the current year?
Going Concern
Materiality
Revenue Recognition
19.
A retailer wishes to report its merchandise inventory on its balance sheet at its retail value. This would
violate which accounting principle/guideline?
Cost
Full Disclosure
Monetary Unit
20.
A company borrowed $100,000 in December and will make its only payment for interest when the note
comes due six months later. The total interest for the six months will be $3,600. On the December
income statement the accountant reported Interest Expense of $600. This action was the result of
which accounting principle/guideline?
Cost
Matching
Revenue Recognition
Financial Accounting
1.
Financial accounting is focused on the __________ financial statements of a company.
External
Internal
2.
Financial statements report the fair market value of a company.
True
False
2. Large corporations must follow the __________ basis of accounting.
3. Corporations whose stock is publicly traded must have their financial statements
__________ by independent certified public accountants.
11.
__________ entry bookkeeping will result in at least two accounts being involved in every transaction.
13. Every transaction will have one account being credited and one account being __________
.
14. The accounting equation is Assets = __________ + Stockholders' (or Owner's) Equity.
15. Matching, cost, and full disclosure are examples of the fundamental or basic accounting
__________
.
16. The profitability of a company for a specified period of time is reported on the __________ statement.
17. The main components or elements of the income statement are __________, expenses, gains, and
losses.
17 .Prepaid insurance is reported as an __________ on a company's balance sheet.
18. The word "__________" is often in the title of liability accounts.
19. The statement of cash flows explains the changes in cash and cash __________ during the specified
time interval.
20. The first section of the statement of cash flows is the __________ activities.
Financial Statements
Which accounting method will result in financial statements that report a more complete picture of a
corporation’s financial position and a better measure of profitability during a recent accounting year?
Accrual Method
Cash Method
2.
Which type of journal entries are made at the end of each accounting period so that the financial
statements better reflect the accrual method of accounting?
Adjusting
Closing
Reversing
4.
Which financial statement will allow you to determine the gross margin for a retailer or manufacturer?
Balance Sheet
Income Statement
Statement Of Cash Flows
Statement Of Comprehensive Income
Statement Of Stockholders’ Equity
5.
Does the heading of a balance sheet indicate a period of time or a point in time?
Period Of Time
Point In Time
6.
A corporation's net income will cause a change in which component of stockholders' equity?
Accumulated Other Comprehensive Income
Paid-in Capital
Retained Earnings
7.
Which financial statement's structure is closest to that of the basic accounting equation?
Balance Sheet
Income Statement
Statement Of Cash Flows
Statement Of Comprehensive Income
Statement Of Stockholders’ Equity
8.
Is it true or false that a grocery store’s sale of its old delivery van to one of its employees for $2,000
should be recorded in the general ledger account Sales?
True
False
9.
Is it true or false that the total amount of stockholders’ equity reported on the balance sheet is intended
to show the fair market value of the corporation?
True
False
10.
Comprehensive income is defined as _______________ plus other comprehensive income.
Extraordinary Items
Gains And Losses
Net Income
11.
Which financial statement reports the adjustments for changes in the market value of available-for-sale
investment securities and adjustments for foreign currency translation?
Statement Of Cash Flows
Statement Of Comprehensive Income
Statement Of Income
12.
Ten years ago, a corporation started a new brand name that is now considered to be its most valuable
asset. On which financial statement and at what amount will you see the brand name reported?
Balance Sheet At Its Present Value
Statement Of Comprehensive Income With No Value
Not Reported On A Financial Statement
13.
A corporation's working capital is calculated using which amounts?
Total Assets and Total Liabilities
Total Assets and Current Liabilities
Current Assets and Current Liabilities
14.
The changes that occurred during a recent year in the accounts Retained Earnings and Treasury Stock
will be found in which financial statement?
Balance Sheet
Income Statement
Statement Of Cash Flows
Statement Of Comprehensive Income
Statement Of Stockholders’ Equity
15.
The amount spent for capital expenditures will be reported in which section of the statement of cash
flows?
Cash Provided/used In Financing Activities
Cash Provided/used In Investing Activities
Cash Provided/used In Operating Activities
Supplemental Information
16.
Which of the following will appear as a negative amount on a statement of cash flows that was prepared
using the indirect method?
A Decrease In Inventory
An Increase In Accounts Payable
An Increase In Accounts Receivable
Depreciation Expense
17.
Which of the following will appear as a positive amount on a statement of cash flows that was prepared
using the indirect method?
An Increase In Accounts Receivable
An Increase In Inventory
A Decrease In Accounts Payable
Depreciation Expense
18.
What is usually presented first in the notes to the financial statements?
Accumulated Other Comprehensive Income
Commitments And Contingencies
Significant Accounting Policies
19.
Which is the annual report to the SEC that contains the financial statements of a publicly-traded
corporation?
Form 1040
Form 10-K
Form 10-Q
Schedule C
20.
Important disclosures regarding likely losses that could not be estimated are found where?
General Ledger Accounts
Income Statement
Notes To The Financial Statements
Balance Sheet
1.
Another name for the balance sheet is
Statement Of Operations
Statement Of Financial Position
2.
The balance sheet heading will specify a
Period Of Time
Point In Time
3.
Which of the following is a category, classification, or element of the balance sheet?
Expenses
Gains
Liabilities
Losses
4.
Which of the following is an asset account?
Accounts Payable
Prepaid Insurance
Unearned Revenue
5.
Which of the following is a contra account?
Accumulated Depreciation
Mary Smith, Capital
6.
What is the normal balance for an asset account?
Debit
Credit
7.
What is the normal balance for liability accounts?
Debit
Credit
8.
What is the normal balance for stockholders' equity and owner's equity accounts?
Debit
Credit
9.
What is the normal balance for contra asset accounts?
Debit
Credit
10.
ABC Co. received $1,000 in December for services it will perform in the following month. ABC uses the
accrual basis of accounting. In December ABC debited Cash for $1,000. What will be the other account
involved in the December accounting entry prepared by ABC (and what type of account is it)?
Accounts Receivable (asset)
Prepaid Services (asset)
Service Revenues (revenue)
Unearned Revenues (liability)
11.
ABC Co. performed services for Client Kay in December and billed Kay $4,000 with terms of net 30
days. ABC follows the accrual basis of accounting. In January ABC received the $4,000 from Kay. In
January ABC will debit Cash, since cash was received. What account should ABC credit in the January
entry?
Accounts Receivable
Service Revenue
Owner's Equity
12.
ABC Co. follows the accrual basis of accounting and performs a service on account (on credit) in
December. The service was billed at the agreed upon amount of $3,500. ABC Co. debited Accounts
Receivable for $3,500 and credited Service Revenue for $3,500. The effect of this entry on the balance
sheet of ABC is to increase assets by $3,500 and to
Decrease Assets By $3,500
Increase Owner's (Stockholders') Equity By $3,500
13.
Which of the following is not a current asset?
Accounts Receivable
Land
Prepaid Insurance
Supplies
14.
Which of the following is normally a current liability?
Note Payable Due In Two Years
Unearned Revenue
15.
When an owner draws $5,000 from a sole proprietorship or when a corporation declares and pays a
$5,000 dividend, the asset Cash decreases by $5,000. What is the other effect on the balance sheet?
Owner's/Stockholders' Equity Decreases
None
16.
ABC Co. incurs cleanup expense of $500 on December 30. The supplier's invoice states that the $500
is due by January 10 and ABC will pay the invoice on January 9. ABC follows the accrual basis of
accounting and its accounting year ends on December 31. What is the effect of the cleanup service on
the December balance sheet of ABC?
Assets Decreased
Liabilities Increased
No Effect On Owner's Equity
17.
Deferred credits will appear on the balance sheet under which heading/classification?
Assets
Liabilities
Owner's/Stockholders' Equity
18.
Notes Payable could not appear as a line on the balance sheet in which classification?
Current Assets
Current Liabilities
Long-term Liabilities
19.
On December 1, ABC Co. hired Juanita Perez to begin working on January 2 at a monthly salary of
$4,000. ABC's balance sheet of December 31 will show a liability of
$4,000
$48,000
No Liability
20.
ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of
$30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity?
$20,000
$30,000
$70,000
$120,000
21.
The amount reported on the balance sheet for Property, Plant and Equipment is the company's
estimate of the fair market value as of the balance sheet date.
True
False
22.
The total amount reported for stockholders' equity is the approximate fair value or net worth of the
corporation as of the balance sheet date.
True
False
23.
The book value of a corporation is the total amount of stockholders' equity reported on the balance
sheet.
True
False
24.
The third line of the balance sheet at the end of the year should begin with "For the Year Ended".
True
False
Income Statement
1.
Which of the following names is NOT associated with the income statement?
P&L
Statement Of Financial Position
Statement Of Operations
2.
The income statement heading will specify which of the following?
A POINT In Time
A PERIOD Of Time
3.
Amounts earned by a company in its main operating activities are
Revenues
Gains
4.
A company disposes of equipment that it no longer uses in its business. The amount received by the
company is more than the amount the asset is carried at in the accounting records. The company will
report a(n)
Expense
Gain
Loss
Revenue
5.
On December 1 a company borrowed $100,000 at 12% per year. The interest will be paid quarterly,
with the first payment due on March 1. What should the company report on its income statement for
December?
Nothing
Interest Expense Of $1,000
6.
Is a retailer's Interest Expense an operating expense or a non-operating expense?
Operating Expense
Non-operating Expense
7.
The income statement line gross profit will appear on which income statement format?
Single-step
Multiple-step
8.
The income statement format that segregates the operating revenues and expenses from the nonoperating revenues and expenses is the
Single-step
Multiple-step
9.
Interest earned on investments would appear in which section of a retailer's multiple-step income
statement?
Non-operating
Operating
Would Not Appear
10.
Under the accrual basis of accounting, revenues are recognized in the accounting period in which
Cash Is Received
Revenues Are Earned
11.
Net Sales minus the Cost of Goods Sold equals
Gross Profit
Income From Operations
Net Income
12.
The combination of Selling Expenses and Administrative Expenses is referred to as
General Expenses
Operating Expenses
Total Expenses
13.
Which basis of accounting best measures profitability during a short time interval?
Accrual Basis
Cash Basis
14.
Gross Profit minus Operating Expenses is best defined as
Net Income
Net Sales
Operating Income
15.
What is defined as sales minus all variable expenses?
Contribution Margin
Gross Profit
Net Income
16.
Where on the income statement will a gain on discontinued operations be reported?
As Part Of Revenues
Near The End
17.
A corporation's net income will cause an increase to which of the following?
Accumulated Other Comprehensive Income
Common Stock
Retained Earnings
18.
If a company's stock is publicly traded, is it a requirement that the earnings per share appear on the
income statement?
Yes
No
19.
Are the notes to the financial statements considered to be an integral part of the financial statements?
Yes
No
20.
Is it acceptable that some of the expenses reported on the income statement be estimates?
Yes
No
Bank Reconciliation
or items 4-15, select the action necessary to reconcile the bank statement.
4.
Outstanding checks.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
5.
Bank service charge.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
6.
Interest credited to bank account.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
7.
Interest charged to bank account.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
8.
Deposit in transit.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
9.
Bank inadvertently charged your bank account for another company's bank fees.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
10.
Bank erred by posting another company's credit memo to your company's bank account.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
11.
Fee charged by bank for returned check.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
12.
A company wrote a check for $76 and it cleared the bank for $76. However, the company recorded the
check in its Cash account as $67. How is the difference of $9 handled on the bank reconciliation?
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
13.
A company had a receipt of $989 and correctly prepared its bank deposit slip for $989. However, the
company recorded the receipt in its Cash account as $998. How is the difference of $9 handled on the
bank reconciliation?
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
14.
The bank collected a Note Receivable for the company and credited the company's bank account for
$1,000.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
15.
A company deposited a check from a customer into its checking account. A few days later the check
was returned with the notation account closed and the bank deducted the amount on the bank statement.
Add
To
BOOK
Balance
Deduct
From
BOOK
Balance
Add
To
BANK
Balance
Deduct
From
BANK
Balance
.
17.
Which of the following items will require a journal entry to the company's books?
Bank Service Charge
Deposit In Transit
Bank Error
18.
Which of the following will NOT require a journal entry to the company's books?
Check Printing Charge
Outstanding Checks
Fee For NSF Check
Break-even Point
1.
Fixed Expenses do not change in total when there is a modest change in sales.
True
False
2.
An example of a fixed expense would be a 5% sales commission.
True
False
3.
Property taxes and rent are often fixed expenses.
True
False
4.
Variable expenses change in total as volume changes.
True
False
5.
An example of a variable expense is an office manager's monthly salary.
True
False
6.
A retailer's cost of goods sold is an example of a variable expense.
True
False
7.
Contribution margin is defined as sales (or revenues) minus variable expenses.
True
False
8.
Break-even point is the point where revenues equal the total of all expenses including the cost of goods
sold.
True
False
9.
The break-even point in dollars of revenues is equal to the total of the fixed expenses divided by the
contribution margin per unit.
True
False
10.
If a company requires a profit of $30,000 (instead of breaking even), the $30,000 should be combined
with the fixed expenses in order to compute the point at which the company will earn $30,000.
True
False
11.
If a company has mixed expenses, the fixed component can be combined with the company's fixed
expenses and the variable component can be combined with the company's variable expenses.
True
False
12.
Decreasing a company's fixed expenses should reduce the break-even point.
True
False
13.
The contribution margin per unit is the selling price per unit minus the fixed expenses per unit.
True
False
14.
Break-even analysis is useful for companies that sell products, but it is not useful for companies that
provide services.
True
False