Accounting 1 Semester 1 Final Exam Review Practice
True/False
Indicate whether the sentence or statement is true or false.
____
1. Accounting is the language of business.
____
2. The relationship among assets, liabilities, and owner's equity can be written as an equation.
____
3. The accounting equation does not have to be in balance to be correct.
____
4. A business that performs an activity for a fee is a service business.
____
5. The amount in an account is an account balance.
____
6. The capital account is a liability account.
____
7. Double lines below a column total mean that the totals have been verified as correct.
____
8. A withdrawal is an expense.
____
9. Cash is increased by expenses.
____ 10. Payments for advertising, equipment repairs, utilities, and rent are expense transactions.
____ 11. Revenue is a decrease in owner's equity resulting from the operation of a business.
____ 12. The accounting equation must remain in balance after the changes caused by a transaction have been
recorded!
____ 13. The accounts on the left side of the accounting equation include the liabilities and owner's equity.
____ 14. When a company receives cash from a customer for a prior sale, the transaction decreases the cash account
balance and increases the accounts receivable balance.
____ 15. When cash is paid for expenses, the business has less cash; therefore, the asset account Cash is decreased and
the owner's equity account is increased!
____ 16. When cash is paid to the owner for personal use, assets decrease and owner's equity decreases.
____ 17. The right side of a balance sheet presents liabilities and assets.
____ 18. The balance of an account increases on the same side as the normal balance side.
____ 19. A list of accounts used by a business is a chart of accounts.
____ 20. Capital is an owner's equity account with a normal debit balance.
____ 21. When cash is paid for supplies, the supplies account is increased by a debit.
____ 22. The balance of a drawing account represents the total value of assets taken out of a business by the owner.
____ 23. The normal balance side of an accounts receivable account is a credit.
____ 24. Accounts payable accounts are increased with a debit.
____ 25. Information for each transaction recorded in a journal is an entry.
____ 26. A receipt is the source document for cash received from sales transactions.
____ 27. A memorandum is a business form giving written acknowledgment for cash received.
____ 28. Posting is transferring information from a journal entry to a ledger account.
____ 29. Only the column totals for special amount columns in a journal are posted.
____ 30. A check mark in parentheses below a General Debit column total indicates that the total is not posted.
____ 31. If a bank does not receive payment from the person who signed the check, each endorser of the check is
individually liable for payment.
____ 32. A check with a future date on it is a postdated check.
____ 33. On a bank statement reconciliation, the adjusted check stub balance must be the same as the adjusted bank
balance.
____ 34. When writing a check, the first step is to prepare the check stub.
____ 35. The source document for an electronic funds transfer is a memorandum.
____ 36. When the petty cash fund is replenished, the balance of the petty cash account increases.
____ 37. The balance of the supplies account plus the value of the supplies on hand equals the up-to-date balance of the
supplies account.
____ 38. The value of the prepaid insurance coverage used during a fiscal period is an expense.
____ 39. Journals, ledgers, and work sheets are considered permanent records.
____ 40. Totaling and ruling the Adjustments columns of a work sheet is necessary to prove the equality of debits and
credits.
____ 41. Two financial statements are prepared from the information on the work sheet.
____ 42. Component percentages on an income statement are calculated by dividing sales and total expenses by net
income.
____ 43. A source document is prepared for adjusting entries.
____ 44. A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing
entries are posted.
____ 45. Temporary accounts are not listed on a post-closing trial balance.
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____ 46. The accounting equation is most often stated as ____.
a. assets = liabilities
c. assets = liabilities + owner's equity
b. cash = assets
d. liabilities + assets = owner's equity
____ 47. If cash is increased by $2,000.00 when the owner invests cash in the business, then capital is ____.
a. increased by $2,000.00
c. increased by $1,000.00
b. decreased by $2,000.00
d. not changed
____ 48. When cash is decreased and supplies are increased by an equal amount, ____.
a. there is an increase in liabilities
c. there is a decrease in liabilities
b. there is an increase in owner's equity
d. liabilities and capital are not changed
____ 49. When a transaction changes only one side of the equation, if one account is increased, the other account on
the same side must ____.
a. increase
c. not change
____ 50.
____ 51.
____ 52.
____ 53.
____ 54.
____ 55.
____ 56.
____ 57.
____ 58.
____ 59.
____ 60.
____ 61.
____ 62.
____ 63.
____ 64.
b. decrease
d. none of the above
Prepaid Insurance is ____.
a. an asset account.
c. an owner's equity account.
b. a liability account.
d. none of the above
Buying items and paying for them at a future date is ____.
a. not recommended
c. illegal
b. not a common business practice
d. a common business practice
When a business buys supplies on account, assets ____.
a. increase
c. decrease
b. increase and liabilities decrease
d. decrease and liabilities increase
Assets are ____.
a. listed on the right side of the balance sheet
b. listed on the left side of the balance sheet
c. listed on both sides of the balance sheet
d. not listed on the balance sheet
Total assets are $22,000.00. Supplies are bought on account for $1,500.00. The total assets are now ____.
a. $22,000.00
c. $20,500.00
b. $23,500.00
d. $25,000.00
An established business should rarely experience a decrease in ____.
a. cash
c. owner's equity
b. expenses
d. liabilities
If a business received $2,000.00 from sales, this would ____.
a. increase assets and increase owner's equity
b. increase assets and decrease liabilities
c. increase liabilities and decrease owner's equity
d. decrease assets and decrease owner's equity
The items shown on the right side of a balance sheet include ____.
a. capital and assets
c. liabilities and owner's equity
b. assets and owner's equity
d. assets and liabilities
In a T account, the debit side is ____.
a. the left side
c. both A and B
b. the right side
d. neither A nor B
The normal balance side of an asset account is the ____.
a. debit side
c. decrease side
b. credit side
d. right side
When a business pays for insurance, Prepaid Insurance is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
When cash is paid for rent, Rent Expense is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
When the owner withdraws cash, the owner's drawing account is ____.
a. increased by a debit
c. decreased by a debit
b. increased by a credit
d. decreased by a credit
Decreases in an asset account are shown on a T account's
a. debit side
c. balance side
b. credit side
d. none of the above
A business form ordering a bank to pay cash from a bank account is ____.
____ 65.
____ 66.
____ 67.
____ 68.
____ 69.
____ 70.
____ 71.
____ 72.
____ 73.
____ 74.
____ 75.
a. a check
c. a receipt
b. a memorandum
d. all of the above
Determining that the amount of cash agrees with the accounting records is ____.
a. proving a journal
c. forwarding totals to a new journal page
b. proving that debits equal credits
d. proving cash
A new account to be added between accounts 530 and 540 will be assigned the number ____.
a. 531
c. 537
b. 535
d. 539
Posting references in a journal are ____.
a. not necessary
b. the first item recorded when posting
c. always placed in an account's Post. Ref. column
d. none of the above
A form showing proof of a petty cash payment is a ____.
a. check
c. petty cash check stub
b. petty cash slip
d. journal
Recording revenue from business activities and expenses associated with earning that revenue in the same
accounting period is an application of the accounting concept ____.
a. Matching Expenses with Revenue
c. Consistent Reporting
b. Accounting Period Cycle
d. Going Concern
On a work sheet, the balance of an expense account is extended to the ____.
a. Balance Sheet Debit column
c. Income Statement Debit column
b. Balance Sheet Credit column
d. Income Statement Credit column
If a pair of work sheet columns do not balance and the difference between the totals is an amount that appears
elsewhere on the work sheet, the error is probably ____.
a. an error in addition
b. an amount that has been written in the wrong column
c. an amount that has not been extended
d. a slide
If the Trial Balance columns are not equal and the difference can by divided evenly by 9, the error most likely
is ____.
a. in transposed numbers or a "slide"
c. addition
b. subtraction
d. in writing an amount in the wrong column
Temporary accounts begin each new fiscal period with a ____.
a. debit balance
c. zero balance
b. credit balance
d. balance equal to the net income
The journal entry to close Income Summary when there is a net income is ____.
a. debit Sales; credit Income Summary
b. debit owner's capital; credit Income Summary
c. debit owner's capital account; credit Sales
d. debit Income Summary; credit owner's capital
Information needed for journalizing the adjusting entries is obtained from the ____.
a. general ledger account Balance columns c. work sheet's Adjustments columns
b. income statement
d. balance sheet
Final Exam Review Practice
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
T
T
F
T
T
F
T
F
F
T
F
T
F
F
F
T
F
T
T
F
T
T
F
F
T
F
F
T
T
T
T
T
T
T
T
F
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
37.
38.
39.
40.
41.
42.
43.
44.
45.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
F
T
F
T
T
F
F
T
T
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
MULTIPLE CHOICE
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
ANS:
C
A
D
B
A
D
A
B
B
C
A
C
A
A
A
A
A
B
A
D
B
D
B
A
C
C
A
C
D
C
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
PTS:
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1