ACF Intro to Financial Accounting 101
Assignments 01
Answer all questions on the MCQ answer sheet provided.
Multiple Choice Questions (1 mark each)
Total marks allocated for this section is 50 marks.
1.
Profit is the difference between
a. assets and liabilities
b. the incoming cash and outgoing cash
c. the assets purchased with cash contributed by the owner and the cash spent to
operate the business
d. the assets received for goods and services and the amounts used to provide the
goods and services
2. Financial reports are used by
a. management
b. creditors
c. investors
d. all of the above
3.
Which of the following best describes accounting?
a. records economic data but does not communicate the data to users according to
any specific rules
b. is an information system that provides reports to stakeholders
c. is of no use by individuals outside of the business
d. is used only for filling out tax returns and for financial statements for various type
of governmental reporting requirements
4. The two most common specialized fields of accounting in practice are
a. forensic accounting and financial accounting
b. managerial accounting and financial accounting
c. managerial accounting and environmental accounting
d. financial accounting and tax accounting systems
5. The initials GAAP stand for
a. General Accounting Procedures
b. Generally Accepted Plans
c. Generally Accepted Accounting Principles
d. Generally Accepted Accounting Practices
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ACF Intro to Financial Accounting 101
6.
Smith Company purchased $105,000 of computer equipment from Brown Company.
Smith Company paid for the equipment using cash that had been obtained from the initial
investment by Connie Smith. The transaction involving the computer equipment should
be recorded on the accounting records of which of the following entities?
a. Smith Company and Connie Smith's personal records
b. Brown Company and Connie Smith's personal records
c. Brown Company
d. Smith Company and Brown Company
7.
John Williams owns and operates Indoor Advertising Company. Recently, John
withdrew $18,000 from Indoor Advertising, and he contributed $10,000, in his name, to
the Red Cross. The contribution of the $10,000 should be recorded on the accounting
records of which of the following entities?
a. Indoor Advertising and the Red Cross
b. John William's personal records and the Red Cross
c. John William's personal records and Indoor Advertising
d. John William's personal records, Indoor Advertising, and the Red Cross
8.
Equipment with an estimated market value of $45,000 is offered for sale at $65,000. The
equipment is acquired for $10,000 in cash and a note payable of $40,000 due in 30 days.
The amount used in the buyer's accounting records to record this acquisition is
a. $50,000
b. $65,000
c. $10,000
d. $45,000
9. Assets are
a. always greater than liabilities.
b. either cash or accounts receivables
c. the same as expenses because they are acquired with cash
d. financed by the owner and/or creditors
10.
The accounting equation may be expressed as
a. Assets = Equities - Liabilities
b. Assets + Liabilities = Owner's Equity
c. Assets = Revenues less Liabilities
d. Assets - Liabilities = Owner's Equity
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ACF Intro to Financial Accounting 101
11.
If total liabilities decreased by $25,000 during a period of time and owner's equity
increased by $30,000 during the same period, the amount and direction (increase or
decrease) of the period's change in total assets is
a. $65,000 increase
b. $5,000 decrease
c. $5,000 increase
d. $65,000 decrease
12.
A business paid $9,000 to a creditor in payment of an amount owed. The effect of the
transaction on the accounting equation was to
a. increase one asset, decrease another asset
b. increase an asset, increase a liability
c. decrease an asset, decrease a liability
d. increase an asset, increase owner's equity
13.
Earning revenue
a. increases assets, increases owner’s equity.
b. increases assets, decreases owner's equity
c. increases one asset, decreases another asset
d. decreases assets, increases liabilities
14. Goods purchased on account for future use in the business, such as supplies, are called
a. prepaid liabilities
b. revenues
c. prepaid expenses
d. liabilities
15. The asset created by a business when it makes a sale on account is termed
a. accounts payable
b. prepaid expense
c. unearned revenue
d. accounts receivable
16.
The debt created by a business when it makes a purchase on account is referred to as an
a. account payable
b. account receivable
c. asset
d. expense payable
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ACF Intro to Financial Accounting 101
17.
If total assets decreased by $47,000 during a period of time and owner's equity increased
by $24,000 during the same period, then the amount and direction (increase or decrease)
of the period's change in total liabilities is
a. $23,000 increase
b. $47,000 decrease
c. $71,000 decrease
d. $71,000 increase
18.
How does the purchase of supplies on account affect the accounting equation?
a. assets increase; owner's equity decreases
b. assets increase; liabilities increase
c. assets increase; liabilities decrease
d. liabilities increase; owner's equity decreases
19.
How does paying a liability in cash affect the accounting equation?
a. assets increase; liabilities decrease
b. assets increase; liabilities increase
c. assets decrease; liabilities decrease
d. liabilities decrease; owner's equity increases
20.
How does receiving a bill to be paid next month for services rendered affect the
accounting equation?
a. assets decrease; owner's equity decreases
b. assets increase; liabilities increase
c. liabilities increase; owner's equity increases
d. liabilities increase; owner's equity decreases
21. How does the purchase of equipment by signing a note affect the accounting equation?
a. assets increase; assets decrease
b. assets increase; liabilities decrease
c. assets increase; liabilities increase
d. assets increase; owner's equity increases
22.
Land, originally purchased for $20,000, is sold for $75,000 in cash. What is the effect of
the sale on the accounting equation?
a. assets increase $75,000; owner's equity increases $75,000
b. assets increase $55,000; owner's equity increases $55,000
c. assets increase $75,000; liabilities decrease $20,000; owner's equity increases
$55,000
d. assets increase $20,000; no change for liabilities; owner's equity increases $75,000
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ACF Intro to Financial Accounting 101
23.
The Melville Company sold land for $60,000 in cash. The land was originally purchased
for $40,000, and at the time of the sale, $15,000 was still owed to First National Bank on
that purchase. After the sale, The Melville Company paid off the loan to First National
Bank. What is the effect of the sale and the payoff of the loan on the accounting
equation?
a. assets increase $20,000; liabilities decrease $15,000; owner's equity increases
$5,000
b. assets increase $5,000; liabilities decrease $15,000; owner's equity increases
$20,000
c. assets increase $60,000; liabilities decrease $15,000; owner's equity increases
$20,000
d. assets increase $20,000; liabilities decrease $15,000; owner's equity increases
$35,000
24. On November 1 of the current year, the assets and liabilities of Jim Chu, M.D., are as
follows: Cash, $10,000; Accounts Receivable, $8,200; Supplies, $1,050; Land, $25,000;
Accounts Payable, $6,530. What is the amount of owner's equity (Jim Chu's capital) as of
November 1 of the current year?
a. $37,720
b. $44,430
c. $21,500
d. $50,780
25.
Al Shea is the sole owner and operator of SawTooth Company. As of the end of its
accounting period, December 31, 2005, SawTooth Company has assets of $925,000 and
liabilities of $285,000. During 2006, Al Shea invested an additional $50,000 and
withdrew $30,000 from the business. What is the amount of net income during 2006,
assuming that as of December 31, 2006, assets were $980,000, and liabilities were
$255,000?
a. $ 95,000
b. $ 65,000
c. $165,000
d. $725,000
26.
If beginning capital was $65,000, ending capital is $43,000, and the owner's withdrawals
were $16,000, the amount of net income or net loss was
a. net income of $37,000
b. net income of $8,000
c. net loss of $22,000
d. net loss of $6,000
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ACF Intro to Financial Accounting 101
27.Transactions affecting owner's equity include
a. owner's investments and payment of liabilities
b. owner's investments and owner's withdrawals, revenues, and expenses
c. owner's investments, revenues, expenses, and collection of accounts receivable
d. owner's withdrawals, revenues, expenses, and purchase of supplies on account
28. Liabilities are reported on the
a. income statement
b. statement of owner's equity
c. statement of cash flows
d. balance sheet
29.
Cash investments made by the owner to the business are reported on the statement of
cash flows in the
a. financing activities section
b. investing activities section
c. operating activities section
d. supplemental statement
30. Accounts
a. do not reflect money amounts
b. are not used by entities that manufacture products
c. are records of increases and decreases in individual financial statement items
d. are only used by large entities with many transactions
31.
32.
Accounts are classified in the ledger
a. chronologically
b. alphabetically
c. in accordance with their appearance in the financial statements
d. so that accounts used most often are listed first
Revenue should be recognized when
a. cash is received
b. the service is performed
c. the customer places an order
d. the customer charges an order
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ACF Intro to Financial Accounting 101
33. The debit side of an account
a. depends on whether the account is an asset, liability or owner's equity
b. can be either side of the account depending on how the accountant set up the
system
c. is the right side of the account
d. is the left side of the account
34. Which statement(s) concerning cash is (are) true?
a. cash will always have more debits than credits
b. cash will never have a credit balance
c. cash is increased by debiting
d. all of the above
35.
a.
b.
c.
d.
Which of the following groups of accounts have a normal debit balance?
revenues, liabilities, capital
capital, assets
liabilities, expenses
assets, expenses
36.
A credit signifies a decrease in
a. drawing
b. liabilities
c. capital
d. revenue
37.
Which one of the statements below is not a purpose for the journal?
a. to show increases and decreases in accounts
b. to show a chronological order by date
c. to show a complete transaction in one place
d. to help locate errors
38. Which of the following applications of the rules of debit and credit is true?
a. decrease Prepaid Insurance with a credit and the normal balance is a credit
b. increase Accounts Payable with a credit and the normal balance is a debit
c. increase Supplies Expense with a debit and the normal balance is a debit
d. decrease Cash with a debit and the normal balance is a credit
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ACF Intro to Financial Accounting 101
39.
The classification and normal balance of the supplies expense account is a(n)
a. asset with a debit balance
b. asset with a credit balance
c. expense with a debit balance
d. liability with a credit balance
40. Office supplies were sold by J's Appliance Repair at cost to another repair shop, with
cash received. Which of the following entries for J's Appliance Repair records this
transaction?
a. Office Supplies, debit; Cash, credit
b. Office Supplies, debit; Accounts Payable, credit
c. Cash, debit; Office Supplies, credit
d. Accounts Payable, debit; Office Supplies, credit
41. Which of the following entries records the acquisition of equipment on account?
a. Equipment, debit; Accounts Payable, credit
b. Equipment, debit; Cash, credit
c. Accounts Payable, debit; Equipment, credit
d. Accounts Payable, debit; Notes Payable, credit
42.
Which of the following entries records the receipt of cash from patients on account?
a. Accounts Payable, debit; Fees Earned, credit
b. Accounts Receivable, debit; Fees Earned, credit
c. Accounts Receivable, debit; Cash, credit
d. Cash, debit; Accounts Receivable, credit
43.
a.
b.
c.
d.
44.
A trial balance is prepared to
prove that there were no errors made in recording transactions into the journal
prove that no errors were made in posting to the ledger
prove that each account balance is correct
summarize the account balances to help prepare financial statements
If the two totals of a trial balance are not equal, it could be due to
a. failure to record a transaction
b. recording the same erroneous amount for both the debit and the credit parts of a
transaction
c. an error in determining the account balances, such as a balance being incorrectly
computed
d. recording the same transaction more than once
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ACF Intro to Financial Accounting 101
45.Which of the following entries records the receipt of cash for two months' rent? The cash
was received in advance of providing the service.
a. Prepaid Rent, debit; Rent Revenue, credit.
b. Cash, debit; Unearned Rent, credit.
c. Cash, debit; Prepaid Rent, credit.
d. Cash, debit; Rent Expense credit.
46.The process of rewriting the information from the journal into the ledger is called
a. sliding
b. transposing
c. journalizing
d. posting
47.Supplies purchased on account were incorrectly recorded as Office Equipment. The
correcting entry would be
a. Supplies, debit; Office Equipment, credit.
b. Accounts Receivable, debit; Supplies, credit.
c. Office Equipment, debit; Supplies Expense, credit.
d. Supplies, debit; Accounts Payable, credit.
48.The adjusting entry for rent earned that is currently recorded in the unearned rent account is
a. Unearned Rent, debit; Rent Revenue, credit
b. Rent Revenue, debit; Unearned Rent, credit
c. Unearned Rent, debit; Prepaid Rent, credit
d. Rent Expense, debit; Unearned Rent, credit
49.The unearned rent account has a balance of $40,000. If $3,000 of the $40,000 is unearned at
the end of the accounting period, the amount of the adjusting entry is
a. $3,000
b. $40,000
c. $37,000
d. $43,000
50.Fees receivable would appear on the balance sheet as a(n)
a. asset
b. liability
c. fixed asset
d. unearned revenue
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ACF Intro to Financial Accounting 101
Problems Questions (marks are allocated next to the questions):
Answer the questions on a fresh sheet of A4 size paper.
Total marks for this section is 140 marks.
1.
Indicate whether each of the following represents an asset, liability, or owner's equity (6
marks):
(a)
(b)
(c)
(d)
(e)
(f)
2.
accounts payable
wages expense
capital
accounts receivable
withdrawal
land
Selected transactions completed by a proprietorship are described below. Indicate the
effects of each transaction on assets, liabilities, and owner's equity by inserting "+" for
increase and "-" for decrease in the appropriate columns at the right. If appropriate, you
may insert more than one symbol in a column (14 marks).
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
Received cash from owner as an additional
investment
Purchased supplies on account
Paid rent for the current month
Received cash for services sold to customers
Returned some defective supplies purchased in
(b)
Paid insurance premiums in advance
Paid cash to creditor for purchases in (b)
Charged customers for services sold on account
Paid cash to a customer as a refund for an
overcharge
Received cash on account from customers
Owner withdrew cash for personal use
Recorded the cost of supplies used during the
year
Received invoice for electricity used
Paid wages
Purchased a truck for cash
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ACF Intro to Financial Accounting 101
3. Identify each of the following as an (1) increase in owner's equity, or a (2) decrease in
owner's equity (6 marks)
(a)
(b)
(c)
(d)
(e)
(f)
4.
Fees Earned
Wages Expense
Withdrawal
Lawn Care Revenue
Investment
Supplies Expense
Identify which of the following accounts appear on a balance sheet. (5 marks)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Cash
Fees Earned
Joe Brown, Capital
Wages Payable
Rent Expense
Prepaid Advertising
Land
5. Indicate whether each of the following activities would be reported on the Statement of
Cash Flows as an Operating Activity, an Investing Activity, a Financing Activity, or does
not appear on the Cash Flow Statement. (7 marks)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
6.
Cash paid for building
Cash paid to suppliers
Cash paid for owner's withdrawal
Cash received from customers
Cash received from the owner's investment
Cash received from the sale of a building
Borrowed cash from a bank
For each of the following, determine the amount of net income or net loss for the year. (8
marks)
(a)
(b)
(c)
(d)
Revenues for the year totaled $90,500 and expenses totaled $44,500. The
owner made an additional investment of $15,000 during the year.
Revenues for the year totaled $75,500 and expenses totaled $110,500. The
owner withdrew $20,000 during the year.
Revenues for the year totaled $198,000 and expenses totaled $85,000. The
owner invested an additional $20,000 and withdrew $15,000 during the year.
Revenues for Smith Co. totaled $273,500 and expenses totaled $263,800.
Cash withdrawals of $30,000 were paid during the year.
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ACF Intro to Financial Accounting 101
7. The total assets and total liabilities of Missy's Draperies, a proprietorship, at the
beginning and at the end of the current fiscal year are as follows: (10 marks)
January 1
$250,000
200,000
Total assets
Total liabilities
(a)
(b)
(c)
(d)
December 31
$430,000
140,000
Determine the amount of net income earned during the year. The owner did
not invest any additional assets in the business during the year and made no
withdrawals.
Determine the amount of net income during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the
amounts presented above. However, the owner withdrew $32,000 in cash
during the year (no additional investments).
Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the
amounts presented above. However, the owner invested an additional
$40,000 in cash in the business in June of the current fiscal year (no
withdrawals).
Determine the amount of net income earned during the year. The assets and
liabilities at the beginning and at the end of the year are unchanged from the
amounts presented above. However, the owner invested an additional
$10,000 in cash in August of the current fiscal year and made twelve
monthly cash withdrawals of $3,000 each during the year. (12 marks)
8. Selected transaction data of a business for June are summarized below. Determine the
following amounts for June: (a) total revenue, (b) total expense, (c) net income. (6
marks)
Service sales charged to customers on account during June
Cash received from cash customers for services performed in June
Cash received from customers on account during June:
Services performed and charged to customers prior to
June
Services performed and charged to customers during June
Expenses incurred prior to June and paid during June
Expenses incurred and paid in June
Expenses incurred in June but not paid in June
Expenses for supplies used and insurance (not included above)
applicable to
June
12
$35,000
30,000
15,000
20,000
8,250
38,500
7,000
1,000
ACF Intro to Financial Accounting 101
9.
Organize the following accounts into the usual sequence of a chart of accounts. (10
marks)
Miscellaneous Expense
Accounts Payable
Accounts Receivable
Cash
Gordon Wells, Capital
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Gordon Wells, Drawing
10. Selected accounts from the ledger of Hughes Company appear below. For each account,
indicate the following: (20 marks)
(a)
In the first column at the right, indicate the nature of each account, using the
following abbreviations:
Asset - A
Liability - L
None of the above - N
(b)
(1)
(2)
(3)
(4
(5)
(6)
(7)
(8)
(9)
(10)
Revenue - R
Expense - E
In the second column, indicate the increase side of each account by inserting
Dr. or Cr.
Type of
Account
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_______
Account
Supplies
Notes Receivable
Fees Earned
Phillips, Drawing
Accounts Payable
Salaries Expense
Hughes Capital
Accounts Receivable
Equipment
Notes Payable
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Increase
Side
________
________
________
________
________
________
________
________
________
________
ACF Intro to Financial Accounting 101
11.
Record the following selected transactions for March in a two-column journal,
identifying each entry by letter: (20 marks)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
12.
Received $10,000 from Shirley Knowles, owner.
Purchased equipment for $35,000, paying $10,000 in cash and giving a note
payable for the remainder.
Paid $1,000 for rent for March.
Purchased $8,500 of supplies on account.
Recorded $2,500 of fees earned on account.
Received $11,000 in cash for fees earned.
Paid $200 to creditors on account.
Paid wages of $1,250.
Received $1,150 from customers on account.
Recorded owner's withdrawal of $1,850.
Set up T accounts for Cash; Accounts Receivable; Supplies; Accounts Payable; Brenda
Wells, Capital; Brenda Wells, Drawing; Professional Fees; and Operating Expenses. (20
marks)
(a)
In the T accounts, record the following transactions of Wells Consultant
Services for May, 2005, identifying each entry by number:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Wells invested $12,000 cash in the business.
Purchased supplies on account, $5,750.
Paid operating expenses, $5,000.
Billed clients for fees, $6,940.
Received cash from cash clients, $4,200.
Paid creditors on account, $1,000.
Received $2,600 from clients on account.
Withdrew $1,000 cash for personal use.
(b)
Prepare a trial balance as of May 31, 2005 for Wells Consultant Services.
(c)
Assuming that supplies expense (which has not been recorded) amounts to
$1,000 for May, determine the following:
(1)
(2)
Net income for the month.
Owner's equity as of May 31.
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ACF Intro to Financial Accounting 101
13. Journalize the entries to correct the following errors: (8 marks)
(a)
(b)
A purchase of supplies for $100 on account was recorded and posted as a
debit to Supplies for $400 and as a credit to Accounts Receivable for $400.
A receipt of $3,000 from Fees Earned was recorded and posted as a debit to
Fees Earned for $3,000 and a credit to Cash for $3,000.
The End
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