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ACCOUNTING TEST PREP 1

True/False Indicate whether the statement is true or false. ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. A professional organization, such as the American Institute of Certified Public Accountants, is a group of people who have common career interests. 2. Being able to make decisions is an important skill for someone interested in becoming a musician. 3. Responsibility is one example of a personality trait. 4. The more you know about yourself, the easier it will be to make career choices. 5. The Internet is a source of educational and career information. 6. In the U.S. economy, for-profit businesses are outnumbered by not-for-profit organizations. 7. One of the best ways to find out about particular careers is by talking to people who work in those fields. 8. Once you decide upon a career, you will probably stay in that career for the rest of your life. 9. Most careers require some education or training beyond high school.

____ 10. On-the-job training provides an opportunity to learn the ins and outs of a particular job and get paid while you're learning. ____ 11. Today, most accounting work is still done with pencil and paper. ____ 12. All businesses need accounting services. ____ 13. AT&T is an example of a not-for-profit organization. ____ 14. A CPA is a person who has passed a national test and met specified experience and educational standards to become "certified" to practice accounting. ____ 15. A person's skills are the principles by which they live and are the core of their belief system. ____ 16. Only businesses that earn a profit will have the economic resources to continue to operate. ____ 17. All types of businesses sell a product. ____ 18. In a free enterprise system, businesses compete for customers. ____ 19. One advantage of owning your own business is that any financial gain from operating the business is yours. ____ 20. For accounting purposes, a business is an entity separate from its owners. ____ 21. A business owner must always get permission to operate from the state government. ____ 22. Basic accounting rules and procedures differ from business to business. ____ 23. The corporation is the easiest form of business to organize. ____ 24. All businesses set up their accounting systems in the same manner. ____ 25. Corporations often start out as sole proprietorships or partnerships. ____ 26. A business is earning a profit if the selling price of its product covers the cost of the raw materials needed to make the product. ____ 27. The life of a business is divided into specific periods for reporting purposes.

____ 28. A partnership can be owned by a more than two individuals. ____ 29. GAAP is a way to communicate financial information in a form understood by those interested in the operations and financial condition of the business. ____ 30. Service businesses are not intended to operate at a profit. ____ 31. After each transaction, the basic accounting equation should remain in balance. ____ 32. A business transaction affects at least two accounts. ____ 33. "Assets + Liabilities = Owner's Equity" is another way to express the basic accounting equation. ____ 34. The increases and decreases caused by business transactions are recorded in specific accounts. ____ 35. The free enterprise system is based on the right to own property. ____ 36. One of the purposes of accounting is to provide financial information about property and the rights to that property. ____ 37. The owner's claims to the assets of a business are liabilities. ____ 38. A creditor has a financial claim to the assets of a business. ____ 39. An account is a record of only the increases in the balance of a specific item such as cash or equipment. ____ 40. The total financial claims do not have to equal the total cost of the property. ____ 41. The top of the T account is used for account titles. Credits are entered on the left side of the T; debits, on the right. ____ 42. Debit and credit rules for accounts on one side of the accounting equation are mirror images of those on the other side. ____ 43. A credit to an account always increases it; a debit to an account always decreases it. ____ 44. An asset account appears on the right side of the accounting equation and is also increased on the right side of its T account. ____ 45. The payment of a liability is recorded by a debit to the liability account and a credit to the owner's capital account. ____ 46. Every transaction affects two or more accounts and is recorded by equal amounts of debits and credits. ____ 47. A business groups its accounts in a ledger. ____ 48. A business transaction can affect two accounts on the same side of the accounting equation and still leave the equation in balance. ____ 49. A chart of accounts is limited to 50 accounts. ____ 50. The difference between the debit and credit amounts in an account is the account balance. ____ 51. Liability, expense, and capital accounts all have normal credit balances. ____ 52. Expenses decrease owners equity and are recorded as debits. ____ 53. The rules of debit and credit for expense accounts are the same as the rules for asset accounts. ____ 54. A business should have separate accounts for recording revenue and expenses. ____ 55. Liability, revenue, and withdrawal accounts all have normal credit balances.

____ 56. The withdrawal of cash by the owner of a business decreases owner's equity. ____ 57. Expenses have the opposite effect from revenue on the capital account. ____ 58. Temporary capital accounts are extensions of the owner's capital account. ____ 59. Permanent accounts start each accounting period with a zero balance. ____ 60. Revenues increase owner's equity, and increases in revenues are recorded as debits. ____ 61. The total of all accounts with normal debit balances should equal the total of all accounts with normal credit balances if the rules of debit and credit were followed correctly. ____ 62. Income from Fees is a permanent account. Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 63. The amount of money earned after the costs of operating a business are paid is ____. a. revenue c. expense b. profit d. capital ____ 64. To survive, a business must ____. a. make a product consumers want and report profits to the IRS b. earn a profit and invest excess profits c. earn a profit and have someone willing to take the risk to run it d. have adequate start-up capital and prepare periodic reports ____ 65. In a business, it is the entrepreneur who ____. a. provides the labor needed to operate the business b. is willing to take the risks to establish and organize the venture c. supplies the capital needed to establish the business d. manages the financial aspects of the business ____ 66. The type of business that provides a product or a service, makes sales to customers, and incurs expenses is ____. a. a service business c. a manufacturing business b. a merchandising business d. all of the above ____ 67. Which of the following would not be considered a service business? a. General Motors c. Delta Air Lines b. North American Van Lines d. Alamo Rent a Car ____ 68. An example of an accounting assumption is ____. a. all businesses prepare reports for governmental review b. business transactions are regularly adjusted for inflation c. a business has the ability to operate indefinitely d. all businesses must pay taxes to the government in a timely fashion ____ 69. The most common form of business organization is the ____. a. sole proprietorship c. corporation b. partnership d. not-for-profit organization ____ 70. Accounting is often call the "language of business" because ____. a. it is easy to understand b. it is fundamental to the communication of financial information c. all business owners have a good understanding of accounting principles d. accountants in many companies share financial information

____ 71. The most common time period covered by an accounting report is one ____. a. quarter c. month b. year d. week ____ 72. An example of an internal user of accounting information is ____. a. the Internal Revenue Service b. a large stockholder c. the president of a bank that has loaned money to the business d. the manager in charge of a specific product line ____ 73. The assumption that requires accounting reports to be prepared for a specific period of time is ____. a. unit of measure c. business entity b. going concern d. accounting period ____ 74. If the creditor's financial claim to property totals $1,000 and the owner's financial claim to property totals $11,000, the property value is ____. a. $10,000 c. $12,000 b. $11,000 d. $1,000 ____ 75. The account Accounts Receivable is an example of a(n) ____. a. asset c. owner's equity b. liability d. none of the above ____ 76. All of the following account titles are asset titles except ____. a. Office Furniture c. Cash in Bank b. Accounts Payable d. Equipment ____ 77. A business transaction that involves a purchase on account is considered to be a(n) ____. a. cash transaction c. investment by the owner b. credit transaction d. expense transaction ____ 78. Each of the following is a business expense except a payment for ____. a. advertising c. utility bills b. monthly rent d. equipment ____ 79. The purchase of a desk on account will increase Office Furniture and will also increase ____. a. Cash in Bank c. Accounts Receivable b. Accounts Payable d. Marie Krabish, Capital ____ 80. The word equities refers to claims against the assets of a business by ____. a. both creditors and owners c. owners only b. creditors only d. customers only ____ 81. If Paul Abdou deposits $30,000 in a checking account in the name of his business, the two accounts affected are ____. a. Cash in Bank and Computer Equipment b. Cash in Bank and Accounts Receivable c. Cash in Bank and Paul Abdou, Capital d. Cash in Bank and Accounts Payable Yes/No Indicate whether you agree with the statement. Paula Abrizzi has a career goal of obtaining an entry-level job with a large accounting firm or with a large corporation after graduating from college. Indicate whether the following activities will help her achieve that goal. ____ 82. Join a social sorority at college.

____ 83. Finance college education. ____ 84. Take a summer job in the business office of a local performing arts center. ____ 85. Study in Europe during her junior year. ____ 86. Participate in an accounting-based internship program. ____ 87. Learn to prepare a rsum and write a cover letter. ____ 88. Volunteer during the school year at a homeless shelter. ____ 89. Pass CPA examination. Completion Complete each statement. Indicate whether each of the following statements should be completed with the word debit or credit. 90. The normal balance for asset accounts is a ____________________. 91. The normal balance for the owner's capital account is a ____________________. 92. An increase in a liability account is recorded as a ____________________. 93. A decrease in an asset account is recorded as a ____________________. 94. A decrease in the owner's capital account is recorded as a ____________________. 95. The normal balance for Accounts Receivable is a ____________________. 96. The normal balance for Accounts Payable is a ____________________. 97. An increase to Office Furniture is a ____________________. 98. An increase to Gilberto Ferreira, Capital is a ____________________. 99. A decrease to Accounts Payable is a ____________________. 100. The normal balance for expense accounts is a ____________________. 101. The normal balance for the owner's withdrawals account is a ____________________. 102. An increase to a revenue account is a ____________________. 103. An increase to the withdrawals account is a ____________________. 104. A decrease to an expense account is a ____________________. 105. The left side of a T account is a ____________________. 106. The normal balance for Consulting Fees is a ____________________. 107. An increase to Utilities Expense is a recorded as a ____________________. 108. An increase to Mark Cookson, Withdrawals is recorded as a ____________________. 109. A decrease to Collection Fees is recorded as a ____________________.

ACCOUNTING TEST PREP 1 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. 37. 38. 39. 40. 41. 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: ANS: ANS: ANS: ANS: ANS: T F T T T F T F T T F T F T F T F T T T F F F F T F T T T F T T F T T T F T F F 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: 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 1 1 1 1 1

NAT: NBEA I.A.

NAT: NBEA IV.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA IV.A. NAT: NBEA I.A.

NAT: NBEA I.A. NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A.

42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

T F F F T T T F T F T T T F T T T F F T F

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

NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT: NAT:

NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A.

MULTIPLE CHOICE 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. YES/NO ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: B C B D A C A B B D D C A B B D B A C 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

NAT: NAT: NAT: NAT: NAT:

NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A. NBEA I.A.

NAT: NBEA I.A. NAT: NBEA I.A. | NBEA II.C.

82. 83. 84. 85. 86. 87. 88. 89.

ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

N Y Y N Y Y N Y

PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS:

1 1 1 1 1 1 1 1

COMPLETION 90. ANS: debit PTS: 1 91. ANS: credit PTS: 1 92. ANS: credit PTS: 1 93. ANS: credit PTS: 1 94. ANS: debit PTS: 1 95. ANS: debit PTS: 1 96. ANS: credit PTS: 1 97. ANS: debit PTS: 1 98. ANS: credit PTS: 1 99. ANS: debit PTS: 1 100. ANS: debit PTS: 1 101. ANS: debit PTS: 1 102. ANS: credit NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A.

PTS: 1 103. ANS: debit PTS: 1 104. ANS: credit PTS: 1 105. ANS: debit PTS: 1 106. ANS: credit PTS: 1 107. ANS: debit PTS: 1 108. ANS: debit PTS: 1 109. ANS: debit PTS: 1

NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A. NAT: NBEA I.A.

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