1.

The financial statement that reports the revenues and expenses for a period of time such as a
year or a month.

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

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. 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
1. Obligations (amounts owed) are reported on the balance sheet and are referred to
as ________________
.
2. Liabilities often have the word ________ in their account title.

3. Unearned Revenues is what type of account?

Asset
Liability
Stockholders' (Owner's) Equity
 4. Accounting entries involve a minimum of how many accounts?

One
 
Two
 
Three
5. The listing of all of the accounts available for use in a company's accounting system is known as
the ___________

6. Assets minus liabilities equals ___________________

.

1. Which term is associated with "left" or "left-side"?

Debit
 
Credit
2. Which term is associated with "right" or "right-side"?
Debit
 
Credit
3. When cash is received, the account Cash will be
4. When a company pays a bill, the account Cash will be
5. What will usually cause an asset account to increase?
6. What will usually cause the liability account Accounts Payable to increase?
7. Entries to expenses such as Rent Expense are usually
8. Entries to revenues accounts such as Service Revenues are usually

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
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
7. To increase the balance in the following accounts, would you debit the account or would you credit
the account?
 Accounts Payable
 Cash
 Land
 Notes Payable
 Accounts Receivable
 Mary Smith, Capital
 Supplies
 Supplies Expense
 Prepaid Insurance
 Service Revenue
 Mary Smith, Drawing
 Equipment
 Unearned Revenue
8. To decrease the balance in the following accounts, would you debit the account or would you credit
the account?

 Accounts Payable
 Cash
 Land
 Notes Payable
 Accounts Receivable
 Mary Smith, Capital
 Supplies
 Supplies Expense
 Prepaid Insurance
 Service Revenue
 Mary Smith, Drawing
 Equipment
 Unearned Revenue
9. What is the normal balance for the following accounts?

 Accounts Payable
 Cash
  Land
 Notes Payable
 Accounts Receivable
 Mary Smith, Capital
 Supplies
 Supplies Expense
 Prepaid Insurance
 Service Revenue
 Mary Smith, Drawing
 Equipment
 Unearned Revenue
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

True or False
1. The chart of accounts is a listing of the accounts presently having balances in the general ledger.
2. Some accounting software will classify some accounts as "income" accounts, while accountants
might refer to these accounts as "revenue" accounts.
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.

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.

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.

1. When a check is written, a cash account should be __________.

Debited
 
Credited
2. Liability accounts will normally have __________ balances.
3. Revenue accounts will normally have __________ balances.
4. The bookkeeping or accounting equation is Assets = Liabilities + Owner's 
________
.
5. The book of original entry is the definition of a __________.
Journal
 
Ledger
1. When a sale is made on credit, the seller will debit the asset account Accounts 
__________
.
2. Asset, __________, and stockholders' equity accounts are known as balance sheet accounts.
3. Large corporations should report revenues on their income statements when the __________.
Cash Is Received
 
Revenues Are Earned

4. The difference between the balance in a company's cash account and its bank statement is documented
in the _________ of the bank statement.

5. Accrued expenses are likely to pertain to transactions that have __________ been paid.
 Already
 
Not Yet
6. Deferred revenues likely involve cash amounts that have __________ been received.
Already
 
Not Yet
7. A __________ entry typically removes an accrual-type adjusting entry that had been recorded in the
preceding accounting period.

8. Cash and Accounts Receivable are two examples of accounts that are reported on the classified
balance sheet under the heading 
__________ assets.
9. A supplier of goods or services is known as a __________.
Debtor
 
Vendor
10. The separation of duties is part of the internal 
__________ for safeguarding assets.

1. The basic accounting equation is Assets = Liabilities + ___________________.

2. The owner invests personal cash in the business.

 Assets
Increase
 
Decrease
 
No Effect

 Owner's (or Stockholders') Equity

3. The owner withdraws cash from the business for personal use.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity

4. The company receives cash from a bank loan.

 Assets
 Liabilities
 Owner's (or Stockholders') Equity

5. The company repays the bank that had lent money to the company.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
6. The company purchases equipment with its cash.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
7. The owner contributes his/her personal truck to the business.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
8. The company purchases a significant amount of supplies on credit.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
9. The company purchases land by paying half in cash and signing a note payable for the other half.
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
10. 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 agreed
upon amount of $5,000. The sales invoice shows that the amount will be due in June.

11. 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?
 Assets
Increase
 
Decrease
 
No Effect
 Liabilities
Increase
 
Decrease
 
No Effect
 Owner's (or Stockholders') Equity
Increase
 
Decrease
 
No Effect
12. In June, Company X receives the $5,000. What is the effect on the accounting
equation and which accounts are affected at Company X?
 Assets
 Liabilities
 Owner's (or Stockholders') Equity
13. What is the effect on Client Q's accounting equation in May when Client Q records the transaction as
a debit to Consultant Expense for $5,000 and a credit to Accounts Payable for $5,000?
 Assets
 Liabilities
  Owner's (or Stockholders') Equity
14. 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
 
 Liabilities

 Owner's (or Stockholders') Equity

15. Which of the following will cause owner's equity to increase?

Expenses
 
Owner Draws
 
Revenue
16. Which of the following will cause owner's equity to decrease?
Net Income
 
Net Loss
 
Revenue
17. The accounting equation should remain in balance because every transaction affects how many
accounts?
Only One
 
Only Two
 
Two or More
18. A corporation's net income is eventually recorded in the following stockholders' equity account: 
__________
.
19. 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.

20. The financial statement with a structure that is similar to the accounting equation is the 
__________
.
21. 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 
__________

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

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

3. Large corporations must follow the 

__________ basis of accounting.
4. Corporations whose stock is publicly traded must have their financial statements 
__________ by independent certified public accountants.
5. The U.S. government agency with authority over the financial reporting requirements of publicly
traded corporations is the __________.
AICPA
 
FASB
 
IRS
 
SEC
6. The non-government organization that researches and develops new accounting standards is the
__________.
AICPA
 
FASB
 
IRS
 
SEC
7. The acronym for the common rules and standards that companies must follow when preparing its
external financial statements is 
__________
.
8. SEC is the acronym for 
__________
.
9. FASB is the acronym for 
__________
 .
10. GAAP is the acronym for 
__________
.
11. __________ entry bookkeeping will result in at least two accounts being involved in every
transaction.

12. Every transaction will have one account being credited and one account being 
__________
.
13. 13.The accounting equation is Assets = 
__________ + Stockholders' (or Owner's) Equity.

14. 14.Matching, cost, and full disclosure are examples of the fundamental or basic accounting 
_________

15. 15.The profitability of a company for a specified period of time is reported on the 
__________ statement.
16. 16.The main components or elements of the income statement are 
__________,expenses, gains, and losses.

17. Prepaid insurance is reported as an or a  __________ 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. 20.The first section of the statement of cash flows is the 
__________ activities.

1. The type of entry will increase the normal balance of the general ledger account Service Revenues?

Debit
 
Credit
2. What type of entry will increase the normal balance of the general ledger account that reports the amount
owed as of the balance sheet date for a company's accrued expenses?

Debit
 
Credit
3. What type of entry will increase the normal balances of the general ledger accounts Electricity Expense,
Insurance Expense, Interest Expense, and Repairs Expense?

Debit
  
Credit
4. What type of accounts are Interest Receivable and Fees Receivable?

Asset
 
Liability
 
Equity
 
Revenue
 
Expense

5. What type of entry will decrease the normal balances of the general ledger accounts Interest Receivable
and Fees Receivable?
Debit
 
Credit

6. What type of accounts are Deferred Revenues and Unearned Revenues?

Asset
 
Liability
 
Equity
 
Revenue

7. What type of entry will decrease the normal balances of the accounts Deferred Revenues and Unearned
Revenues?

Debit
 
Credit

8. What type of accounts are Prepaid Insurance, Prepaid Advertising, and Prepaid Expenses?
Asset
 
Liability
 
Equity
 
Revenue
 
Expense
9. What type of entry will decrease the normal balances of the accounts Prepaid Insurance and Prepaid
Expenses, and Insurance Expense?

Debit
 
Credit
10. What type of accounts are Accumulated Depreciation and Allowance for Doubtful Accounts?
Contra Asset
 
Equity
 
Expense
 
Liability
 
Revenue
11. What type of entry will increase the balances that are normally found in the accounts Accumulated
Depreciation and Allowance for Doubtful Accounts?
Debit
 
Credit
12. In the case of a company's accrued interest expense, which of the following occurs first?
Incurring the Interest Expense
 
Paying the Interest to the Lender
13. In the case of a bank's accrued interest revenues, which occurs first?
Earning the Interest Revenues
 
Receiving the Interest from the Borrower
14. In the case of a company deferring insurance expense, which occurs first?

Incurring The Insurance Expense

 
Paying The Insurance Company
15. In the case of a company's deferred revenues, which occurs first?
Earning The Revenues
 
Receiving The Money From The Customer
16. Which of the following will be included in the adjusting entry to accrue interest expense?
A Debit To Cash
 
A Credit To Interest Payable
 
A Debit To Interest Payable
 
A Debit To Prepaid Interest
17. Which of the following will be included in the adjusting entry to accrue interest income or interest
revenues?
A Debit To Cash
 
A Debit To Interest Income
 
A Credit To Interest Receivable
 
A Debit To Interest Receivable

18. The adjusting entry that reduces the balance in Prepaid Insurance will also include which of the
following?
A Credit To Cash
 
A Credit To Insurance Expense
 
A Debit To Insurance Expense
 
A Debit To Insurance Payable

19. The adjusting entry that reduces the balance in Deferred Revenues or Unearned Revenues will also
include which of the following?

A Debit To Cash
 
A Credit To Fees Earned
 
A Debit To Fees Earned
 
A Credit To Fees Receivable

20. The ending balance in the account Prepaid Insurance is expected to report which of the following?
The Accrued Amount Of Insurance Expense
 
The Original Amount Of The Insurance Premiums Paid
 
The Expired Portion Of The Insurance Premiums Paid
 
The Unexpired Portion Of The Insurance Premiums Paid

21. The ending balance in the account Deferred Revenues (or Unearned Fees) should report which of the
following?
The Accrued Amount Of Fees That Have Been Earned
 
The Original Amount Of Fees Received In Advance From A Customer
  
The Fees Received In Advance Which Are Not Yet Earned
 
The Amount Of Fees Received In Advance And Which Are Now Earned

22. Which type of adjusting entry is often reversed on the first day of the next accounting period?
Accrual
 
Deferral
 
Depreciation

23. Typically an adjusting entry will include which of the following?

One Balance Sheet Account And One Income Statement Account
 
Two Balance Sheet Accounts
 
Two Income Statement Accounts
24. Use the following information to answer questions 25 - 30:
A company borrowed $100,000 on December 1 by signing a six-month note that specifies interest at an
annual percentage rate (APR) of 12%. No interest or principal payment is due until the note matures on May
31. The company prepares financial statements at the end of each calendar month. The following questions
pertain to the adjusting entry that should be entered in the company's records.
25. What date should be used to record the December adjusting entry?

26. How many accounts are involved in the adjusting entry?

27. What is the name of the account that will be debited?

28. What is the name of the account that will be credited?

29. What is the amount of the debit and the credit?

30. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?

Use the following information to answer questions 31 - 36:

A bank lent $100,000 to a customer on December 1 that required the customer to pay an annual percentage
rate (APR) of 12% on the amount of the loan. The loan is due in six months and no payment of interest or
principal is to be made until the note is due on May 31. The bank prepares monthly financial statements at
the end of each calendar month. The following questions pertain to the adjusting entry that the bank will be
making for its accounting records.

31. What date should be used to record the December adjusting entry?

32. How many accounts are involved in the adjusting entry?

33. What is the name of the account that should be debited?

34. What is the name of the account that should be credited?

35. What is the amount of the debit and the credit?

36. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?

Use the following information to answer questions 37 - 42:

On December 1, your company paid its insurance agent $2,400 for the annual insurance premium covering
the twelve-month period beginning on December 1. The $2,400 payment was recorded on December 1 with
a debit to the current asset Prepaid Insurance and a credit to the current asset Cash. Your company
prepares monthly financial statements at the end of each calendar month. The following questions pertain to
the adjusting entry that should be written by the company.

37. What date should be used to record the December adjusting entry?

38. How many accounts are involved in the adjusting entry?

39. What is the name of the account that will be debited?

40. What is the name of the account that will be credited?

41. What is the amount of the debit and the credit?

42. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?
Answer
Use the following information to answer questions 43 - 48:
On December 1, your company paid its insurance agent $2,400 for the annual insurance premium covering
the twelve-month period beginning on December 1. The $2,400 payment was recorded on December 1 with
a debit to the income statement account Insurance Expense and a credit to the current asset Cash. Your
company prepares monthly financial statements at the end of each calendar month. The following questions
pertain to the adjusting entry that should be written by the company.

43. What date should be used to record the December adjusting entry?
44. How many accounts are involved in the adjusting entry?

45. What is the name of the account that will be debited?

46. What is the name of the account that will be credited?

47. What is the amount of the debit and the credit?

48. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?
 Use the following information to answer questions 49 - 54:
On December 1, XYZ Insurance Co. received $2,400 from your company for the annual insurance premium
covering the twelve-month period beginning on December 1. XYZ Insurance Co. recorded the $2,400 receipt
as of December 1 with a debit to the current asset Cash and a credit to the current liability Unearned
Revenues. XYZ Insurance Co. prepares monthly financial statements at the end of each calendar month. The
following questions pertain to the adjusting entry that should be written by the XYZ Insurance Co.

49. What date should be used to record the December adjusting entry?

50. How many accounts are involved in the adjusting entry?

51. What is the name of the account that will be debited?

52. What is the name of the account that will be credited?

53. What is the amount of the debit and the credit?

54. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?

Use the following information to answer questions 55- 60:

On December 1, your company began operations. On December 3 it purchased $1,500 of supplies and
recorded the transaction with a debit to the current asset Supplies and a credit to the current
liability Accounts Payable. Your company prepares monthly financial statements at the end of each calendar
month. At the end of the day on December 31, your company estimated that $700 of the supplies were still
on hand in the supply room. The following questions pertain to the adjusting entry that should be entered by
your company

55. What date should be used to record the December adjusting entry?

56. How many accounts are involved in the adjusting entry?

57. What is the name of the account that will be debited?

58. What is the name of the account that will be credited?

59. What is the amount of the debit and the credit?

60. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?
Answer
Use the following information to answer questions 61 - 66:
On December 1, your company began operations. On December 4 it purchased $1,500 of supplies and
recorded the transaction with a debit to the income statement account Supplies Expense and a credit to the
current liability Accounts Payable. Your company prepares monthly financial statements at the end of each
calendar month. At the end of the day on December 31, your company estimated those $700 of the supplies
 were still on hand in the supply room. The following questions pertain to the adjusting entry that should be
entered by your company.

61. What date should be used to record the December adjusting entry?

62. How many accounts are involved in the adjusting entry?

63. What is the name of the account that will be debited?

64. What is the name of the account that will be credited?

65. What is the amount of the debit and the credit?

66. What would be the effect on the financial statements if the company fails to make the adjusting entry on
December 31?

1. 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
3. The generally accepted accounting principles used in the financial statements of U.S corporations
are researched and developed by which organization?
American Accounting Association (AAA)
 
Financial Accounting Standards Board (FASB)
 
Internal Revenue Service (IRS)
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?
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?

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?

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

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 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. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days. ABC uses
the accrual basis of accounting. In December ABC will debit 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 would not be a current asset?
Accounts Receivable
 
Land
 
Prepaid Insurance
 
Supplies
14. Which of the following would normally be 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 with the
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

Reference: https://www.accountingcoach.com/quizzes