72 free test bank for financial accounting fundamentals 3rd edition

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72 Free Test Bank for Financial Accounting

Fundamentals 3rd Edition

Wild Multiple

Choice Questions - Page 1

Which of the following list of events properly reflects the early steps taken in the accounting process?

1. A Record relevant transactions, Post journal information to ledger accounts Analyze each transaction, Prepare and analyze the trial balance

2. B Post journal information to ledger accounts, Analyze each transaction, Post journal information to ledger accounts, Prepare and analyze the trial balance

3. C Prepare and analyze the trial balance, Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions

4. D Analyze each transaction, Post journal information to ledger accounts, Record relevant transactions, Prepare and analyze the trial balance

5. E Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance

Which of the following statements is correct?

1. A When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense

2. B Promises of future payment are called accounts payable

3. C Increases and decreases in cash are always recorded in the retained earnings account

4. D An account called Land is commonly used to record increases and

decreases in both the land and buildings owned by a business

5. E Accrued liabilities include accounts receivable

The general ledger of a business

1. A Is a collection of all accounts used in a company's information system

2. B Must be kept in a computer file

3. C A and B

4. D Is a set standard not affected by a company's size and diversity

5. E A, B and D

A debit is used to record:

1. A A decrease in an asset account

2. B A decrease in an expense account

3. C An increase in a revenue account

4. D An increase in the balance of common stock

5. E A decrease in the balance of retained earnings

The accounting process begins with:

1. A Analysis of business transactions and events

2. B Preparation of financial statements and other reports

3. C Summarizing the recorded effects of business transactions

4. D Presentation of financial information to decision-makers

5. E Preparation of the trial balance

Which of the following statements about the Cash account is true?

1. A Because most companies earn their fees in cash, the cash account is categorized as revenue

2. B For any given transaction Accounts Receivable and Cash can be used interchangeably because both accounts are measured in terms of cash

3. C The cash account includes the value of any medium of exchange that a bank accepts for deposit

4. D Both A and B are true statements

5. E Both B and C are true statements

Management Services, Inc provides services to clients On May

1, a client prepaid Management Services $60,000 for 6-months contract in advance Management Services' general journal entry

to record this transaction will include a

1. A Debit to Unearned Management Fees for $60,000

2. B Credit to Management Fees Earned for $60,000

3. C Credit to Cash for $60,000

4. D Credit to Unearned Management Fees for $60,000

5. E Debit to Management Fees Earned for $60,000

Source documents include all of the following except:

1. A Sales tickets

2. B Ledgers

4. D Purchase orders

5. E Bank statements

A debit is:

1. A An increase in an account

2. B The right-hand side of a T-account

3. C A decrease in an account

4. D The left-hand side of a T-account

5. E An increase to a liability account

Of the following accounts, the one that normally has a credit

balance is:

1. A Cash

2. B Office Equipment

3. C Sales Salaries Payable

4. D Dividends

5. E Sales Salaries Expense

Wisconsin Rentals purchased office supplies on credit The

general journal entry made by Wisconsin Rentals will include a:

1. A Debit to Accounts Payable

2. B Debit to Accounts Receivable

3. C Credit to Cash

4. D Credit to Accounts Payable

5. E Credit to Retained Earnings

For what reason do most sellers require customers to have their receipts in order to exchange or return purchased items?

1. A The receipt contains coded information which the seller needs to prepare and analyze the trial balance

2. B Sellers wish to ensure that the sale in question was rung up on the

register in the first place

3. C This is a legal requirement mandated by a federal law

4. D The receipt is serving as a promissory note

5. E To create an environment in which customer's do not want to return items

Various types of documents and other papers that companies use when they conduct their business:

1. A Are called source documents

2. B Can include sales tickets

3. C Are the source of information for recording accounting entries

4. D Can be in electronic form

5. E All of the above

Double-entry accounting is an accounting system:

1. A That records each transaction twice

2. B That records the effects of transactions and other events in at least two accounts with equal debits and credits

3. C In which the impact of each transaction is recorded in two or more

accounts but that could include two debits and no credits

4. D That may only be used if T-accounts are used

5. E That insures that errors never occur

Which of the following is a true statement regarding debits and credits?

1. A If a company earned a profit, debits will not equal credits

2. B For a business, debits are better than credits

3. C A company's books are not in balance if they have a current period loss

4. D Assets and expenses are both increased with a debit

5. E Liabilities and equity are both increased with a debit

Source documents:

1. A Include the ledger

2. B Are the sources of accounting information

3. C Must be in electronic form

4. D Are based on accounting entries

5. E Include the chart of accounts

A record of the increases and decreases in a specific asset,

liability, equity, revenue or expense is a(n):

1. A Journal

2. B Posting

3. C Trial balance

4. D Account

5. E Chart of accounts

A simple account form widely used in accounting to illustrate how debits and credits work is called a:

1. A Dividend account

3. C Drawing account

4. D T-account

5. E Balance column sheet

A liability created by the receipt of cash from customers in

payment for products or services that have not yet been delivered

to the customers is:

1. A Recorded as a debit to an unearned revenue account

2. B Recorded as a debit to a prepaid expense account

3. C Recorded as a credit to an unearned revenue account

4. D Recorded as a credit to a prepaid expense account

5. E Not recorded in the accounting records until the earnings process is complete

A collection of all accounts (with account balances) used by a business is called a:

1. A Journal

2. B Book of original entry

3. C General Journal

4. D Balance column journal

5. E Ledger

A list of all accounts used by a company and the identification number assigned to each account is called a:

2. B Journal

3. C Trial balance

4. D Chart of accounts

5. E General Journal

A credit entry:

1. A Increases asset and expense accounts and decreases liability, common stock and revenue accounts

2. B Is always a decrease in an account

3. C Decreases asset and expense accounts and increases liability, common stock and revenue accounts

4. D Is recorded on the left side of a T-account

5. E Is always an increase in an account

Which of the following statements is incorrect?

1. A The normal balance of accounts receivable is a debit

2. B The normal balance of dividends is a debit

3. C The normal balance of unearned revenues is a credit

4. D The normal balance of an expense account is a credit

5. E The normal balance of common stock is a credit

The account used to record the transfers of assets from a

business to its stockholders is:

1. A A revenue account

2. B The retained earnings account

4. D An expense account

5. E A liability account

Prepaid expenses are:

1. A Payments made for products and services that do not ever expire

2. B Classified as liabilities on the balance sheet

3. C Decreases in retained earnings

4. D Assets that represent prepayments of future expenses

5. E Promises of payments by customers

Rocky Industries received its telephone bill in the amount of $300 and immediately paid it Rocky's general journal entry to record this transaction will include a

1. A Debit to Telephone Expense for $300

2. B Credit to Accounts Payable for $300

3. C Debit to Cash for $300

4. D Credit to Telephone Expense for $300

5. E Debit to Accounts Payable for $300

A sales invoice:

1. A Is a type of use document

2. B Is used by sellers for recording purposes

3. C Is not needed by buyers

4. D Gives rise to an entry in the accounting process

5. E Is not necessary in accounting

The right side of a T-account is a(n):

1. A Debit

2. B Increase

3. C Credit

5. E Account balance

An account used to record the owner's investments in the business is called:

1. A Dividends

2. B Common Stock

5. E Liability

An asset created by prepayment of an expense is:

1. A Recorded as a debit to an unearned revenue account

2. B Recorded as a debit to a prepaid expense account

3. C Recorded as a credit to an unearned revenue account

4. D Recorded as a credit to a prepaid expense account

5. E Not recorded in the accounting records until the earnings process is complete

Which of the following statements is correct?

1. A The left side of a T-account is the credit side

2. B Debits decrease asset and expense accounts and increase liability, equity and revenue accounts

3. C The left side of a T-account is the debit side

4. D Credits increase asset and expense accounts and decrease liability, equity and revenue accounts

5. E In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction

A credit is used to record:

1. A An increase in an expense account

2. B An increase in an asset account

3. C An increase in an unearned revenue account

4. D An increase in a revenue account

5. E A decrease to retained earnings

Unearned revenues are:

1. A Revenues that have been earned and received in cash

2. B Revenues that have been earned but not yet collected in cash

3. C Liabilities created when a customer pays in advance for products or services before the revenue is earned

4. D Recorded as an asset in the accounting records

5. E Increases to retained earnings

A ledger is:

1. A A record containing increases and decreases in a specific asset, liability, equity, revenue or expense item

2. B A journal in which transactions are first recorded

3. C A collection of documents that describe transactions and events during the accounting process

4. D A list of all accounts with their debit balances at a point in time

5. E A list of all accounts a company uses and includes an identification number assigned to each account

A written promise to pay a definite sum of money on a specific future date is a(n):

2. B Prepaid expense

3. C Credit account

4. D Note payable

5. E Account receivable

An account balance is:

1. A The total of the credit side of the account

2. B The total of the debit side of the account

3. C The difference between the total debits and total credits for an account including the beginning balance

4. D Assets = liabilities + equity

5. E Always a credit

72 Free Test Bank for Financial Accounting

Fundamentals 3rd Edition Wild Multiple Choice

Questions - Page 2

A column in journals and ledger accounts used to cross reference journal and ledger entries is the:

1. A Account balance column

2. B Debit column

3. C Posting reference column

4. D Credit column

5. E Description column

The debt ratio is used:

1. A To measure the amount of equity relative to the expenses

2. B To reflect the risk associated with a company's debts

3. C Only by banks when a business applies for a loan

4. D To determine how much debt a firm should pay off

5. E To determine who a company owes

The process of transferring general journal information to the ledger is:

1. A Double-entry accounting

2. B Posting

3. C Balancing an account

4. D Journalizing

5. E Not required unless debits do not equal credits

The record in which transactions are first recorded is the:

1. A Account balance

3. C Journal

4. D Trial balance

Which of the following statements is false with regard to the debt ratio?

1. A It is of use to both internal and external users of accounting information

2. B A relatively high ratio is always desirable

3. C The dividing line for a high and low ratio varies from industry to industry

4. D Many factors such as the company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio

5. E The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt

A balance column ledger account is:

1. A An account entered on the balance sheet

2. B An account with debit and credit columns for posting entries and another column for showing the balance of the account after each entry is posted

3. C An alternate name for the retained earnings account

4. D An account used to record the transfers of assets from a business to its stockholders

5. E A simple form of account that is widely used in accounting to illustrate the debits and credits required in recording a transaction

Jones Hardware, Inc pays a cash dividend of $6,000, what is the necessary entry to record this transaction?

1. A Debit Cash, Credit Retained Earnings

2. B Debit Dividends, Credit Cash

3. C Debit Common Stock, Credit Cash

4. D Debit Cash, Credit Common Stock

5. E Debit Cash, Credit Dividend Income

Listed below are two pieces of information Where is the best

place to locate this information, in the journal or the ledger?

Details of a transaction which took place on October 3rd All of the sales activity which took place during the current month

1. A 1 Journal 2 Journal

2. B 1 Journal 2 Ledger

3. C 1 Ledger 2 Ledger

4. D 1 Ledger 2 Journal

5. E This information is only available on the financial statements

According to IFRSs, comparative information on financial

statements is:

1. A Not required

2. B Required for publicly traded companies only

3. C Required for the preceding period only

4. D Required for the last five years

5. E Not required, but considered a hallmark for companies of excellence

A $72,000 receipt of cash from a customer paying on their

account was recorded as a $72,000 debit to Accounts

Receivable Assuming this journal entry was posted, what

correcting entry (if any) is needed?

1. A Debit Cash and Credit Accounts Receivable for $72,000 each

2. B Debit Cash and Credit Accounts Receivable for $144,000 each

3. C Credit Cash and Debit Accounts Receivable for $72,000 each

4. D Credit Cash and Debit Accounts Receivable for $144,000 each

5. E No correcting entry is needed for this transaction

What is another name for the general journal?

1. A The book

2. B The ledger

3. C The book of original entry

4. D The record

5. E The account book

On April 30, Holden Company had an Accounts Receivable

balance of $18,000 During the month of May, total credits to

Accounts Receivable were $52,000 from customer payments The May 31 Accounts Receivable balance was $13,000 What was the amount of credit sales during May?

1. A $5,000

2. B $47,000

3. C $52,000

4. D $57,000

5. E $32,000

6. Normal balance = debit

A $15 credit to Sales was posted as a $150 credit By what

amount is Sales in error?

1. A $150 understated

2. B $135 overstated

3. C $150 overstated

4. D $15 understated

5. E $135 understated

Stride Rite has total assets of $425 million Its total liabilities are

$110 million Its equity is $315 million Calculate the debt ratio

4. D 25.9%

A company failed to post a $50 debit to the Office Supplies

account The effect of this error will be that:

1. A The Office Supplies account balance will be overstated

2. B The trial balance will not balance

3. C The error will overstate the debits listed in the journal

4. D The total debits in the trial balance will be larger than the total credits

5. E All of the above effects will be caused by the error

In which of the following situations would the trial balance not balance?