Cengage Accounting Exam 1 Practice Test

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• If a company pays for insurance in advance, what is the adjusting entry at period end to recognize the used portion?
• At period end, salaries earned but not yet paid are 1,500. What adjusting entry is recorded?
• The Drawing account is an expense.
• What is the journal entry to record paying salaries of 5,000 for the period?
• The initials GAAP stand for:
• If ending cash balance is $12,500 and total cash receipts are $35,000 while cash payments total $28,000, what is the net increase in cash during the period?
• When a company borrows cash by signing a note payable, what is the effect on the accounting equation?
• In the indirect method of cash flows from operating activities, depreciation expense is treated as:
• What is Owner Capital, January 1, 2014 for Rocky’s Day Spa?
• In a T account, the left-hand side is the debit side.
• Which statement best describes cash receipts and unearned liabilities?
• A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.
• Which two transactions increase owner's equity?
• Unearned Revenues are classified as which type of account?
• The adjusted trial balance is prepared as part of which step in the accounting cycle?
• A contra revenue account reduces gross revenue. Which of the following is an example?
• Billing customers on account increases which two accounts?
• Under IFRS vs US GAAP, what is a major difference in the treatment of depreciation?
• Notes Payable is classified as which type of account, and what is its normal increase side?
• Which describes the effect of receiving cash from the owner as an additional investment?
• What is the purpose of the adjusted trial balance?
• During period-end closing, which accounts are closed to Retained Earnings?
• What is working capital and why is it important?
• Which expression correctly represents basic earnings per share (EPS)?
• Which statement about accruing interest on a note payable is true?
• For Fees Earned, what is the type of account and the increase side?
• Which statement is true about accounts with a debit balance?
• What is the Increase in Owner's Equity for the year on Rocky’s Day Spa?
• Which of the following is a business transaction?
• Accounts are records of increases and decreases in individual financial statement items.
• Which account is typically debited to recognize depreciation expense in an adjusting entry?
• Under the revenue recognition principle, revenue is recognized when performance is achieved and collection is reasonably assured. Which journal entry records services performed but not yet billed?
• Which equation represents the basic accounting equation that remains balanced after each transaction?
• The objectivity concept requires that
• Which owner's equity accounts follows the same debit and credit rules as liabilities?
• If a 2,400 annual prepaid insurance covers 12 months, what is the adjusting entry at month-end to recognize one month of insurance expense?
• If the usual adjusting entry for depreciation on equipment is omitted at year-end, which statement is true?
• What step immediately precedes closing entries in the accounting cycle?
• Which account would usually appear in the post-closing trial balance?
• Salaries Expense is classified as which type of account, and what is its normal increase side?
• Which of the following statements correctly defines the current ratio and quick ratio?
• Accrued expenses are ordinarily reported on the balance sheet as which?
• Explain the closing process at period-end and the purpose of closing entries?
• Which statement best describes the effect on net income when maintenance is expensed as incurred and capital expenditures are capitalized and depreciated?
• The unexpired insurance at the end of the fiscal period represents which of the following?
• Accrued revenues would appear on the balance sheet as which of the following?
• What is the concept of net realizable value (NRV) for accounts receivable?
• Which of the following accounts will usually appear in the post-closing trial balance?
• What is the difference between a prepaid expense and an accrued expense?
• What are Total Expenses on Rocky’s Day Spa Income Statement?
• What does the term double-entry accounting mean?
• How does a note receivable differ from accounts receivable?
• Define the purpose of internal controls and give one example relevant to cash receipts.
• Which statement describes liabilities?
• The difference between a classified balance sheet and one that is not classified is that the classified one has subheadings.
• Paid premium on a one-year insurance policy is classified as which of the following?
• Net Income is primarily reported on which financial statement?
• Which statement describes the effect of withdrawals on owner's equity?
• How is the income statement prepared from the adjusted trial balance?
• Depreciation expense is a non-cash charge. Which statement best describes its effect on net income and cash flow in the period recognized?
• At year-end, accrued interest expense is recorded as what?
• What are typical items included in the cash flow from operating activities under the indirect method?
• In what order are accounts listed in the chart of accounts?
• Given ending cash balance of $12,500, cash receipts of $35,000, and cash payments of $28,000, what is the beginning cash balance?
• Which financial statements are prepared from the adjusted trial balance?
• What is Net Income for the year on Rocky’s Day Spa Income Statement?
• Receiving cash from customers on accounts affects which two accounts?
• Which accounts typically have debit balances?
• Which items are included in the quick ratio numerator?
• If the adjusting entry to record expired insurance was omitted, which statement is true?
• What is the purpose of a bank reconciliation?
• Which statement best describes owner's equity in a sole proprietorship?
• What is the effect of a purchase return on inventory?
• Which of the following is NOT a section of the Statement of Cash Flows?
• Why might an inventory write-down to NRV be necessary, and what is its effect on financial statements?
• The T account got its name because it resembles the letter T.
• What is the purpose of a trial balance and what does it indicate when it is not balanced?
• What is the final step in the accounting cycle described here?
• Which of the following is a general-purpose financial statement?
• Equipment is classified as which type of account, and what is its normal increase side?
• Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
• What is the effect on the financial statements when salaries are accrued at year-end?
• Which of the following is not a business transaction?
• Which account would typically appear on the balance sheet but not on the income statement?
• Consuming goods and services in the process of generating revenues results in which of the following?
• In the usual chart of accounts numbering, which account is numbered 1?
• Which of the following are typical reconciling items in a bank reconciliation?
• Which of the following would NOT appear in the post-closing trial balance?
• How do you record a sale with a 2/10, net 30 discount?
• Using the gross profit method, if Net Sales are 500 and the gross margin is 40%, what is the estimated COGS?
• How is basic earnings per share (EPS) calculated on a per-share basis?
• All of the following are general-purpose financial statements except Cash budget.
• What is the first step in the accounting cycle?
• Which of the items below is a guideline for behaving ethically? I. Identify the consequences of a decision and its effect on others. II. Consider your obligations and responsibilities to those affected by the decision. III. Identify your decision based on personal standards of honesty and fairness.
• An account in its simplest form has three parts to it: a title, an increase side, and a decrease side.
• Which of the following is an owner's equity account?
• Under accrual basis accounting, when are revenues recognized?
• How is depreciation recorded for a fixed asset with a cost of 10,000, accumulated depreciation of 2,000, and 2,000 of annual depreciation?
• Under the allowance method, what is the entry to write off a specific uncollectible account?
• Which of the following increases when the owner contributes cash?
• Fees received but not yet earned is classified as which of the following?
• In the chart of accounts, balance sheet accounts are normally listed in which order?
• Unearned Revenues are recorded as which type of balance sheet account?
• What is the effect of issuing common stock for cash on the basic accounting equation?
• Rocky’s Day Spa income statement shows Fees Earned of 98,435. Which value matches Fees Earned?
• Define consignment and how it affects revenue recognition?
• The role of accounting is to provide many different users with financial information to make economic decisions.
• Incurring a utility expense with a bill to be paid later affects which accounts?
• Which statement is true about managerial accounting?
• General-purpose financial statements are designed to provide information primarily to which group?
• What is the purpose of the allowance method for doubtful accounts?
• What is depreciation?
• Which statement best describes the effect of debits and credits on asset and liability/equity accounts?
• The business entity concept means that
• Accounts Receivable is classified as which type of account, and what is its normal increase side?
• What is the post-closing trial balance and its purpose?
• What is the term for an entity organized under state or federal statutes with ownership divided into shares of stock?
• Paying the owner for personal use affects which accounts?
• In bank reconciliation, how are receipts in transit treated relative to the bank balance and the company's book balance?
• For accounting purposes, the business entity should be considered separate from its owners if the entity is
• How do you record a note payable with interest accrued at year-end?
• Which of the following is the best description of accounting's role in business?
• Which category is listed first in a chart of accounts?
• Provide an example of a journal entry for depreciation using straight-line method on a $50,000 asset with $5,000 residual value and 5-year life.
• How are maintenance expenditures treated for fixed assets in accounting compared with capital expenditures?
• Which statement is true about the collection of an accounts receivable in cash?
• The post-closing trial balance includes only permanent accounts.
• When an owner invests assets in the business, the capital account increases.
• Garrison, Capital is classified as which type of account, and what is its normal increase side, according to the ledger excerpt?
• Which item below is not a business entity? entrepreneurship
• Which statement accurately describes a perpetual inventory system?
• What information does the Income Statement provide?
• Which step in the accounting cycle is optional?
• The cash account will always be debited.
• What is the formula for Gross Profit and what is included in COGS?
• How do you record bad debt expense using the allowance method?
• Which action would improve working capital?
• Depreciation expense is a non-cash charge. Which statement best describes its effect on net income and cash flow in the period recognized?
• Which financial statements are affected by accrued interest at year-end?
• Which statement accurately describes the nature of a corporation?
• What is the difference between the matching principle and the revenue recognition principle?
• Proper ethical conduct implies that you only consider what's in your best interest.
• Under the cost principle, at what amount should land be recorded after a seller's counteroffer of $115,000 is accepted?
• Net income increases which account in retained earnings?
• In a balance sheet, if assets are $78,500 and liabilities are $37,600, what is owner's equity?
• Which statement about revenues is true?
• Net income will result when
• When cash is received before performance, which entry records the initial receipt for unearned revenue?
• Which statement is most accurate about determining account balances?
• Which statement about expenses is correct?
• If cash is received in a transaction, what is the typical journal entry?
• Accounts Payable is classified as which type of account, and what is its normal increase side?
• For the ledger entry Supplies, what is the type of account and the increase side?
• When is the adjusted trial balance prepared?
• What is the adjusting entry for expired insurance of 1,200 paid in advance?
• Accounting information users need reports about the economic activities and condition of businesses.
• Debiting the cash account will increase the cash balance.
• Generally accepted accounting principles require accrual-basis accounting.
• In most ledger systems, accounts are listed in alphabetical order.
• Which step is performed after adjusting entries are journalized and posted to the ledger?
• Which of the following pairs of accounts could not appear in the same adjusting entry?
• Which statement about the drawing account is correct?
• What is the effect of a stock dividend on the accounting equation and retained earnings?
• The chart of accounts should be the same for each business.
• Which two transactions decrease owner's equity?
• What is the primary purpose of a worksheet in the accounting cycle?
• Property tax owed to be paid beginning of next year is classified as which of the following?
• Withdrawals by the owner affect owner's equity how?
• Accounts payable are accounts that you expect will be paid to you.
• Which statement best differentiates property, plant, and equipment (PPE) from current assets?
• Withdrawals are typically reported on which financial statement?
• Which step occurs after the adjusted trial balance and before the financial statements?
• Paying creditors on account would result in which effect on the accounting equation?
• What happens to temporary accounts after closing entries?
• An adjusting entry to record expired insurance would involve which accounts?
• What step occurs immediately after transactions are posted to the ledger?
• Which account would most likely appear on an adjusted trial balance but probably would not appear on the trial balance?
• A basic business process involves assembling inputs such as materials and labor to produce outputs for customers.
• Which situation increases owner's equity?
• How are accrued revenues recorded and what adjusting entry is used?
• The statement 'There is really no benefit in preparing financial statements in any particular order' is:
• What is the adjusting entry for accrued salaries of $1,200?
• A corporation is a business that is legally separate and distinct from its owners.
• Garrison, Drawing account is classified as what type, and what is its increase side?
• A chart of accounts is a listing of accounts that make up the journal.
• The Drawing account is best described as which type of account?
• Which statement best describes the impact of depreciation on financial statements?
• Under the allowance method, when a specific uncollectible account is written off, what is the effect on net income?
• A debit balance occurs when?
• Which formula correctly computes Ending Inventory using the gross profit method?
• Fees earned but not yet received is classified as which of the following?
• What is a contra asset account and provide an example?
• In inventory valuation, which statement is true about FIFO and LIFO?
• Which step must be performed before adjusting entries are journalized and posted?
• What is the effect on the balance sheet and income statement when a long-term asset is purchased, and how does this change over time?