Question 1

As expenses increase, the equity of an entity will decrease.

Accepted Answer

A) True 
 B)False  True

Question 2

In accounting, the term "matching" refers to

Accepted Answer

A)  Relating debits to credits 
B)  Relating assets to liabilities 
C)  Relating accruals to deferrals 
D)  Relating expenses to the same period of time that revenues are recognized 
A)  Relating debits to credits 
B)  Relating assets to liabilities 
C)  Relating accruals to deferrals 
D)  Relating expenses to the same period of time that revenues are recognized D

Question 3

Adjusting entries are only needed if there is a mistake in the journal entries that is not caught before the end of each year.

Accepted Answer

A) True 
 B)False  False

Question 4

When an accountant uses T-accounts, the debit side is always the left side and the credit side is always the right side. Which of the following describes increases and decreases in assets and liabilities?

Accepted Answer

A)  Debits increase liabilities and credits increase assets. 
B)  Debits increase assets and debits decrease liabilities. 
C)  Debits increase assets and debits increase liabilities. 
D)  Credits increase assets and credits increase liabilities. 
A)  Debits increase liabilities and credits increase assets. 
B)  Debits increase assets and debits decrease liabilities. 
C)  Debits increase assets and debits increase liabilities. 
D)  Credits increase assets and credits increase liabilities.

Question 5

The process of recording transactions in a journal is referred to as making a trial balance.

Accepted Answer

A) True 
 B)False

Question 6

Eddie Howard's bookkeeper prepared a trial balance of the accounts at December 31, 2020 in order to prepare financial statements. Following is a summary of the trial balance. Based on the trial balance, how much was Eddie Howard's net income on the income statement and how much was Eddie Howard's Capital on the balance sheet? $\begin{array}{c}
\text { Eddie Howard } \
\text { TrialBalance } \
\text { December 31, 2020 }\
\\begin{array}{|l|r|r|}
\hline & {\text { Debit }} & {\text { Credit }} \
\hline \text { Total of asset accounts } & \$ 22,300 & \
\hline \text { Total of liability accounts } & & \$ 7,400 \
\hline \text { Eddie Howard, Capital } & & 6,200 \
\hline \text { Total of revenue accounts } & & 62,000 \
\hline \text { Total of expense accounts } & 53,300 & \
\hline & \$ 75,600 & \$ 75,600 \
\hline\end{array} 
\end{array}$

Accepted Answer

A)  Net income - $8,700; Capital - $14,900 
B)  Net income - $62,000; Capital - $68,200 
C)  Net income - $22,300; Capital - $22,300 
D)  Net income - $84,300; Capital - $6,200 
A)  Net income - $8,700; Capital - $14,900 
B)  Net income - $62,000; Capital - $68,200 
C)  Net income - $22,300; Capital - $22,300 
D)  Net income - $84,300; Capital - $6,200

Question 7

Regina's Dry Cleaning had a great year. It reported net income of $186,600 in 2018. Now Regina Arter needs to close the books and get ready to open on January 1. 
Required:
Using the Regina's 2018 Income Statement, prepare the entry needed to close the books as of December 31, 2018.
 $\begin{array}{c}
\text { Regina's Dry Cleaning}\
\text {  Income Statement }\
\text { For the year ended December 31, 2018}\
\begin{array}{lr}
\text { Dry cleaning revenue } && \$ 357,000 \
\text { Tailoring revenue } && 26,000 \
\text { Rug cleaning revenue } && 4,700 \
\quad \text { Total operating revenue } && 387,700\
\text { Expenses: }\
\text { Salaries and taxes } & \$ 159,000 \
\text { Payroll taxes } & 15,200 \
\text { Service location rent } & 14,000 \
\text { Chemicals and cleaning supplies } & 6,400 \
\text { Miscellaneous supplies } & 3,900 \
\text { Depreciation expense } & 2,750 &201,250\
\text {Operating Income}&&186,450\
\text {Interest revenue}&&150\
\text {Net Income}&&\$186,600
\end{array}
\end{array}$

Accepted Answer

Record closing the r

Question 8

When customers buy goods on credit and are allowed a certain period of time to pay for their purchases, companies need to consider that some customers may not pay their bills. When a company estimates that some purchases will go unpaid, the company should:

Accepted Answer

A)  Credit Bad debt expense and debit Allowance for uncollectible accounts 
B)  Debit Bad debt expense and a credit a contra-asset account called Allowance for uncollectible
Accounts 
C)  Debit Bad debt expense and credit Accounts receivable 
D)  Debit revenues and credit Costs of goods sold 
A)  Credit Bad debt expense and debit Allowance for uncollectible accounts 
B)  Debit Bad debt expense and a credit a contra-asset account called Allowance for uncollectible
Accounts 
C)  Debit Bad debt expense and credit Accounts receivable 
D)  Debit revenues and credit Costs of goods sold

Question 9

Veronica Lodge borrowed $15,000 from a bank on January 1, 2019 to finance her new business. She agrees to repay the bank on December 31, 2019, with $750 interest on the loan. In addition to increasing cash, what else should Veronica record on January 1, 2019?

Accepted Answer

A)  An increase in a liability of $15,000 
B)  An increase in a liability of $15,750 
C)  An increase in equity of $15,000 
D)  An increase in a liability of $15,750, and a decrease in equity of $750 
A)  An increase in a liability of $15,000 
B)  An increase in a liability of $15,750 
C)  An increase in equity of $15,000 
D)  An increase in a liability of $15,750, and a decrease in equity of $750

Question 10

When assets are used by a company, they reduce the owner's equity.

Accepted Answer

A) True 
 B)False

Question 11

The purpose of preparing an entry to close the books is so that a company can start over with zero revenues and zero expenses at the beginning of a new year.

Accepted Answer

A) True 
 B)False

Question 12

The two components of a journal entry are the date and the amount.

Accepted Answer

A) True 
 B)False

Question 13

A balance sheet is used to report the year-end balances of which accounts?

Accepted Answer

A)  Revenues and expenses and owner's equity 
B)  Net income and owner's equity 
C)  Assets, liabilities, and capital accounts 
D)  Assets, liabilities, and net income 
A)  Revenues and expenses and owner's equity 
B)  Net income and owner's equity 
C)  Assets, liabilities, and capital accounts 
D)  Assets, liabilities, and net income

Question 14

Tony's Tool Shed specializes in selling small farm tractors. Tony's starts the year with an inventory of $140,000. During the year, the manufacturer delivered $220,000 more inventory. At year-end, Tony's counts his inventory and finds that he has tractors costing a total of $100,000 on hand. During the year, Tony's sales totaled $300,000. What was his gross profit on the sales for the year?

Accepted Answer

A)  $54,000 
B)  $40,000 
C)  $74,000 
D)  $82,000 
A)  $54,000 
B)  $40,000 
C)  $74,000 
D)  $82,000

Question 15

Companies typically prepare three separate financial statements-a balance sheet, an operating statement, and a statement of change in owner's equity.

Accepted Answer

A) True 
 B)False

Question 16

Most nonprofit entities now refer to their balance sheets as the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 17

Following is a trial balance for Ricardo Sanchez's Auto Repair as of January 31, 2019. 
   Required: 
a. Prepare an income statement.
b.Prepare a statement of changes in owner's equity for the month ended January 31, 2019.
c. Prepare balance sheet as of January 31, 2019.
d. Prepare the entry to close the books, as if Ricardo's financial year end is January 31.

Accepted Answer

None

Question 18

The first step toward preparing financial statements-after recording journal entries-is to prepare a trial balance.

Accepted Answer

A) True 
 B)False

Question 19

What would be the effect of making closing entries before making adjusting entries?

Accepted Answer

A)  Revenues and expenses would be higher than they should be. 
B)  Net income would still be correct. 
C)  Capital assets would be reported as assets. 
D)  Net income would not be recorded on the accrual basis. . 
A)  Revenues and expenses would be higher than they should be. 
B)  Net income would still be correct. 
C)  Capital assets would be reported as assets. 
D)  Net income would not be recorded on the accrual basis. .

Question 20

If a transaction causes an asset to increase, another asset cannot simultaneously decrease.

Accepted Answer

A) True 
 B)False

As expenses increase, the equity of an entity will decrease.

In accounting, the term "matching" refers to

Adjusting entries are only needed if there is a mistake in the journal entries that is not caught before the end of each year.

When an accountant uses T-accounts, the debit side is always the left side and the credit side is always the right side. Which of the following describes increases and decreases in assets and liabilities?

The process of recording transactions in a journal is referred to as making a trial balance.

When customers buy goods on credit and are allowed a certain period of time to pay for their purchases, companies need to consider that some customers may not pay their bills. When a company estimates that some purchases will go unpaid, the company should:

Veronica Lodge borrowed $15,000 from a bank on January 1, 2019 to finance her new business. She agrees to repay the bank on December 31, 2019, with $750 interest on the loan. In addition to increasing cash, what else should Veronica record on January 1, 2019?

When assets are used by a company, they reduce the owner's equity.

The purpose of preparing an entry to close the books is so that a company can start over with zero revenues and zero expenses at the beginning of a new year.

The two components of a journal entry are the date and the amount.

A balance sheet is used to report the year-end balances of which accounts?

Companies typically prepare three separate financial statements-a balance sheet, an operating statement, and a statement of change in owner's equity.

Most nonprofit entities now refer to their balance sheets as the statement of financial position.

The first step toward preparing financial statements-after recording journal entries-is to prepare a trial balance.

What would be the effect of making closing entries before making adjusting entries?

If a transaction causes an asset to increase, another asset cannot simultaneously decrease.

Governmental and Nonprofit Accounting Environment and Characteristics

The Use of Funds in Governmental Accounting

Budgetary Considerations in Governmental Accounting

An Introduction to General and Special Revenue Funds

General and Special Revenue Funds Continued

Capital Projects Funds, Debt Service Funds, and Permanent Funds

Proprietary Type Fundsenterprise and Internal Service Funds

Fiduciary Funds

Reporting Principles and Preparation of Fund Financial Statements

Government-Wide Financial Statements

Analysis of Financial Statements and Financial Condition

Federal Government Accounting and Reporting

Accounting for Nonprofit Organizations

Accounting for Health Care Organizations

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Exam 15: Fundamentals of Accounting

As expenses increase, the equity of an entity will decrease.

In accounting, the term "matching" refers to

Adjusting entries are only needed if there is a mistake in the journal entries that is not caught before the end of each year.

When an accountant uses T-accounts, the debit side is always the left side and the credit side is always the right side. Which of the following describes increases and decreases in assets and liabilities?

The process of recording transactions in a journal is referred to as making a trial balance.

When customers buy goods on credit and are allowed a certain period of time to pay for their purchases, companies need to consider that some customers may not pay their bills. When a company estimates that some purchases will go unpaid, the company should:

Veronica Lodge borrowed $15,000 from a bank on January 1, 2019 to finance her new business. She agrees to repay the bank on December 31, 2019, with $750 interest on the loan. In addition to increasing cash, what else should Veronica record on January 1, 2019?

When assets are used by a company, they reduce the owner's equity.

The purpose of preparing an entry to close the books is so that a company can start over with zero revenues and zero expenses at the beginning of a new year.

The two components of a journal entry are the date and the amount.

A balance sheet is used to report the year-end balances of which accounts?

Companies typically prepare three separate financial statements-a balance sheet, an operating statement, and a statement of change in owner's equity.

Most nonprofit entities now refer to their balance sheets as the statement of financial position.

The first step toward preparing financial statements-after recording journal entries-is to prepare a trial balance.

What would be the effect of making closing entries before making adjusting entries?

If a transaction causes an asset to increase, another asset cannot simultaneously decrease.

Governmental and Nonprofit Accounting Environment and Characteristics

The Use of Funds in Governmental Accounting

Budgetary Considerations in Governmental Accounting

An Introduction to General and Special Revenue Funds

General and Special Revenue Funds Continued

Capital Projects Funds, Debt Service Funds, and Permanent Funds

Proprietary Type Fundsenterprise and Internal Service Funds

Fiduciary Funds

Reporting Principles and Preparation of Fund Financial Statements

Government-Wide Financial Statements

Analysis of Financial Statements and Financial Condition

Federal Government Accounting and Reporting

Accounting for Nonprofit Organizations

Accounting for Health Care Organizations

Filters