Accounting Basics(Quick Test #1)
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1. The financial statement that reports the amount of a company’s assets is
the balance sheet
Income statement
Statement of cash flows
Answer: balance sheet
2. The financial statement that reports the company’s revenues and expenses is the
balance sheet
income statement
statement of cash flows
Answer: Income statement
3. The heading of the balance sheet will indicate which of the following?
a period of time
a moment in time
Answer: a moment in time
4. Under the accrual method of accounting, the interest expense that is reported on the
income statement is the amount of interest that was
incurred
paid
Answer: Incurred
5. A company’s superior management team and the company’s logo will be reported as assets
on its balance sheet.
True
False
Answer: False
6. The financial statement that reports information in a format that is similar to the
accounting equation is the
balance sheet
income statement
statement of cash flows
Answer: balance sheet
7. The financial statement that reports the amount of depreciation expense applicable to the
current accounting period is the
balance sheet
income statement
Answer: income statement
8. Depreciation of the equipment used in a business is recorded in order to
report the equipment’s current market value on the balance sheet
allocate the equipment’s cost to expense during the periods in which it is used
Answer: allocate the equipment’s cost to expense during the periods in which it is
used
9. Which of the following assets will not be depreciated?
buildings
equipment
land
vehicles
Answer: land
10. The amount of prepaid insurance that has not expired as of the end of an accounting period
should be reported as
an asset
an expense
a liability
Answer: an asset
11. Under which method of accounting are revenues reported on the income statement in the
period in which they are earned?
accrual basis or method
cash basis or method
Answer: accrual basis or method
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12. Under the accounting or bookkeeping system known as double entry, the number of general
ledger accounts that will be involved in each transaction is
one
two
two or more
Answer: two or more
13. The word which indicates the left side of a general ledger account is
Debit
credit
Answer: Debit
14. A sale is made with credit terms that allow the customer to pay in 30 days. Under the
accrual method of accounting the account to be debited at the time of the sale is
Accounts Receivable
Cash Sales
Answer: Accounts receivable
15. When the company receives the money from its customer that was billed in the prior
month, the company should credit
Accounts Receivable
Cash Sales
Answer: Accounts receivable
16. The account Rent Expense is almost always
debited
credited
Answer: Debited
17. When a company writes a check to pay its rent, the account Cash will be
debited
credited
Answer: Credited
18. The account Prepaid Insurance is expected to have this type of balance.
debit
credit
Answer: debit
19. When a company receives goods or services on credit, it will record the amount owed in
Accounts Payable as a
debit
credit
Answer: credit
20. Expenses will cause a company’s total amount of owner’s equity or stockholders’
equity to increase decrease
Answer: decrease
21. At the time that a company buys an asset for cash, the total amount of its owner’s
equity or stockholders’ equity will
increase
decrease
not change
Answer: Not change
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22. When a company uses the accrual method and bills a client for the services it had just
provided, the effect on its basic accounting equation will be
an increase in Assets only
an increase in Assets and an increase in Stockholders’ Equity
an increase is Stockholders’ Equity and a decrease in Liabilities
Answer: an increase in Assets and an increase in Stockholders’ Equity
23. The account Wages Payable will be included in which side of the accounting
equation? Left right
Answer: right
24. The account Unearned Revenues is which type of account?
asset
liability
stockholders’ equity
expense
Answer: liability
25. The accounts that are closed at the end of the accounting year are the
balance sheet accounts
income statement accounts
neither
Answer: income statement accounts
26. The listing which includes the titles of the general ledger accounts available for
recording transactions, but excludes the account balances, is the
chart of accounts
trial balance
Answer: chart of accounts
27. In accounting, the word expenses has the same meaning as the word
payments. True False
Answer: False
28. Under the accrual method of accounting, which of the following are
revenues?
Receiving $100,000 cash from issuing common stock
Receiving $100,000 cash from a bank loan
Providing $100,000 of services on credit (with the cash to be received later)
Answer: Providing $100,000 of services on credit (with the cash to be received later)
29. The amount reported as stockholders’ equity should be adjusted at the end of the year so that
it is equal to the corporation’s market value.
True False
Answer: False
30. Common stock and retained earnings are part of a corporation’s
income statement
liabilities
stockholders’ equity
Answer: stockholders’ equity
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