93 test bank for financial accounting fundamentals 3rd edition

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93 Test Bank for Financial Accounting Fundamentals 3rd Edition

Free Text Questions

The _ is a record containing all

accounts (with balances) used by a company.

Answer Given

General ledger (or ledger)

_ identify and describe transactions and

events and provide objective evidence and amounts for recording.

Answer Given

Source documents

Unearned revenue is classified as _ that is

satisfied by delivering products or services in the future.

Answer Given

A Liability

_ requires that the impact of

each transaction be recorded in at least two accounts It also means that total amounts debited must equal total amounts credited for each transaction.

The difference between total debits and total credits for an

account, including any beginning balance is the

.

Answer Given

Account balance

A _ gives a complete record of

each transaction in one place and shows debits and

credits for each transaction.

Assets; liabilities; equity

_ is the process of transferring journal entry

information to the ledger.

Answer Given

Posting

FastForward purchased $25,000 of equipment for cash The

Equipment asset account is _ for $25,000 and the cash account is _ for $25,000.

An account format that is similar to a T-account in that it has

columns for debits and credits, but that is different in that

it has columns for transaction date, explanation and the account balance is the

_.

Answer Given

Balance column account

Stride Rite had total liabilities of $130 million and total assets of

$375 million Its debt ratio was _.

A _ is a list of all the accounts used by a

company and their identification codes.

Answer Given

Chart of accounts

The second step in the analyzing and recording process is to

record the transactions and events in the

_ is a promise of payment from customers

to sellers.

Answer Given

Accounts receivable

A _ is a record containing all accounts for a

company along with their balances.

Multiple Choice Questions - Page 1

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

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

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

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

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

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

3 C Common stock account

4 D An expense account

5 E A liability account

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

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

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

Source documents include all of the following except:

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

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

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 list of all accounts used by a company and the identification

number assigned to each account is called a:

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

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

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

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

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

A written promise to pay a definite sum of money on a specific

future date is a(n):

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

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

1 A Debit

2 B Increase

3 C Credit

4 D Decrease

5 E Account balance

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 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

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

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

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

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

A collection of all accounts (with account balances) used by a

5 E Ledger

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

A simple account form widely used in accounting to illustrate

how debits and credits work is called a:

1 A Dividend account

2 B Common stock account

3 C Drawing account

4 D T-account

5 E Balance column sheet

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

An account used to record the owner's investments in the

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

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

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

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

72 Free Test Bank for Financial Accounting Fundamentals

3rd Edition Wild Multiple Choice Questions - Page 2

Which of the following formulas can be used to calculate the

debt ratio?

1 A Total Equity/Total Liabilities

2 B Total Liabilities/Total Equity

3 C Total Liabilities/Total Assets

4 D Total Assets/Total Liabilities

5 E Total Equity/Total Assets

If the Debit and Credit column totals of a trial balance are equal,

then:

1 A All transactions have been recorded correctly

2 B All entries from the journal have been posted to the ledger correctly

3 C All ledger account balances are correct

4 D The total debit entries and total credit entries are equal

5 E The balance sheet would be correct

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 credit purchase of a delivery truck for $4,700 was posted to

Delivery Trucks as a $4,700 debit and to Accounts Payable

as a $4,700 debit What effect would this error have on the trial balance?

1 A The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700

2 B The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700

3 C The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400

4 D The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400

5 E The total of the Debit column of the trial balance will equal the total of the Credit column

Which of the following statements is true?

1 A If the trial balance is in balance, it proves that no errors have been made in recording and posting transactions

2 B The trial balance is a book of original entry

3 C Another name for trial balance is chart of accounts

4 D The trial balance is a list of all accounts from the ledger with their balances at a point

in time

5 E The trial balance is another name for the balance sheet as long as debits balance with credits

Of the following errors, which one on its own will cause the trial

balance to be out of balance?

1 A A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense

2 B A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable

3 C A $75 cash receipt from a customer in payment of his account posted as a $75 debit

to Cash and a $75 credit to Cash

4 D A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and

a $50 credit to Cash

5 E An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash