Other names for the income statement are the earnings statement, statement of operations or a profit and loss statement.
A) True
B) False
2.
If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.
A) True
B) False
3.
A company had the following account balances at year-end:
If all of the accounts have normal balances, what are the totals for the trial balance?
A) $186,600
B) $104,800
C) $209,600
D) $45,200
E) $67,000
4.
What would be the account balance in the revenue ledger account after the following transactions?
A) $9,000
B) $15,900
C) $17,400
D) $14,400
E) $10,900
5.
What would be the appropriate entry for the following transaction?
Bill Co. performed $5,200 in consulting services on account
A) Credit to Cash, Debit to Accounts Receivable
B) Debit to Revenue, Credit to Cash
C) Debit to Accounts Receivable, Credit to Revenue
D) Debit to Accounts Receivable, Credit to Cash
E) Debit to Revenue, Debit to Cash
6.
Common Stock normally has a debit balance.
A) True
B) False
7.
The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits.
A) True
B) False
8.
A transaction that decreases an asset account and increases a liability account must also affect one or more other accounts.
A) True
B) False
9.
A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.
A) True
B) False
10.
These transactions were completed by the art gallery opened by Zed Bennett.
Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000 in exchange for common stock.
Purchased $70 of office supplies on credit.
Paid $1,200 cash for the receptionist's salary.
Sold a painting for an artist and collected a $4,500 cash commission on the sale.
Completed an art appraisal and billed the client $200.
What was the balance of the cash account after these transactions were posted?
A) $12,430
B) $12,230
C) $43,300
D) $61,430
E) $43,430
11.
Credits always increase account balances.
A) True
B) False
12.
Which of the following statements is correct?
A) When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense
B) Promises of future payment are called accounts payable
C) Increases and decreases in cash are always recorded in the retained earnings account
D) Accrued liabilities include accounts receivable
E) An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business
13.
Which of the following is the appropriate journal entry if a company performs a service and then bills the customer?
A) Debit to Cash, Debit to Revenue
B) Debit to Accounts Receivable, Credit to Revenue
C) Debit to Revenue, Credit to Accounts Receivable
D) Debit to Cash, Credit to Revenue
E) Debit to Accounts Receivable, Credit to Cash
14.
The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement) and Where (the organization's address).
A) True
B) False
15.
Preparation of a trial balance is the first step in the analyzing and recording process.
A) True
B) False
16.
What would be the account balance in the accounts receivable ledger account after the following transactions?
A) $10,900
B) $17,400
C) $14,400
D) $2,000
E) $4,500
17.
An asset created by prepayment of an expense is:
A) Recorded as a debit to an unearned revenue account
B) Recorded as a credit to a prepaid expense account
C) Recorded as a credit to an unearned revenue account
D) Recorded as a debit to a prepaid expense account
E) Not recorded in the accounting records until the earnings process is complete
18.
The debt ratio is calculated by dividing total assets by total liabilities.
A) True
B) False
19.
The record in which transactions are first recorded is the:
A) Journal
B) Account balance
C) Ledger
D) Trial balance
E) Cash account
20.
The general ledger of a business
A) Is a collection of all accounts used in a company's information system
B) A and B
C) A, B and D
D) Must be kept in a computer file
E) Is a set standard not affected by a company's size and diversity
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