Accounting Final Exam Review Questions & Answers

The right side of the T account is the _______.

Credit side

A transaction recorded in a journal is not considered a permanent record.

False. A transaction recorded in a journal is considered a permanent record.

Accounts payable accounts are increased with a debit.

False. Accounts payable accounts are increased with a credit because they are liabilities.

Increases in drawing accounts are recorded as credits.

False. Increases in drawing accounts are recorded as debits.

Increases in revenue accounts are recorded as debits because they increase the owner's capital accounts.

False. Increases in revenue accounts are recorded as credits.

Ownership of a check cannot be transferred.

False. It can be transferred.

A business has total cash of $30,000.00. Then the business pays $1,000.00 on account, buys insurance coverage of $750.00, buys supplies for $1,200, and pays $300.00 more on account. The balance of the cash account is now _______.

$26,750

If an error is recorded in a journal entry, _______.

-Cancel the error by drawing a neat line through the error -Correct the entry by writing the correct item above the canceled error -Do not erase the incorrect item

Accounting Cycle

1.) Analyze transactions 2.) Journalize 3.) Post 4.) Prepare work sheet 5.) Prepare financial statements 6.) Adjust and close entries 7.) Post adjusted and closed entries 8.) Post-Closing Trial Balance

A new account added between accounts 530 and 540 will be assigned the number ____.

535

Information needed to prepare a balance sheet assets section is obtained from a work sheet's Account Title column and _____.

Balance Sheet Debit column

The procedure of arranging accounts in a general ledger, assigning account numbers, and keeping current records is posting.

False. It is file maintenance.

The percentage relationship between one financial statement item and the total that includes that item is _____.

A component percentage

The day of the month is written on each journal page only for the first entry.

False. It is written for every entry.

Reporting changes in financial information for a specific period of time in the form of financial statements is an application of the accounting concept ______.

Accounting Period Cycle

Which account concept applies when financial statements are prepared from information on the work sheet?

Adequate Disclosure

A signature or stamp on the back of a check transferring ownership is _____.

An endorsement

When a business pays cash for supplies, _______.

Assets increase and assets decrease

The account used to summarize the owner's equity in a business is _______.

Capital

The asset most commonly withdrawn by business owners is _______.

Cash

When cash is paid for utilities, the amount is recorded in the _______.

Cash Credit column and General Debit column

When cash is received on account, the amount is recorded in the _______.

Cash Debit column and General Credit column

At the end of a month, if the amount of cash is the same as the balance shown on the next check stub, ________.

Cash is proved

A business form ordering a bank to pay cash from a bank account is a _______.

Check

Source document ordering bank to pay cash from a bank account.

Check

Following the same accounting procedures in the same way in each accounting period is an application of the accounting concept _______.

Consistent Reporting

The journal entry to close the expense accounts is _____.

Debit Income Summary for the total expenses; credit each expense account

The journal entry to adjust Supplies is _____.

Debit Supplies Expense; credit Supplies

The recording of debit and credit parts of a transaction is _______.

Double-Entry Accounting

Many businesses choose a one-year fiscal period that ends during a period of high business activity.

False. Many businesses choose a one-year fiscal period that ends during a period of low business activity.

A source document is prepared for adjusting entries.

False

All companies should have a total expenses component percentage that is not more than 80.0 percent.

False

Amounts from a work sheet's Trial Balance columns are used in preparing the revenue section of an income statement.

False

Information needed to prepare the assets section of the balance sheet is obtained from the work sheet's Account Title column and the Balance Sheet Credit column.

False

Net income on a work sheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total.

False. Net income on a work sheet is calculated by subtracting the Income Statement Debit column total from the Income Statement Credit column total.

Separate amounts in general amount columns are not posted individually.

False. Separate amounts in general amount columns are posted individually.

Examples of source documents include: checks, sales invoices, memorandums, and letters.

False. Source documents include: check, invoice, sales invoice, receipt, memorandum

The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income.

False. The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus net income (or minus net loss) minus drawing account balance.

The petty cash fund is a liability with a normal debit balance.

False. The petty cash fund is an asset.

The posting reference should always be recorded in the journal's "Post Ref." column before accounts are recorded in the ledger.

False. The posting reference should always be recorded in the journal's "Post Ref." column after accounts are recorded in the ledger.

The date on a monthly income statement prepared on July 31 is written as _______.

For Month Ended July 31, 2015

If the Trial Balance columns are not equal and the difference can be divided evenly by 9, the error most likely is ___.

In transposed numbers or a "slide"

Information needed for closing entries is found in the _____.

Income Statement and Balance Sheet columns of the work sheet.

When a business receives revenue, Sales is _______.

Increased by a credit

When cash is paid for rent, Rent Expense is _______.

Increased by a debit

The last step in the accounting cycle is _____.

Post-Closing Trial Balance

Separate amounts in the General Debit and General Credit amount columns of a journal are _______.

Posted individually

Source document that describes goods or services sold, quantity, and price.

Invoice

The values of all things owned (assets) are on the accounting equation's _____.

Left side (debit side)

Recording revenue from business activities and expenses associated with earning that revenue in the same accounting period is an application of the accounting concept _____.

Matching Expenses with Revenue

Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?

Matching Expenses with Revenue

Source document on which a brief message is written describing a transaction.

Memorandum

The source document for journalizing a bank service charge is a ______.

Memorandum

Separate amounts in the Cash Debit column of a journal are _____.

Not posted

Separate amounts in the Sales Credit column of a journal are ____.

Not posted individually

Preparing source documents for each transaction is an application of the accounting concept _______.

Objective Evidence

When a business buys an asset on one date and agrees to pay on a later date, the transaction is _______.

On account

When cash is paid on account, _______.

One asset and one liability are changed.

The amount remaining after the value of all liabilities is subtracted from the value of all assets is ________.

Owner's Equity

An income statement reports a business's financial _____.

Progress over a specific period of time

Source document giving written acknowledgement for cash received.

Receipt

Source document used to record a sale on account.

Sales Invoice

When supplies are bought on account, the account debited is ________.

Supplies

An account number in the journal's "Post. Ref." column shows ______.

The account to which an amount is posted

The first step in the posting procedure is writing _______.

The entry date in the "Date" column of the account

When the revenue is greater than the total expenses, ______.

The income summary account has a credit balance

The last step in the posting procedure is writing _______.

The post reference number in the "Post. Ref." column of the journal

Check marks are placed in parentheses below the General Debit and Credit column totals to show that ______.

The totals are not posted

When preparing a balance sheet, the amount of owner's capital is obtained from _____.

The work sheet's Balance Sheet Credit column

The formula for calculating the total expenses component percentage is ___.

Total expenses divided by total sales equals total expenses component percentage

A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.

True

A balance sheet reports information about the elements of the accounting equation.

True

A bank requires that the signature of the person authorized to sign checks be on the signature card.

True

A check mark in parentheses below a General Debit column total indicates that the total is not posted.

True

A journal amount column headed with an account title is a special amount column.

True

A journal page is proved by verifying that the total debits equals the total credits.

True

A ledger that contains all accounts needed to prepare financial statements is a general ledger.

True

Adjustments are first analyzed and planned on a work sheet before the adjusting entries are journalized.

True

All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts.

True

An accounting device used to analyze transactions is a T account.

True

Errors in general ledger accounts should never be erased.

True

Every adjustment has debit and credit parts.

True

For a service business, the revenue reported on an income statement includes components for total expenses and net income.

True

Increases in expense accounts are recorded as debits because they decrease the owner's capital accounts.

True

Posting is transferring information from a journal entry to a ledger account.

True

The Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period.

True

The capital account is an owner's equity account.

True

The column in which an account balance is recorded on a trial balance shows whether the account has a debit or credit balance.

True

The position of the total asset line is determined after the equities section is prepared.

True

The total of the General Credit column is not posted.

True

When a bank statement is received, the depositor should verify its accuracy immediately.

True

When cash is paid for supplies, the supplies account is increased by a debit.

True

When financial records for a business and for its owner's personal belongings are not mixed, this is an application of the Business Entity accounting concept.

True

When writing a check, the first step is to prepare the check stub.

True

With the exception of the totals lines, the "Post. Ref." column is completely filled in with either an account number or a check mark.

True

If the previous account balance and the current entry posted to an account are both debits, the new account balance is a debit.

True.

After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date balance, which is the _____.

Value of supplies used during the fiscal period

Information needed for journalizing the adjustment entries is obtained from the ______.

Work sheet's adjustment columns

The sections of an income statement are _____.

heading, revenue, expenses, and net income or net loss