Bookkeeping Basics

Lou's total operating expenses for the previous month are ______. (Format your response like this: $x,xxx).

$2,110

Lou's net income on his income statement is _______. (Format your response like this: $x,xxx).

$3,390

If you were going to prepare the Balance Sheet for the previous month, what would you enter for the Accounts Receivable balance? (Format your response like this: $x,xxx).

$4,500

Instructions: Make sure you have completed the hands-on bookkeeping workbook portion of the course 1 project before starting this quiz. You will need your completed workbook to help you respond to many of the questions. Lou made _______ in landscaping income last month.

$5,000 $4,750 $4,500 **$5,500

In the first month of operations, Pepper Consulting's total debit entries to the cash account amounted to $900, and the total credit entries to the cash account amounted to $600. The cash account has a:

$900 debit balance **$300 debit balance $600 credit balance $300 credit balance

If Lou makes a $500 payment to the bank for his small business loan, what will be the new loan balance?

$​10,000 **$9,500 $​500 $​10,500

W​hich two entries would need to be recorded to log Lou receiving a $100 payment for a weeding job he completed for Ms. Rosa?

$​100 Debit in Lawncare Revenue **$​100 Debit in Cash $1​00 Credit in Cash **$​100 Credit in Lawncare Revenue

This ledger shows all transactions impacting the cash account this week. Calculate the balance.​ Debits 200 100 Credits 50 100

$​250 **$150 $3​00 $4​50

The total debits for the Trial Balance equal:

$​33,000 **$​16,500 $​8,500 $​12,700

Lou was paid $280 by Eagles Landing subdivision. How would you record this transaction?

**$​280 Debit to Cash. $​280 Debit to Lawncare Revenue. **$​280 Credit to Lawncare Revenue. $​280 Credit to Cash.

An owner has deposited several payments they've received from customers into the business's bank account. The owner would then enter this transaction in their accounting software as:

**A Bank Deposit An Invoice A Bank Feed A Vendor Check Bank Feed

A customer paid in advance for a service. They need to cancel the service. If the business owner wishes to apply that money towards the customer's next service, the owner would enter that transaction into their accounting software as:

**A Credit Memo A Refund An Invoice A Sales Receipt

A business owner performs a service and is paid when the job is performed. The owner would then enter this transaction into accounting software as:

**A Sales Receipt An Invoice A​ Bank Deposit A​ Credit Memo

Accounts payable would be an example of what kind of account?

**A liability account. An asset account.

If Lou's purchase increased liabilities by $600, what would also need to happen for the accounting equation to be in balance?

**Add $600 to assets Subtract $600 from assets Add $600 to equity

Short-term Investments would be an example of what kind of account?

**An asset account. A liability account.

P​rinting Pros had another big job to do in April and needed to hire additional help to make their deadline. The new employee received their first paycheck at the beginning of May. When should Printing Pros recognize the expense of paying their employee?

**April May

What the company owns or controls and expects to gain value from is defined as:

**A​n Asset A​ Liability Equity

Zach needs to determine what his company's financial position was on March 31st of last year. Which of the following would be the best report to look at?

**B​alance sheet S​tatement of retained earnings S​tatement of equity T​he general ledger

Which of the following best describes the Periodicity Assumption?

**Companies can assume that business activity can be broken up into smaller measurements of time. Companies can assume a value for intangible assets. Companies can assume that the business activity will operate indefinitely.

The general journal is used to record transactions in chronological order. Each transaction requires two entries, a credit and a _____.

**Debit

Caren Cosmos is the world's most popular soft rock folk singer. She sold t-shirts online last year and made $7,000. The money from these sales went directly into her personal banking account which she used for her personal needs. Which key accounting assumption did Caren ignore?

**E​ntity Assumption G​oing Concern Cssumption A​ccrual Basis Assumption P​eriodicity Assumption

This type of assumption/principle requires a business to disclose all information about the business that is important for a lender or investor to know in financial statements in the financial statement notes.

**Full Disclosure Principle Conservatism Assumption Reliability Assumption Economic Entity Assumption

True or False:​ Journal entries should not be used during year-end adjustments.

**F​alse T​rue

You purchased inventory from your vendor and paid cash. The accounts affected are the inventory account and the cash account. In your journal entry, which account would you debit?

**I​nventory account C​ash account

Cecilia Tubular sells 1980s themed enamel pins. She has a huge inventory she purchased in 1984 at $0.10 each. They are now worth $1 each. According to the Monetary Unit Assumption, you:

**Keep the value of the pins at $0.10 each. Update her financials to show the increased value of the pins to $1 each Split the difference and record the value at $0.45 each

What the company owes to others is defined as:

**L​iabilities E​quity A​ssets

When would it be acceptable to use Manual Journal entries to hide or disguise certain financial transactions?

**Never. When the owner asks you to. When you need to balance the assets against the liability and equity.

This journal entry could represent:

**Purchasing $70 worth of equipment with cash. Selling $70 worth of equipment for cash. Purchasing $70 worth of equipment on credit. Selling $70 worth of equipment on credit.​

Reorganizing journal entries and grouping them by account is known as:

**P​osting to the ledger B​alancing the journal F​ile maintenance

Which of the following financial statements provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investments?

**The Statement of Cash Flow The Statement of Equity The Income Statement The Balance Sheet

A form or statement that lists the titles and balances of all ledger accounts at a given date is known as:

**Trial balance S​tatement of retained earnings Income statement B​alance sheet

The digits of the account numbers assigned to general ledger accounts often have significance. For example, an account number beginning with a "1" might signify that the account is an asset account, a "6" might signify an operating expense, etc.

**True False

Which accounting assumption allows bookkeepers to break a company's financial life into smaller chunks of time?

**T​he Periodicity Assumption A​ccrual Basis Assumption E​ntity Assumption G​oing Concern Assumption

Debits are always represented on what side of a T-chart?

**T​he left. T​he right.

True or False: In order to complete a Statement of Equity, you will need the net profit from the Income Statement.

**T​rue F​alse

Lou pays $100 to advertise in his local mailer and puts the charge on his Visa credit card. Which two accounts are involved in this transaction?

**Visa, Advertising expense Visa, Advertising revenue Visa, cash Visa, Equipment

According to the Revenue Recognition Principle, when should a business recognize its revenue?

**When it is earned. Whenever the reporting period ends. When payment is received from a customer.

A Balance Sheet has four parts: a heading, assets, liabilities, and ______.

**equity gross profit t​otal owner/company name

Mike Anderson is the owner and operator of Anderson Consulting. At the end of 2019, the company's assets totaled $500,000 and its liabilities totaled $175,000. Assuming that over the 2020 fiscal year, assets increased by $120,000 and liabilities increased by $72,000, use the accounting equation to determine what Mike's Owner's equity will be as of December 31, 2020?

373,000

Mary Smith is the owner and operator of Smith Construction. At the end of the company's accounting period, December 31, 2020, Smith Construction has assets totaling $760,000 and liabilities totaling $240,000. Use the accounting equation to calculate what Mary's Owner Equity would be as of December 31, 2020

520,000

Maria Garcia owns a software consulting firm. At the beginning of 2019, her firm had assets of $800,000 and liabilities of $185,000. Assuming that assets decreased by $52,000 and liabilities increased by $24,000 during 2020, use the accounting equation to calculate equity at the end of 2020.

539,000

A schedule that contains all accounts needed to prepare financial statements is known as:

A Journal Entry An Income Statement **The General Ledger

A business owner performs a service but is not paid when the job is performed. Using their accounting software, the owner would enter the transaction as:

A Sales Receipt **An Invoice A Bank Deposit A Credit Memo

Becky provided a service to a customer, and they have yet to pay. Which type of journal entry would need to be made?

A Tax Adjustment A Missing Transaction A Deferral **An Accrual

Which of the following best defines a credit as it's used in double-entry accounting?

An increase in assets/expenses and a decrease in liabilities/owner's equity and revenue. **A decrease in assets/expenses and an increase in liabilities/owner's equity and revenue. An increase in liabilities/expenses and a decrease in assets/owner's equity and revenue. An increase in assets/owner's equity and income and a decrease in liabilities/expenses.

Which of the following best defines a debit as it's used in double-entry accounting?

An increase in assets/expenses and a decrease in liabilities/owner's equity and revenue. NOT - A decrease in assets/expenses and an increase in liabilities/owner's equity and revenue. An increase in assets/owner's equity and income and a decrease in liabilities/expenses. An increase in liabilities/expenses and a decrease in assets/owner's equity and revenue.

The accounting equation can be written as _______ = Liabilities + Equity.

Assets

Accounts receivable would be an example of what kind of account?

A​ liablity account. **A​n asset account.

The company pays off the credit card bill. This transaction impacts the accounts payable and the cash accounts. In your journal entry, which account do you credit?

A​ccounts payable **C​ash account

Which of these accounts would have a balance of $0 at the beginning of each new accounting period?

A​ccounts receivable **R​evenue L​ong-term loan payable C​ash

An owner brought in a piece of equipment for servicing and paid for the repair with a check. The owner would then enter the transaction into their accounting software as:

A​n invoice A​ Bank Feed **A Vendor Check A​ bank deposit

Who should manually enter general journal entries?

Bookkeeper Owner (who is not an accountant) **Accountant

A seasonal business like Lou's Landscaping can have decreased cash during off-season months. Which financial statement would show the cash inflows and outflows for a particular month?

Cash Flow Statement Income statement **Balance Sheet Statement of equity

A trial balance that is prepared after taking into account all the adjusting entries is known as:

Cash Flow Statement Unadjusted Trial Balance **Adjusted Trial Balance

An accounting method in which revenues are reported when they are earned and expenses are reported when they are incurred is called:

Cash-Basis Accounting **Accrual Accounting Hybrid Accounting

Your client Rosie Fern wants to add the cost of the trellises she built for her herbal gardening business but can't find a receipt or proof that she paid. Which assumption/principle restricts you from recording this information in financial activities?

Conservatism Assumption Economic Entity **The Reliability Assumption

To record the journal entry, we will ____ the advertising expense account and _____ the Visa account.

Credit, credit Debit, debit Credit, debit **D​ebit, credit

An owner invests $1000 in the company. This transaction impacted the checking account and the owner's equity account. In your journal entry, which account do you credit?

C​hecking account **O​wner's equity account

The double-entry system of bookkeeping normally results in which of the following balances in the ledger accounts?

Debit: Assets and revenue Credit: Liabilities, equity, and expenses Debit: revenue, capital, and liabilities Credit: Assets and expenses **Debit: Assets and expenses Credit: Liabilities, equity, and revenue Debit: Assets, expenses, and capital Credit: Liabilities and revenue

Pepper Consulting bought computers with credit from PYO Suppliers and entered the sale into QuickBooks. The transaction journal would show the following entry:

Debit: Computers Credit: Sales **Debit: Computers Credit: PYO Credit Payable D​ebit: Sales C​redit: computers Debit: PYO Credit Payable Credit: Computers

Sydney is entering a transaction in QuickBooks. What are the two steps of manual accounting that will happen simultaneously as she does this?

Entering an expense and entering revenue **Creating a journal entry and posting to the ledger Creating a journal entry and producing a profit and loss statement

Which of the following statements would best describe the Matching Principle?

Expenses should be recognized when they are paid, regardless of when revenue is generated. NOT - Expenses like manufacturing costs or depreciation should be recognized in the same period as the revenue it helped generate. The manufacturing cost, or cost of goods sold, is recognized once the manufacturing process is complete.

A client owns a small vinyl sign printing company called Printing Pros. They completed a print job for a customer on August 10, but the customer did not pay for the service until October 15. In which month should the revenue be recognized for this big print job?

E​nd of the year. O​ctober S​eptember **A​ugust

On the chart of accounts, which account would you find under liabilities?

E​quipment L​andscaping Income **V​ehicle loan P​aid-in capital

If Lou opened a line of credit at the tractor supply store and used it to purchase $600 in inventory, how would you categorize the $600 borrowed from the store?

E​quity **L​iability A​sset

It is permissible to use a combination of the Cash-Basis and Accrual methods of accounting as long as it is applied consistently and clearly and reflects the business's income and expenses.

False **True

True or False: An advantage of using the Accrual Method of accounting is that it provides a fuller picture of the state of the business.

False **True

True or False:​ Journal entries require a good understanding of debits and credits.

F​alse **T​rue

When a bookkeeper is using the US dollar as currency in accounting and is not considering changes in the value of that currency she is employing the:

Going Concern Assumption **Monetary Unit Assumption Collaboration Assumption

A company is considered a Going Concern when it:

Is providing proof of expenditures for financial statements.​ **Is stable, able to operate and able to meet its financial obligations. Is losing money and access to credit.

A listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger is known as a:

J​ournal Entry F​inancial Statement **C​hart of Accounts

The owner's stake in the company is defined as:

L​iabilities **E​quity A​ssets

After the Unadjusted Trial Balance is created, the process of going back and updating information is known as:

Making corrections **Making adjustments Making changes Making substitutions

What tasks would a bookkeeper do?

Manage accounts receivable/payable, recording financial transactions, and implement HR policies. **Handle bank feeds and reconciles bank accounts, managing accounts receivable/payable, and record financial transactions. Record financial transactions, create employee write-ups, and handle bank feeds and reconcile bank accounts

This assumption / principle is very subjective and should be used with caution outside of rounding to the nearest dollar when entering financial information.

Monetary Unit Assumption **Materiality Principle Conservatism Assumption

A way of bookkeeping that tracks which accounts increase and which decrease for a given transaction is known as:

M​ultiple-entry **D​ouble-entry S​ingle-entry

Which expense provided by Lou did you not include in the journal?

On July 7, Lou rented a piece of commercial equipment from Home Depot for $1,000. He paid for it using his credit card. July 24, Lou hired a subcontractor to help with a job. He paid the subcontractor with check #0002 for $650.00. **On July 17, Lou purchased a new bicycle for his son for $275. On July 4, Lou put an ad in the Penny Saver for his business. He paid $450 with check #0001.

A sales manager purchases office supplies with the company credit card. This transaction impacts the accounts payable and the office supplies accounts. In your journal entry, which account do you credit?

O​ffice supplies account **A​ccounts payable

The accounting cycle starts with the:

Preparation of a trial balance Preparation of ledger accounts **Analysis of business transactions Preparation of adjusting entries

What is the first step in the accounting cycle?

Preparing financial statements Making adjustments Posting transactions to the general ledger **Reviewing source documents and analyzing transactions

Francis enters a $100 check received from a customer into QuickBooks online. If she views the Transaction Journal, which account would show as being debited $100?

Revenue Expenses **Business bank account Accounts receivable

The accounting equation can be defined as:

Revenue - Expenses = Income​ Assets = Liability / Equity **Assets = Liability + Equity

After analysis, the business transaction is recorded in the journal in

R​andom order **Chronological order

To post a debit to the advertising expense ledger, we would record $100 on the ___ side.

R​ight **L​eft D​epends on the situation

To find the balance of the account types that increase with a debit (asset and expense accounts), bookkeepers will:

Subtract total debits from total credits (Credits - Debits) **Subtract total credits from total debits (Debits - Credits)

Which of the following lists general ledger account balances at the end of a reporting period, before any adjusting entries are made?

The Balance Sheet Statement of Equity **Unadjusted Trial Balance Adjusted Trial Balance

Which of the following financial statements provides a summary of a company's revenue and expenses over a period of time?

The Balance Sheet The Statement of Cash Flow The Statement of Equity **The Income Statement

The document that shows all of the account balances after adjustments have been made is known as:

The General Ledger **The Adjusted Trial Balance The Unadjusted Trial Balance The General Journal

Which of the following financial statements provides you with the owner's change in capital over time?

The Statement of Cash Flow The Balance Sheet The Income Statement **The Statement of Equity

Which of the following financial statements shows the balances of a company's assets, equity, and liability?

The Statement of Equity **The Balance Sheet The Income Statement The Statement of Cash Flow

What is the name of the form or statement that lists the profit or loss for a company during a specific period?

The balance sheet The trial balance **The income statement The general journal

A trial balance where total debits equal total credits indicates:

The company made a profit during the accounting period. **The ledger is in balance. One or more transactions have been incorrectly analyzed and recorded in the ledger accounts.

In this example, the journal entry shows a(n) _______ in the Equipment account and a(n) ______ in the Cash account.

The journal entry shows an increase in the Equipment account and a decrease in the Cash account. increase, increase decrease, increase decrease, decrease **increase, decrease

The Economic Entity principle states:

To be financially conservative when recording information that is unclear .​ Companies can only record financial transactions that can be verified. **Business and personal financial activities must be separate for business owners.

If a business is using the Consistency Principle they will:

Treat the business as a separate entity, so the activities of a business must be kept separate from any other financial activities of its business owners. Adopt a specific accounting method and will enter all similar items in the exact same way in the future. Ignore an accounting standard if the impact has such a small effect on financial statements that it would not be misleading.

True or False: According to the Periodicity Assumption, companies can only review their financial health at the end of their fiscal year?

True **False

True or False: Financial reports should be produced before any adjustments have been made.

True **False

True or False: The depreciation of a vehicle is not something that can be entered as an adjustment.

True **False

True or False: The ending cash balance on the Statement of Cash Flow should not equal the cash balance reported on the Balance Sheet.

True **False

T​rue or False: Your client was paid in cash for a service that they provided. They've asked you to leave it off their financial records. Since you are employed by the client, you should do what they ask.

True **False

True or False: The unadjusted trial balance should be used to create financial statements

True **False

Which of these would be considered an asset?

T​axes **A vehicle T​he owner's investment in the company.

Which of the following financial statements reports the sources and uses of cash by a business?

T​he Balance Sheet S​tatement of Equity **S​tatement of Cash Flow T​he Income Statement

True or False: Business owners should use the General Ledger to make business decisions.

T​rue **F​alse

True or False:​ Journal entries should not be used to enter depreciation.

T​rue **F​alse

When the bookkeeper or accountant has a choice between two acceptable alternatives, they should choose the one that will report less profit, less asset amount, or a greater liability amount. This is based upon which assumption/principle?

Vital Asset Assumption **Conservatism Assumption Full Disclosure Assumption

Lou purchased his truck for $32,000. He paid $2,000 cash and took out a $30,000, 5-year loan. S​elect the correct journal entry below.

We credit $32,000 to the asset account, Plant, Property & Equipment. We then credit $2,000 to cash (to decrease the balance) and credit $30,000 to loans payable (to increase the loan balance). Totaling both columns gives us $32,000 = $32,000. Plant, Property, & Equipment - Debit - 32,000 Cash - Credit - 2,000 Loan Payment - Credit 30,000

According to the Cash-Basis accounting method, when would a business recognize its expenses?

When the business actually receives the bill in the mail **When the expense is paid out When the expense is incurred

When creating a journal entry, the following are true

You can only include two accounts. **You record debits on the left. **The credit and debit totals must be equal. **You record credits on the right.

Rudiger has just recorded and posted his business transactions to the ledger. His next step in the accounting cycle is to _______. 1 point

prepare the income statement collect all receipts and invoices a​nalyze transactions **prepare an unadjusted trial balance

The preparation of financial statements and closing the books is the ______ step of the accounting cycle.

t​hird fourth second **last