Accounting Practice Test

Which of the following accounts are increased with a debit? A) Cash, an Expense, Dividends. B) Salaries Payable, Deferred Revenue, an Expense. C) Accounts Payable, Revenue, Dividends. D) Accounts Payable, Revenue, Common Stock.

A) Cash, an Expense, Dividends.

An increase to a liability account is shown with a ______________. A decrease to a liability account is shown with a ______________. A) Credit; Debit B) Credit; Credit C) Debit; Credit D) Debit; Debit

A) Credit; Debit

Deferred (Unearned) revenues refer to: A) Customers paying cash in advance of the good or service to be provided. B) Revenue being recorded at the same time the cash is collected from the customer. C) Cash being collected from the customer after the revenue is recorded. D) Revenue being recorded prior to cash collection from the customer.

A) Customers paying cash in advance of the good or service to be provided.

Merry Maids receives cash on the same day it performs cleaning services. These transactions would be recorded as: A) Debit Cash, credit Service Revenue. B) Debit Accounts Receivable, credit Service Revenue. C) Debit Cash, credit Accounts Receivable. D) Debit Service Revenue, credit Cash.

A) Debit Cash, credit Service Revenue.

Which report details the activity in each account and keeps a running total? A) General Ledger B) Balance Sheet C) Income Statement D) General Journal

A) General Ledger

Purchasing office supplies on account will: A) Increase assets and increase liabilities. B) Increase assets and decrease liabilities. C) Not change assets. D) Increase assets and increase stockholders' equity.

A) Increase assets and increase liabilities.

Receiving cash from a customer who is paying off their account receivable: A) Increases one asset and decreases another asset. B) Increases an asset and increases revenue. C) Decreases a liability and increases an asset. D) Increases revenue and decreases an asset.

A) Increases one asset and decreases another asset

Given the following T-Account information, what is the balance in Accounts Payable? Accounts Payable 1/7 $425 1/21 $200 1/4 $960 A) $335 debit balance B) $335 credit balance C) $960 credit balance D) $625 debit balance

B) $335 credit balance

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? A) $34,000 decrease. B) $34,000 increase. C) $76,000 increase. D) $55,000 increase.

B) $34,000 increase.

What type of account is Prepaid Expense? A) Liability B) Asset C) Stockholders' Equity D) Expense

B) Asset

When a company issues common stock for cash, what is the effect on the accounting equation for the company? A) Assets increase and liabilities increase. B) Assets increase and stockholders' equity increases. C) Liabilities decrease and stockholders' equity increases. D) Assets decrease and liabilities decrease.

B) Assets increase and stockholders' equity increases.

A company pays $18,000 cash for insurance coverage the next year. The appropriate debit and credit are: A) Debit Prepaid Insurance $18,000, credit Insurance Expense $18,000. B) Debit Prepaid Insurance $18,000, credit Cash $18,000. C) Debit Insurance Expense $18,000, credit Prepaid Insurance $18,000. D) Debit Cash $18,000, credit Prepaid Insurance $18,000.

B) Debit Prepaid Insurance $18,000, credit Cash $18,000.

Which of the following is possible for a particular business transaction? A) Decrease assets; Increase stockholders' equity B) Decrease assets; Increase assets C) Increase assets; Decrease liabilities D) Decrease liabilities; Increase expenses

B) Decrease assets; Increase assets

Revenues have what effect on the accounting equation? A) Decrease assets. B) Increase stockholders' equity. C) Increase liabilities. D) No effect.

B) Increase stockholders' equity.

Which of the accounts are increased on the credit side? A) Expenses, dividends, and stockholders' equity. B) Liabilities, stockholders' equity, and revenues. C) Dividends, liabilities, and assets. D) Assets, dividends, and expenses.

B) Liabilities, stockholders' equity, and revenues.

When a company makes insurance payments in advance, this is an example of a(n): A) Deferred revenue. B) Prepaid expense. C) Accrued revenue. D) Accrued expense.

B) Prepaid expense.

Which of the following transactions would cause an increase in both the assets and liabilities of a company? A) Pay for inventory purchased 90 days ago. B) Purchase of a building by issuing a note payable. C) Paying for the current month's rent. D) Provide a service to a customer who uses credit.

B) Purchase of a building by issuing a note payable.

The total revenues of $6,700, total expenses of $3,900 and dividends of $900 were recorded in the closing entries. The net income for the month was: A) $3,700. B) $5,800. C) $2,800. D) $1,900.

C) $2,800.

A Service Company provides services to customers totaling $3,000, for which it billed the customers. How would the transaction be recorded? A) Debit Service Revenue $3,000, credit Accounts Receivable $3,000. B) Debit Cash $3,000, credit Service Revenue $3,000. C) Debit Accounts Receivable $3,000, credit Service Revenue $3,000. D) Debit Accounts Receivable $3,000, credit Cash $3,000.

C) Debit Accounts Receivable $3,000, credit Service Revenue $3,000.

A company received a $400 bill for advertising which ran in the current month. The company will pay the bill in 30 days. How will the transaction be recorded today? A) Debit Accounts Payable $400, credit Cash $400. B) Debit Advertising Expense $400, credit Cash $400. C) Debit Advertising Expense $400, credit Accounts Payable $400. D) Debit Accounts Payable $400, credit Advertising Expense $400.

C) Debit Advertising Expense $400, credit Accounts Payable $400.

Providing services to customers and receiving cash from customers will: A) Increase assets and increase liabilities. B) Decrease assets and increase liabilities. C) Increase assets and increase stockholders' equity. D) Decrease liabilities and increase stockholders' equity.

C) Increase assets and increase stockholders' equity.

The entry to close the revenue accounts includes: A) a debit to Retained Earnings and credits to the respective revenue accounts. B) a debit to Dividends and credits to the respective revenue accounts. C) debits to the respective revenue accounts and a credit to Retained Earnings. D) debits to the respective revenue accounts and a credit to Dividends.

C) debits to the respective revenue accounts and a credit to Retained Earnings.

Finding good reasons for doing things that we really know are wrong is an example of: A) realization. B) perceived opportunity. C) rationalization. D) perceived pressure

C) rationalization.

Dividends paid and net losses: A) increase net income. B) increase Retained Earnings. C) reduce Retained Earnings. D) reduce net income

C) reduce Retained Earnings.

A Real Estate company received $12,000 cash for 24 month's rent in advance. How should the Real Estate company record this transaction? A) Debit Prepaid Rent; credit Rent Expense. B) Debit Rent Expense; credit Cash. C) Debit Cash; credit Service Revenue. D) Debit Cash; credit Deferred Revenue.

D) Debit Cash; credit Deferred Revenue.

When a company pays $2,500 dividends to its stockholders, the transaction should be recorded as: A) Debit Retained Earnings; credit Dividends. B) Debit Cash; credit Dividends. C) Debit Dividends; credit Accounts Payable. D) Debit Dividends; credit Cash.

D) Debit Dividends; credit Cash.

Tyler Incorporated receives $150,000 from investors in exchange for shares of its common stock. Tyler Incorporated records this transaction with a: A) Debit to Investments Credit to Cash. B) Debit to Cash Credit to Service Revenue. C) Debit to Cash Credit to Retained Earnings. D) Debit to Cash Credit to Common Stock.

D) Debit to Cash Credit to Common Stock.

Assets normally carry a _______ balance and are shown in the ______________. A) Debit; Income statement B) Debit; Statement of stockholders' equity C) Credit; Balance sheet D) Debit; Balance sheet

D) Debit; Balance sheet

An increase to an asset account is shown with a ______________. A decrease to an asset account is shown with a ______________. A) Debit; Debit B) Credit; Credit C) Credit; Debit D) Debit; Credit

D) Debit; Credit

Expenses normally carry a _______ balance and are shown in the ______________. A) Credit; Balance sheet B) Debit; Balance sheet C) Debit; Statement of stockholders' equity D) Debit; Income statement

D) Debit; Income statement

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. In which month should the company record wages expense? A) January. B) November. C) Evenly over the three months. D) December.

D) December.

What type of account is Deferred (Unearned) Revenue? A) Asset B) Revenue C) Stockholders' Equity D) Liability

D) Liability

Revenues: A) reduce net income. B) are additions to dividends. C) reduce Retained Earnings. D) increase Retained Earnings

D) increase Retained Earnings

The audit opinion issued when the financial statements are fairly presented without exception is the: A) disclaimer of opinion. B) qualified opinion. C) adverse opinion. D) unqualified opinion.

D) unqualified opinion.