Accounting Quiz
Questions: 16 · 10 minutes
1. Which account normally remains open after the closing process at the end of an accounting period?
Service Revenue
Accounts Receivable
Dividends
Rent Expense
2. A business pays an amount it previously owed to a supplier. What is the effect on the accounting equation?
Assets increase and liabilities decrease by the same amount.
Assets decrease and expenses increase by the same amount.
Liabilities decrease and equity increases by the same amount.
Assets decrease and liabilities decrease by the same amount.
3. A company reports net sales of $150,000 and cost of goods sold of $90,000. What is its gross profit?
$40,000
$90,000
$60,000
$240,000
4. A company has current assets of $120,000 and current liabilities of $80,000. What is its current ratio?
0.67
40,000
2.00
1.50
5. What is the normal balance of a liability account?
Zero until the liability is paid
Debit
Either debit or credit, with no normal side
Credit
6. What is the primary accounting purpose of recording depreciation on a long-lived asset?
To set aside cash for the asset's eventual replacement
To allocate the asset's depreciable cost over periods that benefit from its use
To record every physical change in the asset's condition
To reduce the asset to its current market value each period
7. At period-end, a company estimates that some accounts receivable will be uncollectible. Under the allowance method, which adjusting entry records the estimate?
Debit Allowance for Doubtful Accounts; credit Accounts Receivable
Debit Accounts Receivable; credit Allowance for Doubtful Accounts
Debit Cash; credit Bad Debt Expense
Debit Bad Debt Expense; credit Allowance for Doubtful Accounts
8. A company has issued checks that are recorded in its books but have not yet cleared the bank. If there are no other reconciling items, how does the unadjusted bank statement balance compare with the book balance?
The bank statement balance is higher because the bank has not yet deducted the checks.
The balances are equal because the checks have been recorded by the company.
The bank statement balance is lower because the bank has already deducted the checks.
The comparison cannot be made until the checks are voided.
9. Which statement correctly expresses the basic accounting equation?
Revenue equals assets minus expenses.
Total assets plus total liabilities equals owners' equity.
Total assets equals total liabilities plus owners' equity.
Owners' equity equals total assets plus total liabilities.
10. Inventory purchase costs are rising, and the same number of units are available and sold under each method. Compared with LIFO, what will FIFO generally report for cost of goods sold?
A higher cost of goods sold because the newest costs are expensed first
The same cost of goods sold because cost flow assumptions do not affect it
A lower cost of goods sold because older, lower costs are expensed first
A cost of goods sold equal to ending inventory
11. A company purchases equipment with cash. On the statement of cash flows, where is this payment normally reported?
As an operating cash outflow
As an investing cash outflow
As a financing cash outflow
As a noncash operating activity
12. A business buys equipment for cash. What is the immediate effect on total assets?
Total assets increase because equipment is added.
Total assets decrease because cash is paid.
Total assets stay the same because one asset increases while another decreases.
Total assets stay the same because both assets and liabilities increase.
13. A consulting firm completes work on account but has not yet collected payment. Which entry records the revenue under accrual accounting?
Debit Cash; credit Service Revenue
Debit Accounts Receivable; credit Service Revenue
Debit Service Revenue; credit Accounts Receivable
Debit Unearned Revenue; credit Cash
14. A customer paid in advance, and the amount was initially recorded as unearned revenue. After the company provides the promised service, which entry recognizes the revenue?
Debit Unearned Revenue; credit Service Revenue
Debit Service Revenue; credit Unearned Revenue
Debit Cash; credit Unearned Revenue
Debit Accounts Receivable; credit Service Revenue
15. At month-end, part of a previously recorded prepaid insurance policy has expired. Which adjusting entry is appropriate?
Debit Insurance Expense; credit Prepaid Insurance
Debit Insurance Expense; credit Cash
Debit Cash; credit Prepaid Insurance
Debit Prepaid Insurance; credit Insurance Expense
16. Which error can occur while a trial balance still shows equal total debits and credits?
A transaction is omitted entirely from the accounting records.
A debit amount is posted to the credit side while the credit is posted correctly.
The debit side of an entry is recorded for a different amount than the credit side.
Only the debit side of a journal entry is posted.