Online Financial Accounting Quiz
Questions: 16 · 10 minutes
1. Which financial statement reports assets, liabilities, and equity at a specific date?
Balance sheet
Statement of cash flows
Statement of retained earnings
Income statement
2. When preparing a bank reconciliation, how should outstanding checks generally be treated?
Subtract them from the company's book balance
Add them to the bank statement balance
Subtract them from the bank statement balance
Add them to the company's book balance
3. A company begins the year with retained earnings of $40,000, reports net income of $18,000, and declares dividends of $5,000. What is ending retained earnings?
$23,000
$53,000
$45,000
$63,000
4. A business received $6,000 in advance and credited Unearned Revenue. By period-end, it has earned $2,000. Which adjusting entry should it record?
Debit Unearned Revenue $2,000 and credit Revenue $2,000
Debit Revenue $2,000 and credit Unearned Revenue $2,000
Debit Unearned Revenue $6,000 and credit Revenue $6,000
Debit Cash $2,000 and credit Revenue $2,000
5. A customer pays a $2,500 account receivable in full. Ignoring cash-flow classification, how does this collection affect total assets?
Total assets increase by $2,500
Total assets do not change because cash increases while receivables decrease
Total assets decrease by $2,500
Total assets increase only if the customer pays before the due date
6. A trial balance has equal debit and credit totals. Which error could still remain undetected?
A transaction was omitted entirely from the accounting records
A debit entry was recorded without its corresponding credit
A $900 debit was posted as $90 while the credit remained $900
A credit balance was accidentally listed in the debit column
7. Which statement expresses the accounting equation that forms the foundation of the balance sheet?
Revenue equals expenses plus distributions to owners
Liabilities equal assets plus owners' equity
Assets equal liabilities plus owners' equity
Cash equals revenue minus liabilities
8. A retailer purchases $8,000 of inventory on account. What is the immediate effect on the accounting equation?
Assets increase by $8,000 and liabilities increase by $8,000
Assets increase by $8,000 and equity increases by $8,000
One asset increases while another asset decreases by $8,000
Liabilities increase by $8,000 and equity decreases by $8,000
9. A company paid $12,000 on October 1 for 12 months of insurance and initially recorded the payment as Prepaid Insurance. What adjustment is needed on December 31?
Debit Prepaid Insurance $12,000 and credit Cash $12,000
Debit Insurance Expense $12,000 and credit Prepaid Insurance $12,000
Debit Insurance Expense $3,000 and credit Prepaid Insurance $3,000
Debit Prepaid Insurance $3,000 and credit Insurance Expense $3,000
10. What is the primary financial accounting purpose of recording depreciation on equipment?
To set aside cash for replacing the equipment
To restate the equipment at its current market price each period
To allocate the equipment's depreciable cost over periods benefiting from its use
To recognize the entire cost only when the equipment is sold
11. A company reports net sales of $180,000 and cost of goods sold of $108,000. What is its gross profit?
$288,000
$72,000
$108,000
$180,000
12. Which account is normally closed to a temporary summary account or directly to retained earnings at the end of an accounting period?
Accounts Receivable
Accumulated Depreciation
Common Stock
Service Revenue
13. Under the allowance method, what is the effect of writing off a specific customer's uncollectible account?
Bad Debt Expense increases and net receivables decrease
Sales Revenue decreases and cash decreases
Accounts Receivable increases and the allowance decreases
Accounts Receivable and the allowance both decrease, leaving net receivables unchanged
14. A company pays cash to purchase production equipment. Where is this payment normally reported on the statement of cash flows?
As an operating cash outflow
As a noncash investing activity
As a financing cash outflow
As an investing cash outflow
15. A business has current assets of $150,000 and current liabilities of $100,000. What is its current ratio?
0.50
1.50
0.67
2.50
16. A consulting firm completes $4,000 of work in December but will invoice the client in January. Which December adjusting entry is appropriate?
Debit Cash and credit Service Revenue
Debit Unearned Revenue and credit Cash
Debit Service Revenue and credit Accounts Receivable
Debit Accounts Receivable and credit Service Revenue