Question 1

Which of the following correctly represents the fundamental accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Question 2

Which financial statement reports expenses in decreasing order of their amounts, with the largest expense listed first?

Accepted Answer

Income statement

Question 3

A business pays rent in advance. Which account title is used to record this transaction?

Accepted Answer

Prepaid Rent

Question 4

Accounts Payable is classified as which type of account and normally has what balance?

Accepted Answer

Liability; credit

Question 5

What is the expected value of a depreciable asset at the end of its useful life called?

Accepted Answer

Residual value

Question 6

Adjusting entries are normally recorded:

Accepted Answer

At the end of the accounting period.

Question 7

Which sequence represents the normal flow of accounting data?

Accepted Answer

Source document -\u003e Journal -\u003e Ledger

Question 8

Which accounting principle helps to match expenses with revenues?

Accepted Answer

Expenses and revenues

Question 9

If a company uses accrual-basis accounting, when is revenue generally recorded?

Accepted Answer

When the revenue is earned, even if cash will be received later.

Question 10

At year-end, $900 of prepaid rent has expired. Which adjusting entry is required?

Accepted Answer

Debit Rent Expense $$900; credit Prepaid Rent 900.$$

Question 11

A business purchases equipment for $6,800 cash. Which account is debited?

Accepted Answer

Equipment

Question 12

A business collects $900 cash on account from a customer that was earned last year. What is the effect on the accounting equation?

Accepted Answer

There is no impact on the accounting equation

Question 13

If an accountant fails to record revenue earned but not collected at year-end, which of the following is true?

Accepted Answer

Total assets are understated.

Question 14

A company has total liabilities of $$18,000 and owner's equity of 82$$,000. What are total assets? Use the accounting equation $$	ext{Assets} = 	ext{Liabilities} + 	ext{Equity}.$$

Accepted Answer

$$100,000$$

Question 15

A company paid $$7,200 on November 1 for a 12-month insurance policy beginning that day. After the December 31 adjusting entry, what is the balance in Prepaid Insurance? Use $$	ext{Prepaid Insurance Remaining} = 	ext{Total Paid} - 	ext{Expired Portion}$.

Accepted Answer

$$5,400$$

Question 16

The Supplies account had a beginning balance of $$5,400. During the period, supplies were purchased on account for 4$$,800. A physical count shows $$2,800 of supplies on hand at period end. What is the amount of Supplies Expense for the period? Use $$	ext{Supplies Expense} = 	ext{Beginning Balance} + 	ext{Purchases} - 	ext{Ending Balance}$.

Accepted Answer

$$7,400$$

Question 17

Springer had the following August transactions: Earned $$3,500 of revenues on account; collected 5$$,700 from a customer for services provided last month; incurred $$880 of repair expense and paid cash; paid 200 $$for rent owed from the previous month. What is the net income for August? Use $$	ext{Net Income} = 	ext{Revenues} - 	ext{Expenses} ($$only revenues earned this month and expenses incurred this month).

Accepted Answer

$$2,620$$

Question 18

The beginning balance in an owner's Capital account is $$12,000. During the year, net income is 9$$,000 and the owner withdraws $$3,500. What is the ending Capital balance? Use $$	ext{Ending Capital} = 	ext{Beginning Capital} + 	ext{Net Income} - 	ext{Withdrawals}$.

Accepted Answer

$$17,500$$

Question 19

Rosewood Company purchased land for $$120,000 by making a cash payment of 40$$,000 and promising to pay the remaining amount later. What is the net effect of this transaction on Rosewood’s accounting equation?

Accepted Answer

Assets increase by $$120,000 and liabilities increase by 80$$,000

Question 20

Harbor Light Design Studio paid employees $2,750 cash for salaries earned in December. Which journal entry is correct?

Accepted Answer

Debit Salaries Expense $$2,750; credit Cash 2$$,750

Step-by-Step Guidance for Financial Accounting Practice Questions

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