Multiple Choice Answers

Question 1
The normal balance of any account is the
right side.
side which decreases that account.
side which increases that account.
left side.
Question 2
Which one of the following represents the expanded basic accounting equation?
Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenues.
Assets – Liabilities – Owner’s Drawings = Owner’s Capital + Revenues – Expenses.
Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenue – Expenses.
Assets = Revenues + Expenses – Liabilities.
Question 3
Which of the following is not true of the terms debit and credit?
They can be abbreviated as Dr. and Cr.
They can be interpreted to mean left and right.
They can be used to describe the balance of an account.
They can be interpreted to mean increase and decrease.
Question 4
Assets normally show
debit balances.
debit or credit balances.
credit balances.
debit and credit balances.
Question 5
When an owner makes a withdrawal
it doesn’t have to be cash, it could be another asset.
the drawing account will be decreased with a debit.
the drawing account will be increased with a credit.
the capital account will be directly increased with a debit.

Question 6
During 2010, its first year of operations, Yaspo’s Bakery had revenues of $60,000 and expenses of $33,000. The business had owner drawings of $18,000. What is the amount of owner’s equity at December 31, 2010?
$18,000 debit
$0
$9,000 credit
$27,000 credit
Question 7
A complete journal entry does not show
the new balance in the accounts affected by the transaction.
the date of the transaction.
a brief explanation of the transaction.
the accounts and amounts to be debited and credited.

Question 8
Robitaille Company received a cash advance of $500 from a customer. As a result of this event,
assets increased by $500.
owner’s equity increased by $500.
liabilities decreased by $500.
assets increased by $500 and owner’s equity increased by $500.

Question 9
Posting
is accomplished by examining ledger accounts and seeing which ones need updating.
should be performed in account number order.
accumulates the effects of journalized transactions in the individual accounts.
involves transferring all debits and credits on a journal page to the trial balance.

Question 10
Customarily, a trial balance is prepared
at the end of each day.
after each journal entry is posted.
only at the inception of the business.
at the end of an accounting period.

Question 11
The revenue recognition principle dictates that revenue should be recognized in the accounting records
when cash is received.
when it is earned.
in the period that income taxes are paid.
at the end of the month.

Question 12
Under accrual-basis accounting
cash must be received before revenue is recognized.
net income is calculated by matching cash outflows against cash inflows.
events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

Question 13
Unearned revenues are
earned and recorded as liabilities before they are received.
earned but not yet received or recorded.
earned and already received and recorded.
received and recorded as liabilities before they are earned.

Question 14
As prepaid expenses expire with the passage of time, the correct adjusting entry will be a
debit to an expense account and a credit to an expense account.
debit to an expense account and a credit to an asset account.
debit to an asset account and a credit to an expense account.
debit to an asset account and a credit to an asset account.

Question 15
The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the
market value of the asset.
depreciated difference of the asset.
book value of the asset.
blue book value of the asset.

Question 16
Speedy Clean Laundry purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is
Debit Laundry Supplies Expense, $4,500; Credit Laundry Supplies, $4,500.
Debit Laundry Supplies Expense, $2,000; Credit Laundry Supplies, $2,000.
Debit Laundry Supplies, $2,000; Credit Laundry Supplies Expense, $2,000.
Debit Laundry Supplies, $4,500; Credit Laundry Supplies Expense, $4,500.

Question 17

Henry-K Company purchased a computer system for $3,600 on January 1, 2010. The company expects to use the computer system for 3 years. It has no salvage value. Monthly depreciation expense on the asset is
$1,200.
$0.
$3,600.
$100.

Question 18
Niagara Corporation purchased a one-year insurance policy in January 2010 for $66,000. The insurance policy is in effect from March 2010 through February 2011. If the company neglects to make the proper year-end adjustment for the expired insurance
Net income and assets will be understated by $55,000.
Net income and assets will be overstated by $55,000.
Net income and assets will be understated by $11,000
Net income and assets will be overstated by $11,000.

Question 19
Betty Carson has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Betty make?
Debit Unearned Revenue and credit Service Revenue
Debit Cash and credit Unearned Revenue
Debit Accounts Receivable and credit Unearned Revenue
Debit Accounts Receivable and credit Service Revenue

Question 20
Becki Jean Corporation issued a one-year, 9%, $200,000 note on April 30, 2010. Interest expense for the year ended December 31, 2010 was
$13,500.
$10,500.
$12,000.
$18,000.

Question 21
The principle of an efficient accounting system that states that an accounting system should accommodate a variety of users is

flexibility.
cost effectiveness.
useful output.
implementation.

Question 22
To be useful, the information outputs of a system should be
reliable, flexible, understandable and timeless.
such that one report meets all different users needs.
relevant, reliable, timely, and accurate.
distributed only to management personnel.

Question 23
Which of the following is a true statement about manual and electronic accounting systems?
Few small companies begin with manual systems.
The design and structure of manual and electronic systems are fundamentally different.
The design and structure of manual and electronic systems are essentially the same.
Many companies convert from electronic to manual systems.

Question 24
In which journal would a cash purchase of merchandise inventory be recorded?
Purchase journal
General journal
Cash payments journal
None of these.

Question 25
A company which uses special journals should record a transaction involving the purchase of merchandise for cash in a
cash payments journal.
multi-column purchases journal.
general journal.
one column purchases journal.

Question 26
Adjusting entries are recorded
only on the worksheet.

only in the general ledger.
in the special journals.
in the general journal.

Question 27
Debit postings to the individual accounts in an accounts receivable subsidiary ledger generally come from the
sales journal.
cash payments journal.
purchases journal.
cash receipts journal.

Question 28
Principles of an efficient and effective accounting information system include all of the following except
cost effectiveness.
flexibility.
useful output.
All of these options are principles.

Question 29
Cross-footing a cash receipts journal means
the equality of debits and credits in the journal have been proved.
each line of the journal has a horizontal total.
the columns of the journal have been cross-referenced.
all necessary postings have been completed.

Question 30
All of the following are advantages of using subsidiary ledgers except they
make possible a division of labor.
eliminate errors in individual accounts.
show, in a single account, transactions affecting one customer or one creditor.
free the general ledger of excessive details.