Multiple Choice Answers

Question 1
The first step of the accounting cycle is to
A. record journal entries.
B. post to the ledger.
C. prepare a trial balance.
D. analyze business transactions.
Question 2
The 12-month period a business chooses for its accounting period is a/an
A. calendar year.
B. accounting period.
C. fiscal year.
D. accounting cycle.
Question 3
Which of the following is not a financial statement?
A. Balance sheet
B. Income statement
C. Statement of owner’s equity
D. Trial balance
Question 4
Business transactions are first recorded in the
A. ledger.
B. journal.
C. trial balance.
D. balance sheet.
Question 5
Which entry records the owner’s taking cash for personal use?
A. Debit Wage Expense; credit Cash
B. Debit Capital; credit Cash
C. No entry is necessary because the owner owns the cash and the entire business.
D. Debit Withdrawals; credit Cash
Question 6
The purpose of posting is to
A. list the transactions in chronological order in the journal.
B. provide an explanation of the transaction.
C. update the account balances in the ledger.
D. correct a previous entry.
Question 7
Which of the following groups of accounts have a normal credit balance?
A. Revenue, liabilities, and capital
B. Assets, capital, and withdrawals
C. Liabilities, expenses, and assets
D. Assets, expenses, and withdrawals
Question 8
The process that begins with recording business transactions and includes the completion of the financial statements is the
A. calendar year.
B. natural business year.
C. fiscal year.
D. accounting cycle.
Question 9
An account that would be increased by a debit is
A. cash.
B. fees earned.
C. capital.
D. accounts payable.
Question 10
A business provided services to a cash customer. To record this transaction,
A. an asset is debited, and a liability is credited.
B. an asset is debited, and a revenue is credited.
C. an expense is debited, and Capital is credited.
D. None of the above
Question 11
Which error would cause the trial balance to be out of balance?
A. An entry is posted twice.
B. An entry isn’t posted at all.
C. A debit is entered as $200, and a credit is entered at $2,000.
D. None of the above
Question 12
“PR” in the general journal and general ledger stands for
A. per reviewer.
B. posting reference.
C. prior receipt.
D. None of the above
Question 13
Which of the following is prepared first?
A. Balance sheet
B. Income statement
C. Statement of owner’s equity
D. Trial balance
Question 14
Which entry would be used to record the payment of office salaries?
A. Debit Cash; credit Accounts Receivable
B. Debit Cash; credit Salaries Expense
C. Debit Salaries Expense; credit Accounts Payable
D. Debit Salaries Expense; credit Cash
Question 15
A journal entry affecting three or more accounts is called a _______ entry.
A. multilevel
B. multistep
C. compound
D. simple
Question 16
Given the following list of accounts with normal balances, what are the trial balance totals of the debits and credits?
Cash      $1,000
Equipment           500
Accounts Payable             350
Capital  900
Service Fees        1,000
Salaries Expense               750

A. $3,250 debit, $3,250 credit
B. $1,125 debit, $1,125 credit
C. $4,500 debit, $4,500 credit
D. $2,250 debit, $2,250 credit
Question 17
Revenue is traditionally recognized in the accounting records when
A. cash is received.
B. services are rendered.
C. it’s incurred.
D. None of the above
Question 18
During the month of January, Katelyn invested $11,000 in starting her legal practice. Which of the following would be the proper journal entry?
A. Cash, debit $11,000; Katelyn’s Capital, credit $11,000
B. Accounts Payable, debit $11,000; Cash, credit $11,000
C. Cash, debit $11,000; Revenue, credit $11,000
D. Katelyn’s Capital, debit $11,000; Cash, credit $11,000

Question 19
A business incurred an expense and paid it immediately. To record this transaction,
A. an expense is debited, and a liability is credited.
B. an expense is debited, and an asset is credited.
C. an expense is debited, and Capital is credited.
D. None of the above
Question 20
The general journal
A. is the book of original entry.
B. is the book of final entry.
C. contains account balances.
D. is completed after the general ledger.