Accounting Test
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Section 1:
Choose one answer for each of the multiple questions below - Questions 1 to 36
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1. Variable costs change in direct proportion with a change in the volume of activity, while fixed costs remain unchanged within the relevant range of activity.
True
False
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2. Indirect labor is charged to the product, while direct labor is considered overhead.
True
False
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3. "An asset purchased ten years ago for $100,000 has accumulated depreciation of $100,000 at the end of its tenth year. What amount should be charged to depreciation if the asset is used in its eleventh year?"
9090
1000
0
10000
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4. What is the accounting equation most stated as?
Owners equity = Liabilities + Assets
Assets = Liabilities + Owners Equity
Liabilities = Assets + Owners equity
All of the above
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5. Which of the following statements is false?
to increase cash, debit the account
to increase revenue, credit the account
to decrease a receivable, debit the account
to increase a receivable, debit the account
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6. Which of the following statements is true?
to decrease a receivable, debit the account
to decrease revenue, debit the account
to increase owner's equity, debit the account
to increase an expense account, credit the account
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7. accounting
A planned process designed to compile financial data and summarize the results in accounting records and reports.
A formal report that shows what an individual owns, what an individual owes, and the difference between the two.
formal written document that describes the nature of a business and how it will be run
Planning, recording, analyzing, and interpreting financial information
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8. When calculating the Owner's Equity, what math problem would be correct?
Revenue - Expenses
Revenue - Liabilities
Assets - Liabilities
Assets - Expenses
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9. "Accruing wages expense as of December 31 has what effect on the December 31 balance sheet?"
Assets decrease
Liabilities increase
Owner's equity increases
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10. "Under accrual accounting, amounts received in advance of providing a service should be reported as"
A liability
Revenue - Liabilities
Not reported
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11. "A corporation's failure to accrue an expense will cause expenses and ................ to be understated."
Assets
Liabilities
Owner's Equity
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12. Which of the following is the first step in the Accounting Cycle?
Journal entries
Analyze the transaction
Identify the transaction
Post to ledger
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13. A credit to the accounts receivable account
indicates a sale to customers on account has occurred.
indicates a payment from customers on their account has been received.
is an error.
indicates that a liability has been incurred.
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14. A debit is the normal balance for which account listed below?
Capital account
Service Revenue account
Accounts Payable account
Accounts Receivable account
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15. If beginning capital was $25,000, ending capital is $37,000, and the owner?s withdrawals were $23,000, the amount of net income or net loss for the period was:
Net loss of $35,000
Net income of $35,000
Net income of $14,000
Net loss of $14,000
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16. In the accounting equation: A=L+E, what does E stand for?
Event
Equal
Equity
Equilibrium
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17. If you sell an item on credit, what four accounts are affected?
accounts payable, cash, inventory, and cost of sales
accounts payable, sales, inventory, and cost of sales
accounts receivable, sales, inventory, and cost of sales
accounts receivable, cash, inventory, and cost of sales
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18. The expense associated with manufacturing items for resale is generally kown as?
Administrative Overhead
Gross Profit
Cost of Sales
Inventory
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19. XYZ, Inc. borrowed $1,000 from the bank and debited its cash account for $1,000. What should be done to complete the recording of the transaction?
Nothing further must be done.
Debit a owners' equity account for $1,000.
Credit another asset account for $1,000.
Credit a liability account for $1,000.
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20. XYZ, Inc. paid its supplier $1,000 to satisfy an accounts payable balance. How should XYZ record this transaction?
Debit accounts payable and credit cash for $1,000.
Debit supplies expense and credit cash for $1,000.
Credit accounts payable and debit cash for $1,000.
Only credit a cash for $1,000.
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21. Ike's Lawn Service billed a client on May 1 for a service totaling $ 250. When the client pays said costs, what is the effect on the accounting equation?
Liabilities decrease and owners' equity increases.
Assets increase and assets decrease
Assets increase and owners' equity increases
Assets decrease and liabilities decrease
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22. The accrual basic of accounting recognizes revenues and expenses when:
Revenues are earned and expenses are paid
Revenues are received and expenses are incurred
Revenues are received and expenses are paid
Revenues are earned and expenses are incurred
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23. During the month of May, Marty's Mini-Mart purchased supplies totaling $3,400. A count in the storeroom on May 31 indicates that that supplies on hand amount to $750. The supplies on hand at the beginning of the month total $825. What amount will be recorded as an expense on May 31 in Marty's income statement?
$ 75
$ 3,475
$ 4,150
$ 4,225
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24. Which of the following is an example of a deferral?
Accruing year-end wages
Recognizing revenues earned but not yet recorded
Recording prepaid rent
Recognizing expenses incurred but not yet recorded
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25. Prepaid expenses to be expired within twelve months are shown in which part of the Financial Statement.
Income Statement
Current liabilities
Fixed assets
Current assets
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26. If total liabilities decreased by $15,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?
$20,000 increase
$10,000 decrease
$10,000 increase
$15,000 decrease
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27. Dooley's Dining Services operates seven days a week with a daily payroll of $ 1,100. Workers are paid weekly on Sundays. The end of the month, July 31, falls on a Saturday. What expense should be recorded in the income statement for the month ended July 31?
$ 7,700
$ 6,600
$ 1,100
$ 5,500
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28. "Failure to accrue interest expense at the end of an accounting period will mean that reported net income will be:"
Too high
Too low
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29. "The entry to Accumulated Depreciation to remove an amount associated with a machine that was scrapped."
Debit
Credit
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30. Which of the following best describes the effect of borrowing money?
Assets decrease and liabilities increase
Owners' equity decreases and liabilities increase
Assets increase and liabilities increase
Liabilities decrease and owners' equity increases
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31. Which of the following would not be found on the income statement?
Cost of goods sold
Net income
Retained earnings
Wage expense
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32. Accumulated depreciation will appear on the:
Balance Sheet
Income Statement
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33. Which of the following accounts is a liability account?
Wages Expense
Supplies
Unearned Revenues
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34. What are the key components of a good account reconciliation?
To record the beginning balance, current month activity, and ending balance of an account
To assess the validity, correctness or appropriateness of an account balance at a specific point in time
To record subsystem transactions
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35. Which of the following is true about the date format of financial statements?
the income statement represents a snapshot of a business's position
both the balance sheet and the income statement represent a period of time
the statement of cash flows the balance sheet record a specific date
the balance sheet is a snapshot of a business's position, so a specific day is used
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36. The two major components of Owners' Equity are:
Capital Stock and Dividends
Long-term Liabilities and Net Income
Dividends and Retained Earnings
Capital Stock and Retained Earnings
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Section 2:
Choose the correct answer for each question - Vocabulary & Definitions - Questions 37 to 45
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37. What are liabilities?
costs of selling products or services
amounts owed
owners' claims to resources
distributions to stockholders
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38. What is owners' equity?
sales of products or services
owners' claims to resources
resources owned
costs of selling products or services
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39. What's revenue?
costs of selling products or services
expense to run business
sales of products or services
distributions to stockholders
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40. What are expenses?
Cost of selling products or services
Amounts owed
Distributions to stockholders
Owners' claims to resources
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41. Working capital is a measure of:
Consistency
Liquidity
Profitability
Solvency
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42. Incurring an expense before cash is paid is an example of what kind of adjustment?
Accrued Liability
Deferred Expense
Accrued Asset
Deferred Revenue
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43. What is the name for a formal report that shows what an individual owns, what an individual owes, and the difference between the two?
accounting
net worth statement
personal net worth
accounting system
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44. The name given to an account is the account title.
True
False
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45. Resources owned by a business are referred to as
owners' equity.
liabilities.
assets.
revenues.
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