ACCOUNTING TEST PREP 2

True/False Indicate whether the statement is true or false. ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. A fiscal period may be one month, three months, six months, or even one year, but usually it is one year. 2. An accounting period that begins on July 1 and ends on June 30 is a calendar year accounting period. 3. !o record transactions in chronological order means to record them according to the date on "hich they occurred. #. A $ournal is li%e a diary of a business because it is the only place "here complete details of a transaction are recorded. &. 'or every transaction recorded in the general $ournal, these items are al"ays "ritten( date, account titles, amounts, and source document or brief explanation. ). *f an error is discovered immediately after $ournali+ing, a single ruling should be placed through the incorrect data and the correct information should be "ritten above it. ,. -ecording transactions is the second step in the accounting cycle. .. !o verify a source document means to chec% the accuracy of the information on it. /. 0ince the debit and credit amounts in a business transaction are the same, the order in "hich the account titles are recorded in the general $ournal does not matter.

____ 10. 1ollar signs, commas, and decimals are not used "hen entering amounts in the $ournal. ____ 11. !he title of the account to be credited is indented from the left edge of the 1escription column so it can be easily distinguished from the debit part of the transaction. ____ 12. 2ever erase an error in a $ournal entry because an erasure loo%s suspicious. ____ 13. *n order to help an o"ner3manager %no" the financial condition of a business, accounting records are %ept and reported for a certain period of time called an accounting period. ____ 1#. !he type of source document prepared depends upon the nature of the transaction. ____ 1&. !he purpose of posting is to sho" the changes that ta%e place in the business4s accounts as a result of financial transactions. ____ 1). !he ledger account form used by -oadrunner 1elivery 0ervice is a three column account form. ____ 1,. 5pening an account in a ledger involves "riting the account title and the account number on the account form. ____ 1.. 5pening an account in a computeri+ed accounting system is entirely different from opening an account in a manual system. ____ 1/. 6o" often posting occurs depends on the si+e of the business, the number of transactions, and "hether posting is done manually or electronically. ____ 20. !he easiest "ay to post is from left to right in a ledger account because there is less chance of omitting data. ____ 21. 7very posting re8uires the year, month, and day to be entered in the 1ate column of the ledger account for every transaction.

____ 22. 7very amount posted "ill either increase or decrease the balance of a ledger account. ____ 23. !he notation 9:39 in the ;osting -eference column of a ledger account indicates the data "as posted from general $ournal page 3. ____ 2#. 7very $ournal entry re8uires a posting to at least t"o ledger accounts. ____ 2&. A credit posting to the 5ffice 78uipment account "ill result in an increase to that account. ____ 2). *n the preparation of a trial balance, all accounts are listed in the order in "hich they appear on the chart of accounts, including those accounts "ith a +ero balance. ____ 2,. An error discovered before posting is usually corrected "ith a $ournal entry. ____ 2.. !o locate a trial balance error, the first step is to chec% the postings from the $ournal to the individual ledger accounts. ____ 2/. <hen posting a correcting entry, the phrase 9correcting entry9 is usually "ritten in the 7xplanation column of the ledger account. ____ 30. *f a transaction is $ournali+ed on the .th and is posted on the 10th, the date entered in the 1ate column of the ledger account is the 10th. ____ 31. A trial balance is prepared after posting is completed. ____ 32. A "or% sheet is prepared at the end of each fiscal period. ____ 33. !he "or% sheet is a "or%ing paper and is prepared in pen. ____ 3#. Account titles are listed on the "or% sheet in alphabetical order. ____ 3&. A double rule under a column of figures means that the figures are to be added or subtracted. ____ 3). A net income for the period is the amount left after the expenses for the period have been subtracted from revenue. ____ 3,. All asset accounts are extended to the =alance 0heet section. ____ 3.. ;reparing the "or% sheet is the sixth step in the accounting cycle. ____ 3/. Amounts from the !rial =alance section are extended first to the *ncome 0tatement section. ____ #0. A single rule across both amount columns of the !rial =alance section means that no more entries "ill be made. ____ #1. A net loss decreases the balance in the o"ner4s capital account. ____ #2. After the net loss is calculated, it should be reflected in the debit column of the *ncome 0tatement section and the credit column of the =alance 0heet section. ____ #3. !otal expenses for the period are reflected in the total of the credit column of the *ncome 0tatement section. ____ ##. !he !rial =alance section contains entries for all accounts in the general ledger including those "ith +ero balances. ____ #&. A "or% sheet al"ays covers a period of one month. ____ #). All liability accounts are listed in the credit column of the *ncome 0tatement section. ____ #,. !he balance sheet reports the final balances of the permanent accounts at the end of the fiscal period. ____ #.. !he balance sheet is prepared before the statement of changes in o"ner4s e8uity.

____ #/. 'inancial reports are often prepared in pencil. ____ &0. !he income statement represents the basic accounting e8uation. ____ &1. A net income "ill increase the o"ner4s capital account. ____ &2. !he heading is the same on all three financial statements. ____ &3. !he revenue, expense, and the *ncome 0ummary accounts are included on the statement of changes in o"ner4s e8uity. ____ &#. !he information on the statement of changes in o"ner4s e8uity is used in preparing the income statement. ____ &&. 2et income or net loss is the difference bet"een total revenue and total expenses over a specific period of time. ____ &). !he statement of changes in o"ner4s e8uity summari+es the effects on the capital account of the various business transactions that occurred during the period. ____ &,. -eturn on sales is calculated by dividing net sales by net income. ____ &.. !he primary financial statements prepared for a sole proprietorship are the income statement and the balance sheet. ____ &/. >urrent assets are those used up or converted to cash during the normal operating cycle of a business. ____ )0. !he !rial =alance section of the "or% sheet provides the information used in preparing the income statement. ____ )1. !he net income or net loss reported on the income statement must be the same as the net income or net loss calculated on the "or% sheet. ____ )2. !he changes in the >ash in =an% account are reported in the statement of changes in o"ner4s e8uity. ____ )3. -evenue and expense accounts must be closed out because their balances apply to only one accounting period. ____ )#. >losing entries transfer the net income or net loss to the "ithdra"als account. ____ )&. !o close a revenue account, debit it for the amount of its credit balance. ____ )). <hen expense accounts are closed, the *ncome 0ummary account is credited. ____ ),. =efore closing entries are $ournali+ed and posted, the *ncome 0ummary account in the general ledger has a normal credit balance. ____ ).. !he *ncome 0ummary account is a simple income statement in the ledger. ____ )/. After the closing entries have been posted, the balance in the capital account reflects the net income or net loss and the "ithdra"als for the period. ____ ,0. !he *ncome 0ummary account is located in the o"ner4s e8uity section of the general ledger. ____ ,1. >losing the revenue account is the second closing entry. ____ ,2. *f a business reports a net loss for the period, the $ournal entry to close the *ncome 0ummary account "ould be a debit to capital and a credit to *ncome 0ummary. ____ ,3. !he last step in the accounting cycle is the preparation of the post closing trial balance. ____ ,#. !o close the "ithdra"als account, the amount of its balance is debited to the capital account and credited to the "ithdra"als account.

Multiple Choice Identify the choice that best completes the statement or answers the question. ____ ,&. <hich of the follo"ing accounts is not closed at the end of the accounting period? a. 'ees c. @aintenance 7xpense b. *ncome 0ummary d. Alaus =raun, >apital ____ ,). !ransferring the expense account balances to the *ncome 0ummary account is the ____. a. first closing entry c. third closing entry b. second closing entry d. fourth closing entry ____ ,,. Accounts that start each ne" accounting period "ith +ero balances are ____. a. permanent accounts c. liability accounts b. asset accounts d. temporary accounts ____ ,.. <hich of the follo"ing statements is true? a. !he *ncome 0ummary account is located in the o"ner4s e8uity section of the general ledger. b. !he *ncome 0ummary account has a normal debit balance. c. !he *ncome 0ummary account is a permanent account. d. !he *ncome 0ummary account is used throughout the accounting period. ____ ,/. !he balance of the revenue account is transferred to the ____. a. debit side of the >ash in =an% account b. credit side of the o"ner4s capital account c. credit side of the *ncome 0ummary account d. debit side of the o"ner4s "ithdra"als account ____ .0. *f a business has a net income for the period, the $ournal entry to close the balance of the *ncome 0ummary account is ____. a. a debit to o"ner4s capital, a credit to *ncome 0ummary b. a debit to 'ees, a credit to o"ner4s capital c. a debit to *ncome 0ummary, a credit to o"ner4s capital d. a debit to o"ner4s capital, a credit to 'ees. ____ .1. >losing entries are used to transfer the net income or net loss for the accounting period to the ____. a. >ash in =an% account c. revenue account b. expense accounts d. capital account Matching Match each item with the correct statement below. a. accounting cycle g. b. calendar year h. c. chec% stub i. d. fiscal year $. e. general $ournal %. f. invoice $ournal $ournali+ing memorandum receipt source document

____ .2. ABnC ____ is an accounting period of t"elve months ending on the last day of any month except 1ecember. ____ .3. ABnC ____ is often called a boo% of original entry. ____ .#. !he ____ is an all purpose $ournal used for recording business transactions.

____ .&. !he various activities a business completes to organi+e its accounting records in an orderly fashion is called the ____. ____ .). ABnC ____ is any type of business paper that verifies that a transaction occurred. ____ .,. Another term used for 9recording9 a business transaction is ____. ____ ... ABnC ____ accounting period begins on January 1 and ends on 1ecember 31. Match each item with the correct statement below. a. correcting entry f. b. general ledger g. c. ledger h. d. ledger account form i. e. posting ____ ____ ____ ____ ./. /0. /1. /2. proving the ledger slide transposition error trial balance

____ /3. ____ /#. ____ /&. ____ /). ____ /,.

*f you "ere to "rite D1/0 as either D1/ or D1,/00, this mista%e "ould be called aBnC ____. 7rrors discovered after posting has ta%en place re8uire aBnC ____. !ransferring data from the $ournal to the ledger is called ____. A periodic report prepared by a business to test the e8uality of total debits and total credits in the ledger is called aBnC ____. *f you meant to "rite D2, but "rote D,2, this mista%e is called aBnC ____. !he accounts used by a business can be %ept on pages or cards, "hich are %ept together in a boo% or file called aBnC ____. Adding all the debit balances and all the credit balances and then comparing the t"o totals to see "hether they are e8ual is called ____. !he accounting stationery used to record financial information about specific accounts is aBnC ____. <hether accounts are %ept manually in a special file or electronically on magnetic dis%s or tapes, the ledger is often called aBnC ____. Match each item with the correct statement below. a. =alance 0heet section h. b. capital i. c. credit $. d. debit %. e. extending l. f. heading m. g. *ncome 0tatement section matching principle net income net loss ruling trial balance "or% sheet

____ ____ ____ ____ ____ ____ ____ ____ ____

/.. //. 100. 101. 102. 103. 10#. 10&. 10).

____ 10,.

ABnC ____ results "hen revenue is larger than expenses. !he asset, liability, and o"ner4s e8uity accounts are extended to the ____ of the "or% sheet. ____ means dra"ing a line under a column of amounts. A net loss is entered in the ____ column of the *ncome 0tatement section of the "or% sheet. -evenue and expense accounts are listed in the !rial =alance section of the "or% sheet and in the ____ of the "or% sheet. !he ____ allo"s a business to match revenue against expenses as a means of measuring profit for the period. ABnC ____ is a paper used to collect information from the general ledger accounts. !he first t"o columns on the "or% sheet are used to enter the ____. *f there is a net loss for the period, it is entered in the ____ column of the =alance 0heet section of the "or% sheet. ____ is transferring balances from the !rial =alance section of the "or% sheet to either the =alance 0heet section or the *ncome 0tatement section.

____ 10.. *f the total of the credit column of the *ncome 0tatement section is less than the debit column, there is aBnC ____ for the period. ____ 10/. !he amount of net income for the period is added to the =alance 0heet credit total because it increases the balance in the ____ account. ____ 110. !he ____ of the "or% sheet ans"ers the 8uestions 9"ho?9, 9"hat?9, and 9"hen?9. Match each item with the correct statement below. a. balance sheet b. =alance 0heet section of the "or% sheet c. current assets d. current liabilities e. current ratio f. financial statements g. income statement h. *ncome 0tatement section of the "or% sheet i. li8uidity ratio $. net income or net loss %. on a specific date l. profitability ratio m. 8uic% ratio n. ratio analysis o. report form p. return on sales 8. statement of changes in o"ner4s e8uity ____ 111. !he balance sheet reports financial information ____. ____ 112. !he information needed to prepare the income statement comes from the____. ____ 113. ____ summari+e the changes resulting from business transactions that have occurred during an accounting period. ____ 11#. ____ is a comparison of t"o items on a financial statement, resulting in a percentage that is used to evaluate the relationship bet"een the t"o items. ____ 11&. ____ is reported on the income statement. ____ 11). ABnC ____ is the financial statement that reports the final balances in all asset, liability, and o"ner4s e8uity accounts at the end of the accounting period. ____ 11,. *n the ____, the classifications of balance sheet accounts are sho"n one under the other. ____ 11.. 5ne source of information for completing the balance sheet is the ____. ____ 11/. !he ____ is completed as a support document for the balance sheet. ____ 120. ____ are debts of the business that must be paid "ithin the next accounting period.. ____ 121. ____ indicates "hat percentage of net sales represents profit. Match each item with the correct statement below. a. closing entries d. permanent accounts b. compound entry e. post closing trial balance c. *ncome 0ummary account f. temporary capital accounts ____ 122. Accounts that start an accounting period "ith +ero balances are called ____. ____ 123. ABnC ____ is a $ournal entry "ith t"o or more debits or t"o or more credits. ____ 12#. !he ____ is a general ledger account used to accumulate and summari+e the revenue and expenses for a period. ____ 12&. 5nly ____ and their balances are listed on the post closing trial balance.

____ 12). ABnC ____ is prepared to prove that debits in the ledger accounts are e8ual to the credits after the closing entries have been posted. ____ 12,. ____ are made to close out or reduce to +ero the balance of certain general ledger accounts.

ACCOUNTING TEST PREP 2 Ans er Section

TRUE/FA!SE 1. 2. 3. #. &. ). ,. .. /. 10. 11. 12. 13. 1#. 1&. 1). 1,. 1.. 1/. 20. 21. 22. 23. 2#. 2&. 2). 2,. 2.. 2/. 30. 31. 32. 33. 3#. 3&. 3). 3,. 3.. 3/. #0. #1. A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( ! ' ! ! ' ! ' ! ' ! ! ! ! ! ! ' ! ' ! ! ' ! ! ! ' ! ' ' ! ' ! ! ' ' ' ! ! ! ' ' ! ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A.

2A!( 2=7A *.A.

2A!( 2=7A *.A.

#2. #3. ##. #&. #). #,. #.. #/. &0. &1. &2. &3. &#. &&. &). &,. &.. &/. )0. )1. )2. )3. )#. )&. )). ),. ).. )/. ,0. ,1. ,2. ,3. ,#.

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1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2A!( 2=7A *.A.

2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!(

2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A ***.=. 2=7A *.A. 2=7A ***.A. 2=7A *.A. 2=7A *.A. E 2=7A **.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A.

MU!TIP!E C"OICE ,&. ,). ,,. ,.. ,/. .0. .1. A20( A20( A20( A20( A20( A20( A20( 1 = 1 A > > 1 ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( ;!0( 1 1 1 1 1 1 1 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A.

MATC"ING

.2. .3. .#. .&. .). .,. ... ./. /0. /1. /2. /3. /#. /&. /). /,. /.. //. 100. 101. 102. 103. 10#. 10&. 10). 10,. 10.. 10/. 110. 111. 112. 113. 11#. 11&. 11). 11,. 11.. 11/. 120. 121.

A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20( A20(

1 : 7 A A 6 = : A 7 * 6 > ' 1 = * A A > : 6 @ F 1 7 J = ' A 6 ' 2 J A 5 = G 1 ;

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1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!( 2A!(

2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. E 2=7A ***.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. 2=7A *.A. E 2=7A **.=. 2=7A *.A. E 2=7A ***.A.

122. A20( ' 123. A20( = 12#. A20( >

;!0( 1 ;!0( 1 ;!0( 1

2A!( 2=7A *.A. 2A!( 2=7A *.A. 2A!( 2=7A *.A.

12&. A20( 1 12). A20( 7 12,. A20( A

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