SMU Classification: Restricted

PRACTICE QUESTIONS – Accounting Cycle

____ 1. Which pair of the listed accounts follows the rules of debits and credits in relation to increases and decreases
in the opposite manner?
A. Salary Expense and Notes Payable
B. Common Stock and Unearned Rent
C. Prepaid Rent and Advertising Expense
D. Service Revenue and Wages Payable

____ 2. On October 1, Metz Industries had an Accounts Payable balance of $30,000. During October, the company
made cash payments on account of $25,000 and on October 31, the Accounts Payable balance is $15,000.
Determine the amount of purchases on account for the month of October.
A. $40,000
B. $20,000
C. $10,000
D. $0

____ 3. A trial balance will not balance if

A. a journal entry is posted twice.
B. a wrong amount is used in journalizing.
C. incorrect account titles are used in journalizing.
D. a journal entry is only partially posted.

____ 4. During January 2011, Wells Corporation purchased $80,000 of inventory; they paid one-fourth in cash, and
signed a note for the remaining balance. This transaction will be recorded as:
A. Inventory 80,000
Cash 60,000
Notes Payable 20,000
B. Inventory 80,000
Cash 20,000
Accounts Payable 60,000
C. Inventory 80,000
Accounts Payable 60,000
Cash 20,000
D. Inventory 80,000
Cash 20,000
Notes Payable 60,000
 SMU Classification: Restricted

____ 5. A trial balance will NOT balance if

A. a journal entry is posted twice
B. a $350 payment of rent is debited to Rent Expense for $350 and credited to Cash for $35
C. a $500 payment on accounts payable is debited to Accounts Payable for $50 and credited
to Cash for $50
D. a transaction is not posted at all

____ 6. Chaffin Consulting performed consulting services during June 2012 on account and collections for these
services were not received until August 2012. What effect did performing these services have on the
accounting equation for June 2012?
A. Increase in assets and decrease in stockholder’s equity
B. Increase in assets and increase in stockholder’s equity
C. Decrease in assets and decrease in stockholder’s equity
D. Decrease in assets and increase in stockholder’s equity

____ 7. If ONLY the debit amount of an entry to record the purchase of supplies on account was NOT posted:
A. liabilities would be understated
B. liabilities would be overstated
C. assets would be overstated
D. assets would be understated

____ 8. During its first month of operations, Stephen Company borrowed $80,000 from a bank, and then purchased an
equipment costing $40,000 by paying cash of $20,000 and signing a long term note for the remaining amount.
During the month, the company also purchased Supplies for $30,000 on credit, performed services for clients
for $40,000 on account, paid $15,000 cash for accounts payable, and received $10,000 from its credit
customers. What is the company’s amount of total assets at the end of the month?
A. $155,000
B. $165,000
C. $145,000
D. $175,000

____ 9. The ending balance of Accounts Receivable was $12,000. Services billed to customers during the year were
$21,500, and collections on account from customers were $23,600. What was the beginning balance of
Accounts Receivable?
A. $14,100
B. $33,500
C. $9,900
D. $33,100
 SMU Classification: Restricted

____ 10. Tesser Company’s Accounts Payable account had a balance of $3,700 on September 1, 2011, and a balance of
$4,500 on September 30, 2011. During the month of September 2011, the company made total payments of
$32,800 on accounts payables. What must have been their total purchases on account during September 2011?
A. $33,600
B. $32,000
C. $37,300
D. $29,100

____ 11. The accountant at Error Prone Company recorded the purchase of $100 of supplies for cash as a debit to
Supplies for $100 and a credit to Accounts Payable for $100. Determine the effect of this error on the
accounting equation of Error Prone Company.
A. Total Equity would be overstated by $100
B. Total Liabilities will be understated by $100
C. Total Assets would be overstated by $100
D. Total Equity would be understated by $100

____ 12. In terms of debits and credits, which accounts below will have the same normal balances?
A. expenses, assets, dividends
B. assets, capital stock, revenues
C. retained earnings, dividends, liabilities
D. expenses, liabilities, capital stock

____ 13. Which of the following direct effects on the fundamental accounting equation is not possible as a result of
transactional analysis?
A. An increase in an asset and a decrease in another asset.
B. A decrease in a liability and an increase in an asset.
C. A decrease in stockholders' equity and a decrease in an asset.
D. An increase in an asset and an increase in stockholders' equity.

____ 14. The normal balance of the Supplies Expense account is a because it is a(n) account.
A. credit, liability
B. debit, asset
C. debit, expense
D. credit, stockholders’ equity

____ 15. Which of the following errors, each considered individually, would cause the trial balance to be out of
balance?
A. A payment of $148 to a creditor was posted as a debit to Accounts Payable for $148 and a
debit of $148 to Cash.
B. Cash of $530 received from a customer on account was posted as a debit of $350 to Cash
and as a credit of $350 to Accounts Payable.
C. A payment of $59 for supplies was posted as a debit of $95 to Supplies and a credit of $95
to Cash.
D. A transaction was not posted.

ANSWER SECTION
 SMU Classification: Restricted

1. ANS: A
2. ANS: C
3. ANS: D
4. ANS: D
5. ANS: B
6. ANS: B
7. ANS: D
8. ANS: A
9. ANS: A
10. ANS: A
11. ANS: C
12. ANS: A
13. ANS: B
14. ANS: C
15. ANS: A