1.Which of the following statements about an account is true?

a. The left side of an account is the credit or decrease side.

b. An account is an individual accounting record of increases and decreases in
specific asset, liability, and owner’s equity items.
c. There are separate accounts for specific assets and liabilities but only one
account for owner’s equity items.
d. The right side of an account is the debit or increase side.
2. Credits:
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.
3. Accounts that normally have debit balances are:
a. assets, expenses, and revenues.
b. assets, expenses, and owner’s capital.
c. assets, liabilities, and drawings.
d. assets, expenses, and drawings.
4. What is the correct sequence of steps in the recording process?
a. Analyzing transactions; preparing a trial balance
b. Analyzing transactions; entering transactions in a journal; posting
transactions
c. Entering transactions in a journal; posting transactions; preparing a trial
balance
d. Entering transactions in a journal; posting transactions; analyzing transactions
5. Performing services for a customer on account should result in:

1
a. a decrease in the liability account Accounts Payable and an increase in the
revenue account Service Revenue.
b. an increase in the asset account Cash and a decrease in the asset account
Accounts Receivable.
c. an increase in the asset account Accounts Receivable and an increase in the
liability account Unearned Revenue.
d. an increase in the asset account Accounts Receivable and an increase in the
revenue account Service Revenue.
6. The purchase of equipment on account should result in:
a. a debit to Equipment and a credit to Accounts Payable.
b. a debit to Equipment Expense and a credit to Accounts Payable.
c. a debit to Equipment and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Equipment.
7. ledger:
a. contains only asset and liability accounts.
b. should show accounts in alphabetical order.
c. is a collection of the entire group of accounts maintained by a company.
d. is a book of original entry.
8. Posting:
a. is normally done before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts.
9. trial balance:
a. is a list of accounts with their balances at a specific time.
b. proves that journalized transactions are accurate.
2
c. will not balance if a correct journal entry is posted twice.
d. proves that all transactions have been recorded.
10. A trial balance will not balance if:
a. the collection of an account receivable is posted twice.
b. the purchase of supplies on account is debited to Supplies and credited to
Cash.
c. a $100 cash drawing by the owner is debited to Drawings for $1,000 and
credited to Cash for $100.
d. a $450 payment on account is debited to Accounts Payable for $45 and
credited to Cash for $45.
1. Which of the following statements about an account
is true?
(a) The right side of an account is the debit or
increase side.
(b) An account is an individual accounting record of
increases and decreases in specific asset, liability,
and equity items.
(c) There are separate accounts for specific assets
and liabilities but only one account for equity
items.
(d) The left side of an account is the credit or
decrease side.
2. Debits:
(a) increase both assets and liabilities.
(b) decrease both assets and liabilities.

3
 (c) increase assets and decrease liabilities.
(d) decrease assets and increase liabilities.
3. A revenue account:
(a) is increased by debits.
(b) is decreased by credits.
(c) has a normal balance of a debit.
(d) is increased by credits.
4. Accounts that normally have debit balances are:
(a) assets, expenses, and revenues.
(b) assets, expenses, and share capital—ordinary.
(c) assets, liabilities, and dividends.
(d) assets, dividends, and expenses.
5. The expanded accounting equation is:
(a) Assets + Liabilities = Share Capital + Retained
Earnings + Dividends + Revenues + Expenses.
(b) Assets = Liabilities + Share Capital + Retained
Earnings + Dividends + Revenues – Expenses.
(c) Assets = Liabilities – Share Capital – Retained
Earnings – Dividends – Revenues – Expenses.
(d) Assets = Liabilities + Share Capital + Retained
Earnings + Revenues – Expenses – Dividends.
6. Which of the following is not part of the recording
process?
(a) Analyzing transactions.

4
 (b) Preparing a trial balance.
(c) Entering transactions in a journal.
(d) Posting transactions.
7. Which of the following statements about a journal is false?
(a) It is not a book of original entry.
(b) It provides a chronological record of transactions.
(c) It helps to locate errors because the debit and
credit amounts for each entry can be readily
compared.
(d) It discloses in one place the complete effect of a
transaction.
8. The purchase of supplies on account should result
in:
(a) a debit to Supplies Expense and a credit to
Cash.
(b) a debit to Supplies Expense and a credit to
Supplies.
(c) a debit to Supplies and a credit to Accounts Payable.
(d) a debit to Supplies and a credit to Accounts
Receivable.
9. A ledger:
(a) contains only asset and liability accounts.
(b) should show accounts in alphabetical order.
(c) is a collection of the entire group of accounts maintained by a company.

5
 (d) is a book of original entry.
10. Posting:
(a) normally occurs before journalizing.
(b) transfers ledger transaction data to the journal.
(c) is an optional step in the recording process.
(d) transfers journal entries to ledger accounts.
11. Before posting a payment of €5,000, the Accounts Payable of Senator
Company had a normal balance of €16,000. The balance after posting this
transaction was:
(a) €21,000.
(b) €5,000.
(c) €11,000.
(d) Cannot be determined.
12. A trial balance:
(a) is a list of accounts with their balances at a given
time.
(b) proves the mathematical accuracy of journalized
transactions.
(c) will not balance if a correct journal entry is
posted twice.
(d) proves that all transactions have been recorded.
13. A trial balance will not balance if:
(a) a correct journal entry is posted twice.
(b) the purchase of supplies on account is debited to
Supplies and credited to Cash.

6
 (c) a £100 cash dividend is debited to Dividends for
£1,000 and credited to Cash for £100.
(d) a £450 payment on account is debited to Accounts
Payable for £45 and credited to Cash for £45.
14. The trial balance of Clooney Ltd. had accounts
with the following normal balances: Cash £5,000,
Service Revenue £85,000, Salaries and Wages Payable £4,000, Salaries and
Wages Expense £40,000, Rent Expense £10,000, Share Capital—Ordinary
£42,000, Dividends £15,000, and Equipment £61,000. In preparing a trial
balance, the total in the debit
column is:
(a) £131,000.
(b) £216,000.
(c) £91,000.
(d) £116,000.

1. The accrual basis of accounting is considered superior to

the cash basis of accounting because it:
a. is easier to use.
b. provides better information about the activities of the business.
c. records events in the period in which the cash is paid.
d. is used by most businesses.
2. Revenue should be recognized when:
a. the performance obligation is satisfied

7
b. there is an increase in assets or decrease in liabilities as the
result of the company’s business activities with its customers.
c. the service is provided or the goods are sold and delivered.
d. All of the above.
3. Adjusting entries are made to ensure that:
a. revenues and expenses are recorded in the correct accounting
period.
b. the accrual basis of accounting is used.
c. assets and liabilities have up-to-date balances at the end of an
accounting period.
d. All of the above.
4. A company pays $1,140 for a one-year insurance policy
effective April 1, 2021. The payment is recorded as Prepaid Insurance.
On April 30, 2021, an adjusting entry is required to:
a. increase the asset Prepaid Insurance by $95 and increase
the expense Insurance Expense by $95.
b. decrease the asset Prepaid Insurance by $95 and increase
the expense Insurance Expense by $95.
c. decrease the asset Prepaid Insurance by $1,045 and increase
the expense Insurance Expense by $1,045.
d. increase the asset Prepaid Insurance by $1,045 and increase
the expense Insurance Expense by $1,045.
5. The trial balance shows Supplies $1,350 and Supplies
Expense $0. If $600 of supplies are on hand at the end of the period,

8
the adjusting entry is:
a. Supplies 600
Supplies Expense 600
b. Supplies 750
Supplies Expense 750
c. Supplies Expense 750
Supplies 750
d. Supplies Expense 600
Supplies 600
6. Accumulated Depreciation is:
a. an expense account.
b. an owner’s equity account.
c. a liability account.
d. a contra asset account.
7. Queen an Company calculates depreciation on its equipment of $1,000 for
the month of June. The adjusting journal entry to
record this depreciation expense is:
a. Depreciation Expense 1,000
Accumulated
Depreciation—Equipment 1,000
b. Depreciation Expense 1,000
Equipment 1,000
c. Equipment Expense 1,000
Equipment 1,000
d. Accumulated
9
Depreciation—Equipment 1,000
Equipment 1,000
8. Adjustments for prepaid expenses:
a. decrease assets and increase revenues.
b. decrease expenses and increase assets.
c. decrease assets and increase expenses.
d. decrease revenues and increase assets.
9. A company records all cash received in advance of providing a service as a
liability. At the end of the accounting period, an
adjustment for unearned revenues is required to:
a. decrease liabilities and increase revenues.
b. increase assets and increase revenues.
c. decrease revenues and increase liabilities.
d. decrease revenues and decrease assets.
10. A bank has a three-month, 4%, $6,000 note receivable,
issued on November 1. Interest is due at maturity. What adjusting entry should
the bank record on November 30?
a. Cash 20
Interest Revenue 20
b. Interest Receivable 20
Interest Revenue 20
c. Interest Receivable 60
Unearned Revenue 60
d. Interest Receivable 60
Interest Revenue 60

10
11. Kathy Kiska earned a salary of $400 in the last week
of September. She will be paid for this in October. The adjusting
entry for Kathy’s employer at September 30 is:
a. Salaries Expense 400
Salaries Payable 400
b. Salaries Expense 400
Cash 400
c. Salaries Payable 400
Cash 400
d. No entry is required.
12. Which of the following statements about the adjusted
trial balance is incorrect?
a. An adjusted trial balance proves that the total debit balances
and the total credit balances in the ledger are equal after all
adjustments are made.
b. The adjusted trial balance is prepared after preparing financial statements.
c. The adjusted trial balance is used to prepare the financial
statements.
d. The adjusted trial balance proves that the total debits in the
adjusting journal entries are equal to the total credits in the
adjusting journal entries.

1. When a loss has occurred, the journal entry to close the

Income Summary account is:

11
 a. debit Income Summary; credit Owner’s Capital.
b. debit Owner’s Capital; credit Income Summary.
c. debit Income Summary; credit Owner’s Drawings.
d. debit Owner’s Drawings; credit Income Summary.
2. After the closing entries have been posted, the balance in
the Owner’s Capital account should equal:
a. the profit or loss reported on the income statement.
b. the opening capital balance reported on the statement of
owner’s equity.
c. the ending capital balance reported on the statement of owner’s equity
and balance sheet.
d. the opening capital balance plus any investments made by
the owner during the period.
3. Which accounts will appear in the post-closing trial
balance?
a. Assets, liabilities, and Owner’s Capital
b. Revenues, expenses, Owner’s Drawings, and Owner’s Capital
c. Assets, liabilities, revenues, and expenses
d. All accounts
4. The proper order of the following steps in the accounting
cycle is:
a. prepare unadjusted trial balance, journalize transactions,
post to ledger accounts, journalize and post adjusting
entries.
b. journalize transactions, prepare unadjusted trial balance,
12
 post to ledger accounts, journalize and post adjusting
entries.
c. journalize transactions, post to ledger accounts, prepare
unadjusted trial balance, journalize and post adjusting
entries.
d. prepare unadjusted trial balance, journalize and post
adjusting entries, journalize transactions, post to ledger accounts.
5. All of the following are required steps in the accounting
cycle, except:
a. Journalizing and posting closing entries
b. Preparing financial statements
c. Analyzing transactions
d. Preparing a work sheet
6. When Zander Company purchased supplies worth $500,
it incorrectly recorded a credit to Supplies for $5,000 and a debit to
Cash for $5,000. Before correcting this error:
a. Cash is overstated and Supplies is overstated.
b. Cash is understated and Supplies is understated.
c. Cash is understated and Supplies is overstated.
d. Cash is overstated and Supplies is understated.
7. Cash of $100 is received at the time a service is provided.
The transaction is journalized and posted as a debit to Accounts Receivable
of $100 and a credit to Service Revenue of $100. The correcting entry is:
a. Accounts Receivable 100
Service Revenue 100
13
 b. Service Revenue 100
Accounts Receivable 100
c. Cash 100
Service Revenue 100
d. Cash 100
Accounts Receivable 100
8. Which of the following statements about classifying assets is correct?
a. Supplies are not current assets and should be included as part
of property, plant, and equipment on the balance sheet.
b. Current assets normally are cash and other assets that will be
converted to cash, sold, or used up within one year from the
balance sheet date.
c. Some companies use a period shorter than one year to classify
assets as current because they have an operating cycle that is
shorter than one year.
d. Prepaid expenses are considered non-current assets because
they are intangible assets.
9. Non-current liabilities:
a. are obligations that are expected to be paid before one year
from the balance sheet date.
b. cannot be called long-term liabilities.
c. are sometimes listed on the balance sheet before current liabilities, if the
company is following International Financial
Reporting Standards.
d. include accounts payable, salaries payable, and interest
14
 payable.
10. A company reports current assets of $15,000 and current liabilities of
$10,000. Its current ratio is:
a. $5,000.
b. 67%.
c. 1.5:1.
d. unknown without information about the amount of cash,
short-term investments, and receivables, which is needed to
calculate the ratio.
11. In a work sheet, profit is entered in the following
columns:
a. income statement (Dr.) and balance sheet (Dr.).
b. income statement (Cr.) and balance sheet (Dr.).
c. income statement (Dr.) and balance sheet (Cr.).
d. income statement (Cr.) and balance sheet (Cr.).
12. On December 31, 2021, Mott Company correctly made
an adjusting entry to recognize $2,000 of accrued salaries payable. On
January 8 of the next year, total salaries of $3,400 were paid. Assuming the
correct reversing entry was made on January 1, the entry on
January 8 will result in a credit to Cash of $3,400, and the following
debit(s):
a. Salaries Expense $3,400.
b. Salaries Payable $1,400, and Salaries Expense $2,000.
c. Salaries Payable $2,000, and Salaries Expense $1,400.
d. Salaries Payable $3,400.

15
 1. The time period assumption states that:
(a) companies must wait until the calendar year is
completed to prepare fi nancial statements.
(b) companies use the fi scal year to report fi nancial
information.
(c) the economic life of a business can be divided into artificial time periods.
(d) companies record information in the time period
in which the events occur.
2. The revenue recognition principle states that:
(a) revenue should be recognized in the accounting period in which a
performance obligation is satisfied.
(b) expenses should be matched with revenues.
(c) the economic life of a business can be divided
into artificial time periods.
(d) the fiscal year should correspond with the calendar year.
3. Which of the following statements about the accrual
basis of accounting is false?
(a) Events that change a company’s fi nancial statements are recorded in the
periods in which the
events occur.
(b) Revenue is recognized in the period in which services are performed.
(c) The accrual basis is in accordance with IFRS.
(d) Revenue is recorded only when cash is received,
and expense is recorded only when cash is paid.

16
 4. The principle or assumption dictating that efforts
(expenses) be matched with accomplishments (revenues) is the:
(a) expense recognition principle.
(b) cost assumption.
(c) time period assumption.
(d) revenue recognition principle.
5. Adjusting entries are made to ensure that:
(a) expenses are recognized in the period in which
they are incurred.
(b) revenues are recorded in the period in which
services are performed.
(c) statement of financial position and income statement accounts have
correct balances at the end
of an accounting period.
(d) All the responses above are correct.
6. Each of the following is a major type (or category) of
adjusting entries except:
(a) prepaid expenses.
(b) accrued revenues.
(c) accrued expenses.
(d) recognized revenues.
7. The trial balance shows Supplies NT$13,500 and
Supplies Expense NT$0. If NT$6,000 of supplies
are on hand at the end of the period, the adjusting
entry is:
17
 (a) Supplies 6,000
Supplies Expense 6,000
(b) Supplies 7,500
Supplies Expense 7,500
(c) Supplies Expense 7,500
Supplies 7,500
(d) Supplies Expense 6,000
Supplies 6,000
8. Adjustments for prepaid expenses:
(a) decrease assets and increase revenues.
(b) decrease expenses and increase assets.
(c) decrease assets and increase expenses.
(d) decrease revenues and increase assets.
9. Accumulated Depreciation is:
(a) a contra asset account.
(b) an expense account.
(c) an equity account.
(d) a liability account.
10. Queen an Company computes depreciation on delivery equipment at
HK$10,000 for the month of June.
The adjusting entry to record this depreciation is as
follows.
(a) Accumulated Depreciation—
Queen an Company 10,000
Depreciation Expense 10,000
18
 (b) Depreciation Expense 10,000
Equipment 10,000
(c) Depreciation Expense 10,000
Accumulated Depreciation— Equipment 10,000
(d) Equipment Expense 10,000
Accumulated
Depreciation—
Equipment 10,000
11. Adjustments for unearned revenues:
(a) decrease liabilities and increase revenues.
(b) have an assets-and-revenues-account relationship.
(c) increase assets and increase revenues.
(d) decrease revenues and decrease assets.
12. Adjustments for accrued revenues:
(a) have a liabilities-and-revenues-account relationship.
(b) have an assets-and-revenues-account relationship.
(c) decrease assets and revenues.
(d) decrease liabilities and increase revenues.
13. Kathy Siska earned a salary of R$400 for the last
week of September. She will be paid on October 1.
The adjusting entry for Kathy’s employer at September 30 is:
(a) No entry is required.
(b) Salaries and Wages Expense 400
Salaries and Wages Payable 400

19
 (c) Salaries and Wages Expense 400
Cash 400
(d) Salaries and Wages Payable 400
Cash 400
14. Which of the following statements is incorrect concerning the adjusted
trial balance?
(a) An adjusted trial balance proves the equality
of the total debit balances and the total credit
balances in the ledger after all adjustments are
made.
(b) The adjusted trial balance provides the primary
basis for the preparation of fi nancial statements.
(c) The adjusted trial balance lists the account balances segregated by assets
and liabilities.
(d) The adjusted trial balance is prepared after the
adjusting entries have been journalized and
posted.
*15. The trial balance shows Supplies €0 and Supplies
Expense €1,500. If €800 of supplies are on hand at
the end of the period, the adjusting entry is:
(a) debit Supplies 800 and credit Supplies Expense
800.
(b) debit Supplies Expense 800 and credit Supplies
800.
(c) debit Supplies 700 and credit Supplies Expense

20
 700.
(d) debit Supplies Expense 700 and credit Supplies
700.
*16. Neutrality is an ingredient of: Faithful Representation Relevance
(a) Yes Yes
(b) No No
(c) Yes No
(d) No Yes
*17. Which item is a constraint in financial accounting?
(a) Comparability.
(b) Materiality.
(c) Cost.
(d) Consistency

1. Which of the following statements is incorrect concerning the worksheet?

(a) The worksheet is essentially a working tool of the
accountant.
(b) The worksheet is distributed to management and other interested
parties.
(c) The worksheet cannot be used as a basis for posting to ledger accounts.
(d) Financial statements can be prepared directly
from the worksheet before journalizing and posting the adjusting entries.
2. In a worksheet, net income is entered in the following columns:
(a) income statement (Dr) and statement of financial position (Dr).
(b) income statement (Cr) and statement of financial position (Dr).
21
 (c) income statement (Dr) and statement of financial position (Cr).
(d) income statement (Cr) and statement of financial position (Cr).
3. In the unadjusted trial balance of its worksheet for the year ended
December 31, 2017, Taitum Company reported Equipment of £120,000. The
year-end adjusting entries require an adjustment of £15,000 for depreciation
expense for the equipment. After the adjusted trial balance is completed,
what amount should be shown in the fi nancial statement columns?
(a) A debit of £105,000 for Equipment in the statement of fi nancial position
column.
(b) A credit of £15,000 for Depreciation Expense—Equipment in the income
statement column.
(c) A debit of £120,000 for Equipment in the statement of fi nancial position
column.
(d) A debit of £15,000 for Accumulated Depreciation—
Equipment in the statement of fi nancial position
column.
4. An account that will have a zero balance after closing entries have been
journalized and posted is:
(a) Service Revenue.
(b) Supplies.
(c) Prepaid Insurance.
(d) Accumulated Depreciation—Equipment.
5. When a net loss has occurred, Income Summary is:
(a) debited and Retained Earnings is credited.
(b) credited and Retained Earnings is debited.
(c) debited and Dividends is credited.
(d) credited and Dividends is debited.

22
 6. The closing process involves separate entries to close
(1) expenses, (2) dividends, (3) revenues, and (4) income
summary. The correct sequencing of the entries is:
(a) (4), (3), (2), (1)
(b) (1), (2), (3), (4)
(c) (3), (1), (4), (2)
(d) (3), (2), (1), (4)
7. Which types of accounts will appear in the post-closing trial balance?
(a) Permanent (real) accounts.
(b) Temporary (nominal) accounts.
(c) Accounts shown in the income statement columns
of a worksheet.
(d) None of these answer choices is correct.
8. All of the following are required steps in the accounting cycle except:
(a) journalizing and posting closing entries.
(b) preparing fi nancial statements.
(c) journalizing the transactions.
(d) preparing a worksheet.
9. The proper order of the following steps in the accounting cycle is:
(a) prepare unadjusted trial balance, journalize
transactions, post to ledger accounts, journalize
and post adjusting entries.
(b) journalize transactions, prepare unadjusted trial
balance, post to ledger accounts, journalize and

23
 post adjusting entries.
(c) journalize transactions, post to ledger accounts, prepare unadjusted trial
balance, journalize and post adjusting entries.
(d) prepare unadjusted trial balance, journalize and
post adjusting entries, journalize transactions,
post to ledger accounts.
10. When Alexander Company purchased supplies worth
£500, it incorrectly recorded a credit to Supplies for
£5,000 and a debit to Cash for £5,000. Before correcting this error:
(a) Cash is overstated and Supplies is overstated.
(b) Cash is understated and Supplies is understated.
(c) Cash is understated and Supplies is overstated.
(d) Cash is overstated and Supplies is understated.
11. Cash of NT$3,000 received at the time the service was
performed was journalized and posted as a debit to
Cash NT$3,000 and a credit to Accounts Receivable
NT$3,000. Assuming the incorrect entry is not reversed,
the correcting entry is:
(a) debit Service Revenue NT$3,000 and credit
Accounts Receivable NT$3,000.
(b) debit Accounts Receivable NT$3,000 and credit
Service Revenue NT$3,000.
(c) debit Cash NT$3,000 and credit Service Revenue
NT$3,000.
(d) debit Accounts Receivable NT$3,000 and credit
24
 Cash NT$3,000.
12. The correct order of presentation in a classifi ed statement of fi nancial
position for the following current
assets is:
(a) accounts receivable, cash, prepaid insurance,
inventories.
(b) cash, inventories, accounts receivable, prepaid
insurance.
(c) prepaid insurance, inventories, accounts receivable, cash.
(d) inventories, cash, accounts receivable, prepaid
insurance.
13. A company has purchased a tract of land. It expects to
build a production plant on the land in approximately
5 years. During the 5 years before construction, the
land will be idle. The land should be reported as:
(a) property, plant, and equipment.
(b) land expense.
(c) a long-term investment.
(d) an intangible asset.
14. In a classified statement of fi nancial position, assets
are usually classified using the following sequence of categories:
(a) current assets; non-current assets; property, plant,
and equipment; intangible assets.
(b) tangible assets; property, plant, and equipment;
long-term investments; current assets.
25
 (c) current assets; long-term investments; tangible
assets; intangible assets.
(d) intangible assets; property, plant, and equipment; long-term
investments; current assets.
15. Current assets are listed:
(a) by the reverse order of their expected conversion to cash.
(b) by importance.
(c) by longevity.
(d) alphabetically.
*16. On December 31, Frank Varies Company Ltd. correctly made an
adjusting entry to recognize €2,000 of accrued salaries payable. On January 8
of the next year, total salaries of €3,400 were paid. Assuming the correct
reversing entry was made on January 1, the entry on January 8 will result in a
credit to Cash €3,400 and the following debit(s):
(a) Salaries and Wages Payable €1,400 and Salaries
and Wages Expense €2,000.
(b) Salaries and Wages Payable €2,000 and Salaries
and Wages Expense €1,400.
(c) Salaries and Wages Expense €3,400.
(d) Salaries and Wages Payable €3,400.

26