Basic Accounting Exam Practice Tests
Course Introduction
Basic Accounting introduces students to the fundamental principles and practices of accounting, focusing on the systematic recording, reporting, and analysis of financial transactions. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation of key financial statements (balance sheet, income statement, and cash flow statement), and an understanding of assets, liabilities, and equity. Students will also gain foundational skills in interpreting financial information, basic internal controls, and the ethical considerations in accounting, providing a solid base for further studies in business and finance.
Recommended Textbook
Fundamental Financial Accounting Concepts 10th Edition by Thomas P Edmonds
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13 Chapters
1246 Verified Questions
1246 Flashcards
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Page 2
Chapter 1: An Introduction to Accounting
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) All of a business's temporary accounts appear on the income statement.
A)True
B)False
Answer: False
Q2) Borrowing cash from the bank is an example of which type of transaction?
A)Asset source
B)Claims exchange
C)Asset use
D)Asset exchange
Answer: A
Q3) Algonquin Company reported assets of $50,000,liabilities of $22,000 and common stock of $15,000.Based on this information only,what is the amount of the company's retained earnings?
A)$7,000.
B)$57,000.
C)$13,000.
D)$87,000.
Answer: C
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Chapter 2: Accounting for Accruals and Deferrals
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92 Verified Questions
92 Flashcards
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Sample Questions
Q1) What is the amount of net cash flows from operating activities that will be reported on the Year 1 statement of cash flows?
A)$400
B)$600
C)$1,400
D)$1,200
Answer: B
Q2) Recognizing an expense may be accompanied by which of the following?
A)An increase in liabilities
B)A decrease in liabilities
C)A decrease in revenue
D)An increase in assets
Answer: A
Q3) Which of the following is an asset source transaction?
A)Issued common stock
B)Paid a cash dividend to stockholders
C)Collected cash from customers in settlement of accounts receivable
D)Accrued salary expense
Answer: A
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Chapter 3: The Double-Entry Accounting System
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) On October 1,Year 1,Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200.On December 31,Year 1,the required adjusting entry was recorded.What are the adjusted account balances at December 31,Year 1?
A)Prepaid Rent,$300;Rent Expense,$900
B)Prepaid Rent,$1,200;Rent Expense,$0
C)Prepaid Rent,$0;Rent Expense,$1,200
D)Prepaid Rent,$900;Rent Expense,$300
Answer: D
Q2) A business's chart of accounts is prepared to verify the equality of debits and credits.
A)True
B)False
Answer: False
Q3) The balance in Retained Earnings is decreased by debiting the account.
A)True
B)False
Answer: True
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Chapter 4: Accounting for Merchandising Businesses
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Which of the following statements regarding a multistep income statement is true?
A)When a company sells inventory for more than its cost,the difference between the sales revenue and the cost of goods sold is called the operating income.
B)A single-step income statement shows sales,gross margin,and net income.
C)Gross margin is calculated as sales revenue minus cost of goods sold.
D)Gross margin equals net income.
Q2) Which of the following describes the purpose of a common size financial statement?
A)Compare the amount of common stock to other types of stock
B)Make comparisons between firms of different sizes
C)Make comparisons between different time periods
D)Make comparisons between firms of different sizes and between different time periods
Q3) The beginning inventory plus cost of goods sold equals the cost of goods available for sale during the period.
A)True
B)False
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Chapter 5: Accounting for Inventories
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Which of the following statements is not correct regarding the importance of inventory turnover to a company's profitability?
A)Companies will prefer to have a low inventory turnover rather than a high inventory turnover.
B)It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin.
C)A company's profitability is affected by how rapidly inventory sells.
D)A company's profitability is affected by the spread between cost and selling price.
Q2) Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest number of inventory write-downs?
A)Each individual inventory item
B)Average of cost of goods sold for the past three years
C)Major classes or categories of inventory
D)The entire stock of inventory in the aggregate
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7
Chapter 6: Internal Control and Accounting for Cash
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Sample Questions
Q1) On April 30,Midwest Company established a petty cash fund of $1,000.On May 1,a disbursement of $355 was made from the fund for payment of delivery expense.What entry should be made on May 1 to record this disbursement?
A)Debit delivery expense and credit cash for $355.
B)Debit petty cash and credit cash for $355.
C)Debit delivery expense and credit petty cash for $355.
D)No entry is necessary on May 1.
Q2) A bank reconciliation normally begins with the ending cash balance shown on the bank statement and reconciles it to the unadjusted cash account balance on the company's books.
A)True
B)False
Q3) Requiring segregation of duties in a business eliminates the need for the work of one employee to serve as a check on the work of other employees.
A)True
B)False
Q4) Most audits result in unqualified audit opinions.
A)True
B)False
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Chapter 7: Accounting for Receivables
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Sample Questions
Q1) Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900,respectively.During Year 2,Allegheny wrote off $1,500 of Uncollectible Accounts.Using the percent of receivables method,Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600.What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?
A)$2,200
B)$1,500
C)$700
D)$1,600
Q2) When is it acceptable to use the direct write-off method?
A)If the dollar amount of uncollectible accounts is not material.
B)If most uncollectible accounts do not occur in the period of sale.
C)If most sales are made to other businesses.
D)All of these answer choices are correct.
Q3) What does the accounts receivable turnover ratio measure?
A)How quickly accounts receivable turn into cash
B)How quickly the accounts receivable balance increases
C)Average balance of accounts receivables
D)How quickly inventory turns into accounts receivable
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Chapter 8: Accounting for Long-Term Operational Assets
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) When Company X purchases Company Y,Company X should record Company Y's assets at their fair value at the time of the acquisition.
A)True
B)False
Q2) A trademark is a tangible asset with an indefinite useful life.
A)True
B)False
Q3) On January 1,Year 1 Missouri Co.purchased a truck that cost $57,000.The truck had an expected useful life of 10 years and a $6,000 salvage value.Missouri uses the double declining-balance method.What is the amount of depreciation expense recognized in Year 2?
A)$9,120
B)$11,400
C)$10,200
D)$8,160
Q4) An expenditure that improves the quality of service provided by a plant asset is added to the historical cost of the asset.
A)True
B)False
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Chapter 9: Accounting for Current Liabilities and Payroll
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86 Flashcards
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Sample Questions
Q1) The current ratio is calculated as total current assets divided by total assets.
A)True
B)False
Q2) What is (are)the term(s)used to describe the party who borrows money as evidenced by a note payable?
A)Maker
B)Payee
C)Issuer
D)Issuer and maker
Q3) Which of the following items would most likely not be classified as a current asset?
A)Office equipment
B)Merchandise inventory
C)Office supplies
D)Prepaid rent
Q4) Joseph Company is preparing to repay a one-year note on May 1,Year 2.The first step in this process is to accrue eight months of interest expense.
A)True
B)False
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11
Chapter 10: Accounting for Long-Term Debt
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) What is the amount of interest expense appearing on the income statement for the year ending December 31,Year 3?
A)$17,500
B)$12,500
C)$14,250
D)$15,000
Q2) On January 1,Year 1,Strang Incorporated issued bonds with a face value of $500,000,a stated rate of interest of 8%,and a 5-year term to maturity.The effective rate of interest was 10%.Interest is payable in cash on June 30 and December 31 of each year.Which of the following statements is true?
A)This bond was issued at a premium,and each semiannual cash payment is $25,000.
B)This bond was issued at a discount,and each semiannual cash payment is $20,000.
C)This bond was issued at a discount,and the annual interest expense is $40,000.
D)This bond was issued at a premium,and the annual interest expense is $40,000.
Q3) The effective interest rate method of amortizing bond discounts and premiums results in a constant amount of interest expense every period.
A)True
B)False
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12
Chapter 11: Proprietorships,partnerships,and Corporations
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Sample Questions
Q1) The balance sheet of a sole proprietorship will report two equity accounts: one for amounts contributed by the owner,and one for the earnings of the business.
A)True
B)False
Q2) What is the number of shares outstanding after the stock dividend is issued?
A)57,750
B)55,000
C)52,250
D)525,000
Q3) Which of the following terms designates the maximum number of shares of stock that a corporation may issue?
A)Number of shares issued
B)Number of shares authorized
C)Par value
D)Number of shares outstanding
Q4) The class or type of stock that every corporation must have is preferred stock.
A)True
B)False
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Chapter 12: Statement of Cash Flows
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88 Flashcards
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Sample Questions
Q1) Ervin Company began the accounting period with $64,000 in accounts receivable.The ending balance in accounts receivable was $40,000.If the credit sales during the period were $588,000,what is the amount of cash received from customers?
A)$564,000
B)$612,000
C)$24,000
D)$548,000
Q2) The amount of revenue a company recognizes on the income statement normally differs from the amount of cash collected from customers.
A)True
B)False
Q3) Which of the following cash transactions is not classified as an operating activity?
A)Cash paid for interest.
B)Cash paid for dividends.
C)Cash received from dividends.
D)All of these answer choices would not be shown under operating activities.
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14
Chapter 13: Financial Statement Analysis
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108 Flashcards
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Sample Questions
Q1) The accounts receivable turnover ratio can be used to asses a firm's solvency.
A)True
B)False
Q2) Working capital is current assets minus current liabilities.
A)True
B)False
Q3) The return on investment measure is also referred to as:
A)Net margin.
B)Return on equity.
C)Return on debt.
D)Return on assets.
Q4) Knell Company paid its sales employees $15,000 in sales commissions.What impact will this transaction have on the firm's working capital?
A)No impact
B)Increase it
C)Decrease it
D)Not enough information is provided to answer the question.
Q5) The current ratio is one of the most common measures of solvency.
A)True
B)False
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