Fundamentals of Financial Accounting Test Questions
Course Introduction
Fundamentals of Financial Accounting introduces students to the foundational principles, concepts, and techniques used in the preparation and interpretation of financial statements. This course covers essential topics such as the accounting cycle, double-entry bookkeeping, accruals and deferrals, and the recognition and measurement of assets, liabilities, equity, revenues, and expenses. By emphasizing the importance of accurate financial reporting, the course aims to equip students with the skills necessary to analyze financial information and make informed business decisions in compliance with generally accepted accounting principles (GAAP).
Recommended Textbook College Accounting Chapters 1 9 22nd Edition by James A. Heintz
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Page 2
Chapter 1: Introduction to Accounting
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Q1) A person who records,sorts,and files accounting information in accounting records may be referred to as a(n)
A) budgeter.
B) journalist.
C) accounting clerk.
D) scribe.
Answer: C
Q2) Entering financial information about events affecting the company into the accounting system is called ____________________.
Answer: recording
Q3) A business that purchases a product from another business to sell to customers is called a
A) service business.
B) manufacturing business.
C) merchandising business.
D) nonprofit business.
Answer: C
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Chapter 2: Analyzing Transactions: the Accounting Equation
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Q1) Falana received $7,000 in cash from a client for professional services rendered.This transaction would
A) increase assets and increase owner's equity.
B) decrease assets and increase owner's equity.
C) increase liabilities and decrease owner's equity.
D) decrease assets and decrease owner's equity.
Answer: A
Q2) Other terms used for owner's equity include net worth and capital. A)True
B)False
Answer: True
Q3) A(n)____________________ is an economic event that has a direct impact on the business.
Answer: business transaction
Q4) The ____________________ reports the investments and withdrawals by the owner,the profits and losses generated through operations,and how they have affected the capital account.
Answer: statement of owner's equity
Q5) ____________________ represent probable future benefits.
Answer: Assets
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Chapter 3: The Double-Entry Framework
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Sample Questions
Q1) The normal balance of a capital account
A) can be either a debit or a credit balance.
B) is a debit balance.
C) is a credit balance.
D) is called a footing.
Answer: C
Q2) Elysa paid $135 for utilities for her office; this transaction increased Cash and the expense account.
A)True
B)False
Answer: False
Q3) A credit
A) increases assets.
B) is on the right side.
C) decreases liabilities.
D) decreases owner's equity.
Answer: B
Q4) The total dollar amounts on the debit and credit sides of a T account are known as ____________________.
Answer: footings
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Chapter 4: Journalizing and Posting Transactions
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Q1) The purpose of a journal is to provide a chronological record of all transactions completed by the business.
A)True
B)False
Q2) The steps in the journalizing process include all of the following EXCEPT
A) enter the balance.
B) enter the debit.
C) enter the date.
D) enter the credit.
Q3) The simplest form of journal is one with
A) four columns.
B) three columns.
C) two columns.
D) one column.
Q4) The flow of data through the accounting information system includes analyzing transactions,journalizing,posting,and preparing a trial balance.
A)True
B)False
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Page 6
Chapter 5: Adjusting Entries and the Work Sheet
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Q1) The ____________________ is a form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements.
Q2) The original cost of an asset added to its salvage value represents the depreciable cost of an asset.
A)True
B)False
Q3) The time an asset is expected to last is called its
A) depreciation.
B) fiscal period.
C) net loss value.
D) useful life.
Q4) Depreciable cost is the amount of depreciation expense recorded for each accounting period.
A)True
B)False
Q5) A 12-month fiscal year can end on any month of the calendar year.
A)True
B)False
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Chapter 6: Financial Statements and the Closing Process
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Q1) Long-term liabilities may also be called long-term debt.
A)True
B)False
Q2) Number in their proper order the following steps in the accounting cycle.
____a. Frepare a trial balance.
____b. Post to the general ledger accounts.
____c. Journalize and post the closing entries.
____d. Complete an end-of-period work sheet.
____e. Prepare a post-closing trial bal ance.
____f. Journalize and post the adjusting entries.
____g. Analyze source documents.
____h. Record the adjusting entries on a work sheet.
____i. Joumalize the transactions.
____j. Prepare the financial statements.
Q3) The ____________________ balance sheet shows the liabilities and owner's equity sections below the asset section.
Q4) To close the drawing account with a debit balance,credit the account for its balance and debit the owner's capital account.
A)True
B)False
Page 8
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Chapter 7: Accounting for Cash
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Q1) Whenever the bank mails a credit memo to the depositor indicating the amount of interest credited to the account,the transaction that would be entered in the accounting records of the depositor would include
A) debiting Interest Earned and crediting Cash.
B) debiting Interest Expense and crediting Cash.
C) debiting Cash and crediting Interest Earned.
D) debiting Cash and crediting Interest Expense.
Q2) Outstanding checks are checks issued that have not yet been presented to the bank for payment.
A)True
B)False
Q3) The term "cash" has several different meanings.
A)True B)False
Q4) Each person authorized to sign checks must sign a(n)____________________.
Q5) Every person authorized to sign checks for a business must complete and sign a signature card for the bank.
A)True
B)False
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Chapter 8: Payroll Accounting: Employee Earnings and Deductions
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Q1) The Fair Labor Standards Act provides which of the following minimum rates to be paid to employees for all hours worked over 40 hours per week?
A) one and one-half times the regular rate
B) same rate as the regular rate
C) two and one-half times the regular rate
D) two times the regular rate
Q2) The ____________________ account is credited for the Social Security tax withheld from an employee's earnings.
Q3) The ____________________ requires employers to determine the amount to withhold from an employee's gross pay for a specific time period from the appropriate wage-bracket table provided by the Internal Revenue Service.
Q4) Both manual and electronic payroll systems require the same payroll input and output.
A)True
B)False
Q5) FICA taxes include amounts for both Social Security but not Medicare programs.
A)True
B)False
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Q6) An employee's total earnings are also known as ____________________.
Chapter 9: Payroll Accounting: Employer Taxes and Reports
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Q1) A self-employment tax is a contribution to the A) charities of the individual owner's choice.
B) SUTA programs.
C) FUTA programs.
D) Social Security and Medicare programs.
Q2) Employers use the ____________________ to transmit employees' W-2 forms to the Social Security Administration.
Q3) The due date for payroll taxes is not the same date for all employers.
A)True
B)False
Q4) The self-employment tax rate is double the rate of
A) Social Security and Medicare taxes.
B) FUTA taxes.
C) SUTA taxes.
D) property taxes.
Q5) By January 31 each year,employers must furnish each employee with a Wage and Tax Statement.
A)True
B)False
Q6) Employers report payroll taxes withheld each quarter using
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Chapter 10: Module Accounting For A Professional Service
Business The Combination Journal
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Sample Questions
Q1) The column in the combination journal where the account number is entered after posting is the ____________________.
Q2) Which of the following is the proper sequence for end-of-the-month work with the combination journal?
A) complete the individual postings,total and rule the columns,prove the journal,complete the summary postings
B) prove the journal,total and rule the columns,complete the individual posting,complete the summary postings
C) total and rule the columns,complete the individual postings,complete the summary postings,prove the journal
D) total and rule the columns,complete the summary postings,complete the individual postings,prove the journal
Q3) Professional service enterprises include real estate,insurance,advertising,transportation,and various other firms.
A)True
B)False
Q4) ____________________ are meant for frequently used accounts.
Q5) A(n)____________________ is a journal with special and general columns.
Page 12
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