Basic Principles of Accounting Practice Test Questions & Chapter Exam

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1.5Typical accounting tasks include all of the following tasks except ________. LO
1.4The accounting information of a privately held company is generally available to all of the following except for ________. The security system for this website has been triggered.

• All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
• The understatement of expense causes income and equity to be overstated.
• You will receive your score and answers at the end.
• Next, Prepaid Insurance is debited for $22,000; to establish the correct ending debit balance of $10,000, one must record a $22,000 debit (the existing balance is a $12,000 credit).
• To correct and adjust the accounts first requires a debit to Insurance Expense for $2,000 (to reflect the expired amount).

We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. The $6,000 amount ($2,000 per day times 3 days) needs to be expensed for the work rendered. This amount should be recorded as a liability — it will be paid on Friday. No cash is disbursed on Wednesday. LO
1.2All of the following are examples of managerial accounting activities except ________. For multiple-choice and true/false questions, simply press or click on what you think is the correct answer.

Quiz & Worksheet Goals

Capital Stock is also increased and should be credited. This entry reflects that the $10,000 cash disbursement is recorded as $4,000 of expense (for Thursday and Friday) and a $6,000 payment of the payable that was established on Wednesday. $1,200. The only liabilities listed are accounts payable ($200) and bank loans ($1,000). The purchase of land would cause assets to increase and liabilities to increase. Dividends and net losses cause reductions in total equity, while investments cause increases.

The desired balance in the Allowance account is $37,500 ($750,000 X 5%). The Allowance account should be a credit balance; therefore, an adjustment of $46,500 is needed to convert from a $9,000 debit balance to a $37,500 credit balance. This adjustment would occur by debiting Uncollectible Accounts Expense and crediting the Allowance for Uncollectible Accounts for $46,500. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.

Accounting Test Questions

20X1 income was thereby overstated. 20X2’s income was reduced for the write-offs attributable to 20X1 sales, and accordingly was understated. Answers “a” and “b” both relate to the allowance methods — establishing the allowance and writing off an account against the allowance. Under the direct write-off method, expense is recorded at the same time the receivable is written off, as demonstrated by answer “c.” Answer “d” is not a typical journal entry. Both Accounts Receivable (an asset which is increased with a debit) and Service Revenue (increased with a credit) increase by the rendering of services on account.

Read more about the author. If you have difficulty answering the following questions, learn more about this topic by reading our Accounting Principles (Explanation). To reinstate a previously written-off account requires a reversal of the entry which was made at the time of write off. The Accumulated Depreciation account is for exactly this purpose. Note that the Equipment account is not directly credited.

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My students efficiently solve accounting problems with confidence in the allotted time. I want to show you how to do this with my Pass Accounting Class program. The journal entry would involve a debit to expense and a credit to a liability. Failure to record this entry causes expenses and liabilities to be understated. As a result of understating expenses, income and owner’s equity are overstated.

10. Transactions occur, are documented (source document), reduced to debit/credit form (journal entry), and posted to the ledger. From the ledger, a trial balance can be prepared. The Dividends account is increased with a debit and Cash is decreased with a credit. Accounts Payable and Service Revenue are not involved at all. Also, never record dividends as an expense — they are distributions of income.

• Failure to record this entry causes expenses and liabilities to be understated.
• Because total assets increased $240,000 and liabilities increased $120,000, the increase in equity must have been $120,000 ($240,000 – $120,000).
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• The journal entry would involve a debit to expense and a credit to a liability.

Payment of rent for the current period would be accounted for as rent expense. The repayment of a bank loan is the reduction of a liability, dividends are a distribution of equity, and the purchase of land establishes an asset. The Financial Accounting Standards Board is the private sector oversight group for accounting standards. The Federal Bureau of Investigation is a government organization that employs many accountants, but has little to do with accounting rule development.

This amount needs to be recorded into the Unearned Revenue account (credited). The accounting for revenue that has been earned and recorded is complete; no adjustment is needed. Multiperiod costs and revenues must be adjusted self-employment tax to reflect the amount consumed or generated in a given period, and the amount prepaid or unearned at the end of the period. Expenses incurred but not recorded (accrued) must be recorded via adjusting entries. $60,000.

Written by True Tamplin, BSc, CEPF®

Accountants use the information to make decisions by analyzing data and trends. This information can come from Financial Statements, internal reports, surveys, and other sources. By analyzing this data, accountants can make informed decisions to help the company achieve its goals. Land, an asset, is increased and should be debited.

The General Accounting Office and Internal Revenue Service are also government agencies. The GAO serves Congress and the IRS administers tax law. With NetSuite, you go live in a predictable timeframe — smart, stepped implementations begin with sales and span the entire customer lifecycle, so there’s continuity from sales to services to support. $46,500.

Transposition is the accidental reversing of two digits in a number. So, how did you score on the accounting principles practice test above? More importantly, did you really know the answers, or did you have to guess at some of the questions? Ideally, you should be able to answer those accounting questions with ease. If you can’t, you may want to get some more accounting practice.

Finally, Cash is credited for $24,000 (to correct the error which showed cash increasing by $12,000 when it really decreased by $12,000). Assets and expenses are increased with debits. Liabilities, equity, and revenues are increased with credits. Under the allowance method, uncollectible accounts are recorded by writing off the specific account receivable against the Allowance account.

What are the rules and regulations that must be followed when reporting all financial data?

All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. The amount paid on a normal payday should also be expensed. The expense and related payable would not have been previously recorded.

Completing the challenge below proves you are a human and gives you temporary access. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com.

Quizzes

When making decisions in accounting, it is essential to consider all relevant factors. Some of the factors that may be considered include the company’s financial position, Cash Flow, profitability, and business strategy. Test your knowledge with this multiple choice question (MCQ) test on accounting principles and concepts. If you’re unsure about any questions, you can read about this topic in detail in the explanation section.