Accounting Test 2 Practice

27 Questions | By Emilyclairechris | Updated: Mar 21, 2022 | Attempts: 123

Questions

Settings

Create your own Quiz

Questions and Answers

1.

Which of the following businesses is most likely to use a periodic inventory system?
- A.
  
  A beer bar
- B.
  
  An aircraft manufacturer
- C.
  
  A supermarket that is part of a national chain
- D.
  
  An independently owned art gallery with a manual account system
2.

A periodic inventory system eliminates the need for:
- A.
  
  Taking an annual physical inventory
- B.
  
  Recording the revenue from sales transactions
- C.
  
  Recording the cost of merchandise sold as sales occur
- D.
  
  None of the above
3.

If management wants to know the cost and quantity of merchandise on hand at all times, the business will probably:
- A.
  
  Use a periodic inventory system
- B.
  
  Maintain an inventory subsidiary ledger
- C.
  
  Take a complete physical inventory each day
- D.
  
  Debit all purchases of merchandise directly to the Cost of Goods sold account
4.

In a perpetual inventory system, the entry to record the cost of goods sold always includes an entry of equal amount to the:
- A.
  
  Inventory account
- B.
  
  Sales Account
- C.
  
  Purchases account
- D.
  
  None of the above
5.

Prior to taking a physical inventory at year-end, the perpetual inventory records of Athena Designs showed an inventory of $26,000, sales of $358,000, and the cost of goods sold of $215,000. The year-end physical inventory indicated merchandise on hand costing $24,000. The company's gross profit for the year was:
- A.
  
  $334,000
- B.
  
  $145,000
- C.
  
  $141,000
- D.
  
  Some other amount
6.

The normal order in which the financial statements are prepared is:
- A.
  
  Balance Sheet, income statement, statement of retained earnings
- B.
  
  Income statement, statement of retained earnings, balance sheet
- C.
  
  Income tax return, income statement, balance sheet
- D.
  
  Income statement, statement of cash flows, balance sheet
7.

If Income Summary has a net credit balance, it signifies:
- A.
  
  A net loss
- B.
  
  Net income
- C.
  
  A reduction of net worth
- D.
  
  Dividends have been declared
8.

If a business closes its accounts only at year-end:
- A.
  
  Financial statements are prepared only at year-end
- B.
  
  Adjusting entries are made only at year-end
- C.
  
  Revenue and expense accounts reflect year-to-date amounts throughout the year
- D.
  
  Monthly and quarterly financial statements cannot be prepared
9.

Assets are considered current assets if they are cash or will usually be inverted into cash:
- A.
  
  Within a month or less
- B.
  
  Within 3 months
- C.
  
  Within a year or less
- D.
  
  Within 6 months or less
10.

Which account listed below is classified as contra-revenue account?
- A.
  
  Cost of Goods Sold
- B.
  
  Gross Profit
- C.
  
  Sales Discounts
- D.
  
  Purchases
11.

Gross Profit is the difference between:
- A.
  
  Net sales and the cost of goods sold
- B.
  
  The cost of merchandise purchased and the cost of merchandise sold
- C.
  
  Net sales and net income
- D.
  
  Net sales and all expenses
12.

The credit term2.10, n.30 means:
- A.
  
  That after 10 days 2% interest is charged
- B.
  
  That there is a 10% discount if payment is received within 30 days
- C.
  
  That there is a 2% discount if payment is received within 10 days, otherwise, full payment is due within 30 days
- D.
  
  There is a 10% discount if paid immediately and 2% if paid within 30 days
13.

The basic purpose of a subsidiary ledger is to:
- A.
  
  Provide a chronological record of all business transactions
- B.
  
  Provide details about the individual items comprising the balance of a general ledger account
- C.
  
  Enable accountants to prepare financial statements
- D.
  
  Provide persons outside of the organization with detailed information about the company's operations
14.

In a perpetual inventory system, two entries usually are made to record each sales transition. The purposes of these entries are best described as follows:
- A.
  
  On entry recognizes the sales revenue, and the other recognizes the cost of goods sold
- B.
  
  One entry records the purchase of the merchandise, and the other records the sale
- C.
  
  One entry records the cost of goods sold, and the other reduces the balance in the Inventory account
- D.
  
  One entry updates the general ledger, and the other updates the subsidiary ledgers
15.

Regal Artwork Co. records purchases net of all available purchase discounts. If the company makes payment after the discount has expired, the entry to record the payment should include a:
- A.
  
  Debit to Purchase Discount Lost
- B.
  
  Credit to Purchase Discount Lost
- C.
  
  Debit to Sales Discount
- D.
  
  Credit to Sales Discount
16.

The allowance for Doubtful Accounts will appear on the:
- A.
  
  Income Statement
- B.
  
  Balance Sheet
- C.
  
  Cash flow statement
- D.
  
  Owner's equity statement
17.

The bookkeeper prepare a check for $68 but accidentally recorded it as $86. When preparing the bank reconciliation, this should be corrected by:
- A.
  
  Adding $18 to the bank statement
- B.
  
  Subtracting $18 from the bank balance
- C.
  
  Adding $18 to the book balance
- D.
  
  Subtracting $18 from the book balance
18.

Financial assets:
- A.
  
  Consist of cash and cash equivalents
- B.
  
  Are reported at cost in the balance sheet
- C.
  
  Included short-term investments i marketable securities and receivables, as well as cash
- D.
  
  Are not very productive assets and should be kept to a minimum in a well-managed company
19.

When preparing a bank reconciliation, checks outstanding will:
- A.
  
  Increase the balance per depositor's records
- B.
  
  Decrease the balance per depositor's
- C.
  
  Increase the balance per the bank statement
- D.
  
  Decrease the balance per the bank statement
20.

When the account Allowance for Doubtful Accounts is used, writing-off of an uncollectible accounts receivable will:
- A.
  
  Reduce income
- B.
  
  Reduce an expense
- C.
  
  Not change income or total assets
- D.
  
  Increase total assets
21.

What is the equation for net income?
- A.
  
  Expenses + Taxes = Net Income
- B.
  
  Revenue - Expenses = Net Income
- C.
  
  Revenue - Expenses + Retained Earnings = Net Income
- D.
  
  Revenue - Dividends = Net Income
22.

What is the equation for Retained Earning at the end of a period?
- A.
  
  Inventory + Gross Profit = Retained Earnings
- B.
  
  Beginning Retained Earnings - Gross Profit - Inventory = Ending Retained Earnings
- C.
  
  Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings
- D.
  
  Beginning Retained Earnings + Dividends - Gross Profit = Ending Retained Earnings
23.

What do you increase on the statement of retained earnings?
- A.
  
  Dividends
- B.
  
  Business Earnings
- C.
  
  Income
- D.
  
  Business Losses (Depreciation)
24.

What do you decrease on the statement of retained earnings?
- A.
  
  Dividends
- B.
  
  Business Earnings
- C.
  
  Business Losses (Depreciation)
- D.
  
  Profit
25.

What goes under "Balance per Bank" when reconciling a bank statement?
- A.
  
  + Deposits in Transit
- B.
  
  - Deposits in Transit
- C.
  
  + Deposits by Bank
- D.
  
  - Deposits by Bank
- E.
  
  +/- Bank Adjustments
- F.
  
  +/- Book Adjustments
- G.
  
  + Outstanding Checks
- H.
  
  - Outstanding Checks
- I.
  
  - Service Charge
- J.
  
  + Service Charge
- K.
  
  + NSF Checks
- L.
  
  - NSF Checks