Financial Accounting
Pre-Test Questions
Course Introduction
Financial Accounting introduces students to the fundamental principles and concepts used to prepare, analyze, and interpret financial statements. The course covers essential topics such as the accounting cycle, recording transactions, adjusting entries, and the preparation of key financial statements including the balance sheet, income statement, and cash flow statement. Emphasis is placed on understanding how financial information is used by external stakeholders such as investors, creditors, and regulators to make informed decisions. The course also explores the regulatory framework, ethical considerations, and the limitations of financial reporting, providing students with a solid foundation for further study in accounting and related disciplines.
Recommended Textbook College Accounting Chapters 1 9 22nd Edition by James
A. Heintz
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Chapter 1: Introduction to Accounting
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Q1) A(n)____________________ is owned by two or more people who assume the risks for the business and whose assets may be taken to pay creditors.
Answer: partnership
Q2) A corporation is usually managed by A) stockholders.
B) a professional manager.
C) a proprietor.
D) two or more partners.
Answer: B
Q3) ____________________ involves the application of standard review and testing procedures to be certain that proper accounting policies and practices have been followed.
Answer: Auditing
Q4) ____________________ is deciding the meaning and importance in various reports,which may include ratio analysis to help explain how pieces of information relate to one another.
Answer: Interpreting
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3
Chapter 2: Analyzing Transactions: the Accounting Equation
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Q1) Jason purchased office equipment for $4,800 in cash.This transaction would
A) increase assets and increase owner's equity.
B) increase assets and increase liabilities.
C) increase one asset and decrease another asset.
D) decrease assets and decrease liabilities.
Answer: C
Q2) Recognizing the effects of transactions on assets,liabilities,owner's equity,revenue,and expenses of a business is the processing function.
A)True
B)False
Answer: True
Q3) 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
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Chapter 3: The Double-Entry Framework
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Q1) The accounting equation must remain in balance.
A)True
B)False Answer: True
Q2) A trial balance is a list of all accounts showing the title and balance of each account.
A)True
B)False Answer: True
Q3) Prepaid insurance and supplies are assets because they will provide benefits for more than one month.
A)True
B)False Answer: True
Q4) The sum of the debits must equal the sum of the credits on the trial balance.
A)True
B)False Answer: True
Q5) The ____________________ balance is on the side that increases an account. Answer: normal
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Chapter 4: Journalizing and Posting Transactions
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Q1) Entering transactions in a journal is called posting.
A)True
B)False
Q2) When two digits in a debit or credit amount are reversed,a(n)____________________ has occurred.
Q3) Almost any document that provides information about a business transaction is included in the chart of accounts.
A)True
B)False
Q4) The information in the Posting Reference columns of the journal and the ledger that provides a link between the journal and the ledger is known as a(n)____________________.
Q5) If cash is paid for worker salaries,the transaction includes
A) debiting Salaries Expense and crediting Cash.
B) debiting Salaries Expense and crediting Accounts Payable.
C) debiting Salaries Expense and crediting Capital.
D) debiting Cash and crediting Salaries Expense.
Q6) An erasure may suggest that you are hiding something.
A)True
B)False
Page 6
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Chapter 5: Adjusting Entries and the Work Sheet
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Q1) The matching of assets and expenses of a business on a periodic basis is referred to as the matching concept.
A)True
B)False
Q2) Depreciable cost is the amount of depreciation expense recorded for each accounting period.
A)True
B)False
Q3) To record wages earned but not paid under the modified cash accounting method,
A) debit Wages Payable and credit Wages Expense.
B) debit Cash and credit Wages Expense.
C) debit Wages Expense and credit Wages Payable.
D) no entry is required.
Q4) Under the ____________________ principle,assets are recorded at their actual cost,and this cost remains on the books as long as the business owns an asset.
Q5) The work sheet columns that show the amounts that will be reported in the statement of owner's equity and the balance sheet are the ____________________.
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Chapter 6: Financial Statements and the Closing Process
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Q1) The income summary account is an account used only during the closing process. A)True
B)False
Q2) The ____________________ process gives zero balances to the temporary accounts so that they can accumulate information for the next accounting period.
Q3) A post-closing trial balance is used to prove the equality of debit and credit balances in the general ledger accounts after the closing entries have been posted.
A)True
B)False
Q4) After posting the adjusting entries,the balance of the depreciation expense account should agree with the amount shown on the income statement.
A)True B)False
Q5) (Appendix)A utility bill for $315 was paid.This activity is classified as A) operating. B) investing. C) financing. D) paying.
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Chapter 7: Accounting for Cash
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Q1) On a bank reconciliation,deposits that were not entered by the bank before the bank statement was prepared are known as
A) NSF deposits.
B) restrictive deposits.
C) deposits in transit.
D) unrecorded deposits.
Q2) Each person authorized to sign checks must sign a(n)____________________.
Q3) A supply of currency and coins kept in a cash drawer for use in handling sales transactions.
A)outstanding checks
B)cash
C)petty cash voucher
D)automated teller machines
E)change fund
F)internal control
G)credit memos
H)debit memos
Q4) A statement of account issued by a bank to each depositor once a month is known as a(n)____________________.
Q5) A(n)____________________ contains a listing of all items being deposited.
Page 9
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Chapter 8: Payroll Accounting: Employee Earnings and Deductions
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Q1) A(n)____________________ is a computerized system based on a software package that performs all payroll record keeping and prepares payroll checks.
Q2) Jillian Diaz receives a regular salary of $1,500 a month and is entitled to overtime pay at the rate of one and one-half times the regular hourly rate for any time worked in excess of 40 hours per week.Diaz's overtime pay rate is
A) $6.92.
B) $12.98.
C) $276.92.
D) $1,800.
Q3) Employers may use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay.
A)True
B)False
Q4) Form W-4 is a(n)
A) Social Security application form.
B) Employer's Quarterly Federal Tax Return.
C) Employee's Withholding Allowance Certificate.
D) Wage and Tax Statement.
Page 10
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Chapter 9: Payroll Accounting: Employer Taxes and Reports
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Q1) Employer payroll taxes include FUTA,SUTA,and ____________________ taxes.
Q2) One-half of the self-employment tax is really a personal expense to the owner of the business.
A)True B)False
Q3) In most states,if an employer has very few former employees who collect unemployment compensation,the employer qualifies for a lower state unemployment tax rate.
A)True
B)False
Q4) The date by which federal income tax withholding,Social Security,and Medicare taxes must be paid depends on the amount of these taxes.
A)True
B)False
Q5) 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.
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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Q1) If the owner has not made any additional investments during the period,the financial statements can be prepared directly from the work sheet.
A)True
B)False
Q2) A cash balance may be computed
A) daily.
B) weekly.
C) at the end of the accounting period.
D) whenever desired.
Q3) Professional service business enterprises include attorneys,physicians,dentists,public accountants,artists,and educators.
A)True
B)False
Q4) The amounts in the general columns of the combination journal should be posted A) daily.
B) weekly.
C) at the end of the accounting period.
D) whenever there is time.
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Q5) A(n)____________________ is a journal with special and general columns.