Bookkeeping Basics Practice Test

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• Which financial statement provides aggregate data on cash inflows and outflows from operating activities and investments?
• What is the primary purpose of the accounting cycle?
• Lou's total operating expenses for the previous month are ______.
• If you record a cash sale, which account is debited?
• Using the accounting equation, what is Mary's Owner Equity as of December 31, 2020 given assets $760,000 and liabilities $240,000?
• An owner invests $1000 in the company. This transaction impacted the checking account and the owner's equity account. In your journal entry, which account do you credit?
• Which accounts typically increase with a debit and have a debit balance?
• If the owner contributes cash to the business, what is the effect on the accounting equation?
• Financial reports should be produced before any adjustments have been made.
• Which of the following best defines a credit as it's used in double-entry accounting?
• When a business pays a repair bill by check, which accounting entry best describes the payment in the vendor's records?
• This ledger shows all transactions impacting the cash account this week. Calculate the balance.
• Which journal entry could represent a cash purchase of equipment?
• Lou made _______ in landscaping income last month.
• Pepper Consulting purchased computers on credit from PYO Suppliers and recorded the transaction in the journal. Which entry correctly reflects this purchase?
• Which statement about debits and credits is true?
• Under cash-basis accounting, when are expenses recorded?
• In the transaction where Visa is involved with advertising expense, Visa is what type of account?
• To record the journal entry, we will ____ the advertising expense account and _____ the Visa account.
• Which statement is true about cash-basis accounting?
• Who is primarily responsible for entering general journal entries?
• On which date did Lou rent equipment paid by credit card?
• Mike Anderson’s end-of-year equity is calculated after asset and liability changes: assets +$120,000 and liabilities +$72,000 during 2020. Beginning assets $500,000 and liabilities $175,000. What is equity as of December 31, 2020?
• Under the Monetary Unit Assumption, how should gains or losses from changes in the value of inventory be reflected?
• Which accounting assumption allows bookkeepers to break a company's financial life into smaller chunks of time?
• Which financial statement shows revenues and expenses to determine net income?
• Beginning 2019, assets $800,000 and liabilities $185,000. If assets decrease $52,000 and liabilities increase $24,000 during 2020, what is equity at end of 2020?
• Using personal funds for business expenses violates which accounting assumption?
• When revenue is earned on credit, which entries are recorded?
• Lou's net income on his income statement is _______.
• Which statement describes the Entity Concept?
• Which financial statement shows the owner’s change in capital over time?
• Depreciation of a vehicle is an adjusting-entry item that can be recorded in the accounts.
• If Lou opened a line of credit at the tractor supply store and used it to purchase $600 in inventory, how would you categorize the $600 borrowed from the store?
• Which scenario would increase owner's equity?
• Printing Pros hired a new employee for a big April job; the first paycheck arrived at the beginning of May. When should the expense be recognized?
• When a $100 customer payment is recorded in QuickBooks Online, which account would be debited for $100 in the Transaction Journal?
• Which statement best describes the relationship between the general ledger and the trial balance?
• True or False: Journal entries require a good understanding of debits and credits.
• A sales manager purchases office supplies with the company credit card. This transaction impacts the accounts payable and the office supplies accounts. In your journal entry, which account do you credit?
• Which task would be least likely for a bookkeeper?
• Which statement best describes the Going Concern assumption?
• Which statement best describes the required contents of a journal entry?
• Under Cash-Basis accounting, when would a business recognize its expenses?
• To post a debit to the advertising expense ledger, we would record $100 on the ___ side.
• Which of the following best defines a debit as it's used in double-entry accounting?
• The total debits for the Trial Balance equal:
• Which transaction shows payment by check for advertising?
• Advertising expense payment method?
• Which document shows the balances of all ledger accounts to verify that debits equal credits?
• The digits of the account numbers assigned to general ledger accounts often have significance. For example, a leading '1' might signify an asset account.
• In a credit sale (sale on account), which account is credited?
• A trial balance where total debits equal total credits indicates:
• If the advertising expense increases with a debit, what happens to the expense balance?
• How is net income calculated?
• When would it be acceptable to use Manual Journal entries to hide or disguise certain financial transactions?
• In Pepper Consulting's first month, total debits to the cash account were $900 and total credits were $600. What is the ending cash balance?
• Which of the following would be recorded as an asset when purchased with cash?
• Which financial statement lists assets, liabilities, and equity on a single date?
• What would you include on a Balance Sheet to show the amount owed by customers?
• Accounts payable would be an example of what kind of account?
• A company is considered a Going Concern when it:
• When a service is performed for a customer who has not yet paid, which type of journal entry is required?
• For a seasonal business, which statement would show monthly cash inflows and outflows?
• Under accrual accounting, when are revenues recognized?
• Which principle requires disclosure of all important information in the notes to financial statements?
• Which concept states that business transactions should be recorded separately from the owner's personal transactions?
• Which financial statement shows a company’s revenue and expenses over a period of time?
• Which assumption presumes the business will continue to operate for the foreseeable future?
• Which accounting method reports revenues when earned and expenses when incurred?
• If a customer pre-pays for a service and later applies that payment to a future service, which entry is used?
• What term describes a form listing the titles and balances of all ledger accounts at a specific date?
• Rudiger has just recorded and posted his business transactions to the ledger. His next step in the accounting cycle is to _______.
• Lou purchased his truck for $32,000. He paid $2,000 cash and took out a $30,000 loan. Select the correct journal entry.
• In double-entry bookkeeping, which side of an asset account normally increases with a debit?
• Which statement best describes the Periodicity Assumption?
• Which of the following lists general ledger account balances at the end of a reporting period, before any adjusting entries are made?
• What is the primary purpose of a journal entry?
• On which date did Lou purchase a bicycle?
• What is the total amount of the business-related expenses shown, excluding personal purchases?
• Which journal entry could represent a cash sale of equipment?
• Which financial statement reports the sources and uses of cash by a business?
• If a client who paid you in cash asks you to omit that income from the financial records, is it appropriate to comply?
• Which statement shows the financial position of a company on a specific date?
• An owner has deposited customer payments into the business's bank account. The appropriate entry is?
• Caren Cosmos is the world's most popular soft rock folk singer. She sold t-shirts online last year and made $7,000. The money from these sales went directly into her personal banking account which she used for her personal needs. Which key accounting assumption did Caren ignore?
• Which set of tasks would a bookkeeper typically perform?
• Accounts receivable would be an example of what kind of account?
• An unadjusted trial balance is prepared before adjusting entries are made.
• In a journal entry that increases the Equipment account and decreases the Cash account, which descriptions correctly reflect the changes?
• Using the accrual method provides a fuller picture of the business state.
• Who should manually enter general journal entries?
• Should the ending cash balance on the Statement of Cash Flows always match the cash balance reported on the Balance Sheet?
• Which document would you use to record revenue when you deliver a service and payment is received at the time?
• Which item is not a business operation expense?
• Which document shows all account balances after adjustments have been made?
• Which accounting concept requires that financial statements be prepared for discrete time intervals such as months or quarters?
• Which statement best describes the Matching Principle?
• A Balance Sheet has four parts: a heading, assets, liabilities, and ______.
• If a business adheres to the Consistency Principle, they will:
• Under normal accounting rules, which type of account typically carries a credit balance?
• According to the Monetary Unit Assumption, you should:
• True or False: Journal entries should not be used during year-end adjustments.
• What would you issue if a service has been performed but payment is still outstanding?
• Which ledger contains balances for all accounts after posting journal entries?
• Reorganizing journal entries and grouping them by account is known as:
• Which transaction would be recorded as a business expense in the journal?
• A client owns a vinyl sign printing company. They completed a job on August 10, but payment was received on October 15. In which month should the revenue be recognized?
• Which statement best describes the accrual basis of accounting?
• Which principle is highly subjective and should be used with caution outside rounding to the nearest dollar?
• A listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger is known as:
• Should business decisions be made using the General Ledger?
• Zach needs to determine his company's financial position on March 31 of last year. Which financial report would best show this position?
• True or False: According to the Periodicity Assumption, companies can only review their financial health at the end of their fiscal year?
• Which item is a correct component of the Balance Sheet?
• Debits are always represented on what side of a T-chart?
• Lou pays $100 to advertise in his local mailer and puts the charge on his Visa credit card. Which two accounts are involved in this transaction?
• Which account would have a zero balance at the beginning of a new accounting period?
• If you were going to prepare the Balance Sheet for the previous month, what would you enter for the Accounts Receivable balance?
• Which of the following is NOT a standard component of the Balance Sheet?
• If you lack a receipt for trellises, which assumption restricts recording this information?
• Which of the following accounts would appear on the balance sheet but not on the income statement?
• Completing the Statement of Equity requires net profit from the Income Statement.
• Which payment method was used to pay the subcontractor?
• Why do chart of accounts use structured account numbers (such as leading digits)?
• After the Unadjusted Trial Balance is created, the process of going back and updating information is known as:
• Which of the following is an example of a liability?
• Short-term Investments would be an example of what kind of account?
• When settling accounts payable with cash, which statement best describes the effect on the two accounts involved?
• The accounting cycle starts with the:
• When a service is performed and payment is received immediately, which accounting entry is used?
• In double-entry bookkeeping, which balances are normally debited for assets and expenses and credited for liabilities, equity, and revenue?
• Which of the following would be considered a business operating expense for a service company?
• You purchased inventory from your vendor and paid cash. In your journal entry, which account would you debit?
• In a properly prepared trial balance, which statement is true?
• A way of bookkeeping that tracks which accounts increase and which decrease for a given transaction is known as:
• A schedule that contains all accounts needed to prepare financial statements is known as:
• Which financial statement presents the balances of assets, liabilities, and owner’s equity at a point in time?
• Which form or statement lists the profit or loss for a company during a specific period?
• Which transaction involved check #0001?
• It is permissible to use a combination of the Cash-Basis and Accrual methods of accounting as long as it is applied consistently and clearly and reflects the business's income and expenses.
• You purchase office supplies with cash. Which account would be debited?
• Is the unadjusted trial balance used to create financial statements?
• After adjusting entries, which report lists all accounts with their balances and is used to prepare financial statements?
• Which assumption encourages reporting lower profits, lower assets, or higher liabilities when two acceptable methods exist?
• To find the balance of the account types that increase with a debit (asset and expense accounts), bookkeepers will:
• After analysis, the business transaction is recorded in the journal in
• The preparation of financial statements and closing the books is the ______ step of the accounting cycle.
• On the chart of accounts, which account would you find under liabilities?
• Which adjusting entry postpones revenue or expense recognition to a future period, often when cash is exchanged in advance?
• Which of these would be considered an asset?
• Under accrual accounting, when is revenue recognized for a service performed on August 10 but paid in October?
• The general journal is used to record transactions in chronological order. Each transaction requires two entries, a credit and a _____.
• Lou was paid $280 by Eagles Landing subdivision. How would you record this transaction?
• Which term describes updating balances after the initial trial balance?
• Which two entries would be recorded to log Lou receiving a $100 payment for a weeding job he completed for Ms. Rosa?
• If Lou's purchase increased liabilities by $600, what would also need to happen for the accounting equation to be in balance?
• Which statement about recording depreciation is correct?
• Which transaction involved advertising expense?
• According to the Revenue Recognition Principle, when should a business recognize its revenue?
• What is the first step in the accounting cycle?
• What is defined as what the company owns or controls and expects to gain value from?
• Sydney is entering a transaction in QuickBooks. What are the two steps of manual accounting that will happen simultaneously as she does this?
• What is defined as what the company owes to others?
• When a bookkeeper uses the US dollar as currency and ignores changes in its value, this is known as the Monetary Unit Assumption.
• The accounting equation can be defined as:
• If assets increase by 50 and liabilities decrease by 20, by how much does owner's equity change?
• When revenue is earned and cash is received at the same time, which accounts are affected?
• Which statement best describes the Economic Entity assumption?
• Accounts Payable is an example of which type of account?
• If Lou makes a $500 payment to the bank for his small business loan, what will be the new loan balance?
• The company pays off the credit card bill. This transaction impacts the accounts payable and the cash accounts. In your journal entry, which account do you credit?
• The owner's stake in the company is defined as:
• A trial balance that is prepared after taking into account all the adjusting entries is known as:
• Which statement best describes the impact of loan proceeds on the accounting equation?
• The accounting equation can be written as _______ = Liabilities + Equity.
• Which expense should not be included in the business journal?
• If a service is performed but payment is not yet received, which entry should be used?