Multiple Choice Review for FINAL:

1.
2.

3.

4.
5.

In a worksheet, where do assets go?

a. Income Statement Column

see 6-column wksheet

b.

Balance Sheet Column

Does the Statement of Changes in Equity summarize

a. The effects on the capital account of the various business transactions that occurred
b. The listing of assets, liabilities and capital in order to prove that A = L+OE

see 3 financials

Net income equals

see 3 financials
c. Capital withdrawals
a. Revenue expenses
b. Assets liabilities
If a business has a net income for the period
see 3 financials (specifically the Change in Equity)
a. Capital will increase
b. Capital will decrease
The income statement represents the Accounting Equation of A = L + OE
False. Income Statement is Revenue - Expenses
a. True
b. False
Balance sheet shows Assets (A), then Liabilities (L), then Equity (OE).

See Balance sheet

6.

If expenses exceed revenues, the business will have a net loss instead of net income.
a. True
b. False

7.

The normal side for Accounts Payable is

a. The Debit side

b.

The Credit side

The normal side for any account is

"Normal" is the side you have a balance for.
a. The increase side

b.

The decrease side

8.
9.

A/P
C+

Debits and Credits must always be equal for our accounting equation to be balanced
Of course. Every journal entry has equal D's and C's
b. False
a. True

10. Revenue increases as a

a. Credit

b.

Debit

11. Owners Capital account is increased on the

a. Debit side

b.

Credit side

c.

Two or more accounts

b.

False

14. An owners personal financial records must be separated from the businesses.
b.
a. True

False

12. Every business transaction affects

a. Only 1 account
remember, we did some "triple-entries"
b. Exactly 2 accounts
13. Every business transaction must be recorded with equal debits and credits
a. True

14-16 were part of our 1st day

of Accounting theory introduction.
They aren't in any notes.
Make sure to remember these.

15. The IRS doesnt care about profits or losses earned by a business
a. True

b.

False

16. Accounting provides financial information to

a. Owners
b. Creditors

c.
d.

Employees
All of the above

17. Which of the following should be closed in closing entries?

a. A/R
A/R, Equip, and Capital are all permanent.
Do not reset them to 0. Only Revenue goes back to 0.
b. Equipment

c.
d.

Fees Revenue
Capital

18. Withdrawals and Expenses should be closed during closing entries because they are:
a. Permanent Accounts
Temporary = reset to 0.
b. Temporary Accounts
19. Income Summary is technically classified as a Owners Equity Account as it is in the 300s.
true. see 6 column worksheet
b. False
a. True
20. Which is a voluntary employee deduction (as in, its optional)?
Soc. Sec is required tax.
a. Social Security
401k is an optional way to save for retirement.

b.

401k contributions

21. Which financial statement shows the final Balances of Assets, Liabilities, and Owners Equity
c. Profitibility Ratio
a. Income Statement
this is a repeat of #5.
b. Balance Sheet
22. The recordkeeping journal system done in this class that effect 2 or more accounts is called:
a. Single-entry
Double-entry is the idea of Debit & Credit for every event. c. Retail accounting
b. Double-entry
23. The left side of a T-chart is always a
b. Debit
a. Credit
24. The process of transferring journal entries to a individual account is called:
"posting" to a ledger
c.
a. Organizing
b. Posting
25. Net pay =
b.
a. After taxes

any account

Moving

Before taxes

26. Any item from gross earning, whether it be tax or voluntary, is called a
a. Elimination
b. Deduction
27. The first 2 columns of the 6 column worksheet are for:
a. Trial Balance
b. Income Statement

see 6-column wksheet

c.

Withdrawal

c.

Balance Sheet

nd

28. The 2 2 columns of the 6 column worksheet that show revenues and expenses is
a. Trial Balance
c. Balance Sheet
see 6-column wksheet
b. Income Statement

CAPITAL
29. Which account is not a sub-account of Capital as was taught by the T-Charts visual diagram?
Expenses
Revenue
a. Expenses
c. A/R
W/D
b. Revenue
d. Withdrawals
30. Which best defines Capital
c. The total value or worth of the business
a. Any item of value such as equipment
d. Any amount owed to the business (often
b. Any debt of the business (often expressed as
expressed as A/R)
A/P)
31. Business A sells $100 worth of widgets and has expenses of $80. Business B sells $500 worth of widgets and has expenses
of $300. Which has a higher profit margin?
profit margin = profit over revenue
a. Business A
Business B has $200 in income after expenses. $200 / $500 = 40%
b. Business B
Business A has $20 in income after expenses. $20 / $100 = 20%
32. A hamburger stand purchases buns and ketchup the same day that they pay for rent. Of the three, which are considered
COST OF GOODS rather than expenses?
a. Ketchup
c. Ketchup and Buns and Rent
Cost
of
Goods
=
pieces
that
go
into
the
product
for
sale
b. Ketchup and Buns
33. If the owner of a business borrows $20,000 to open a business and also contributes $5,000 of his/her own money, the
business begins with a debt to equity ratio of:
a. 4/5 (80%)
c. 1 to 4 (25%)
b. 4 to 1 (400%)
d. 1/5 (20%)
Debt = 20,000

Equity = 5,000