Quiz #1

Financial Accounting 1 Student Name & Section:
Quiz # 1 Student ID Number:
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1. Which of the following best describes accounting?

a. records economic data but does not communicate the data to users according to any specific rules
b. is an information system that provides reports to users regarding economic activities and condition of a
business
c. is of no use by individuals outside of the business
d. is used only for filling out tax returns and for financial statements for various type of governmental
reporting requirements
2. Which of the following is a service business?

a. Microsoft
b. Dell Computers
c. Facebook
d. Walmart
3. Managerial accountants would be responsible for providing information regarding

a. tax reports to government agencies
b. profit reports to owners and management
c. expansion of a product line report to
management
d. consumer reports to customers
4. Which of the following is most likely to obtain large amounts of resources by issuing stock?
a. partnership
b. corporation
c. proprietorship
d. government entity
5. The objectivity concept requires that

a. business transactions be consistent with the objectives of the entity
b. the Financial Accounting Standards Board be fair and unbiased in its deliberations over new accounting
standards
c. accounting principles meet the objectives of the Securities and Exchange Commission
d. amounts recorded in the financial statements be based on independently verifiable evidence
6. Assets are
a. always lower than liabilities
b. equal to liabilities less owner’s equity
c. the same as expenses because they are acquired with
cash
d. financed by the owner and/or creditors
7. Which of the following is not a business transaction?

a. make a sales offer
b. sell goods for cash
c. receive cash for services to be rendered
later
d. pay for supplies
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8. Expenses are recorded when

a. cash is paid for services rendered
b. a bill is received in advance of services
rendered
c. assets are used in the process of earning revenue
d. assets are purchased
9. Owner's withdrawals
a. increase expenses
b. decrease expenses
c. increase cash
d. decrease owner's equity
10. Gomez Service Company paid its first installment on a note payable of $2,000. How will this transaction affect the
accounting equation?
a. increase in liabilities (Notes Payable) and decrease in assets (Cash)
b. decrease in assets (Cash) and decrease in owner’s equity (Note Payable Expense)
c. decrease in assets (Cash) and decrease in assets (Notes Receivable)
d. decrease in assets (Cash) and decrease in liabilities (Notes Payable)
11. The debit side of an account

a. depends on whether the account is an asset, liability, or owner's equity
b. can be either side of the account depending on how the accountant set up the system
c. is the right side of the account
d. is the left side of the account
12. A cash payment is recorded in the cash account as

a. neither a debit nor a credit
b. a credit
c. a debit
d. either a debit or a credit
13. Which group of accounts is comprised of only assets?

a. Cash, Accounts Payable, Buildings
b. Accounts Receivable, Revenue, Cash
c. Prepaid Expenses, Buildings, Patents
d. Unearned Revenue, Prepaid Expenses, Cash
14. Which of the following correctly identifies the major account groups typically represented by the numbers 1
through 5?
a. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Expenses, 5-
Revenues
b. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Revenues, 5-
Expenses
c. 1-Assets, 2-Owner’s Equity, 3-Revenues, 4-Expenses, 5-Drawing
d. 1-Owner’s Equity, 2-Drawing, 3-Revenues, 4-Expenses
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15. A credit may signify a

a. decrease in assets
b. decrease in liabilities
c. decrease in capital
d. decrease in revenue
16. The accounting equation elements and their balances of Awesome Travel Services at December 31 are listed
below. There were no additional investments or withdrawals by J. Trendsetter during the year.
Accounts payable $12,000 J. Trendsetter, capital (January 1) $10,000
Accounts receivable 14,000 Supplies 1,000
Cash 18,000 Income taxes expense 1,300
Computer equipment 21,000 Utilities expense 8,000
Fees earned 78,000 Wages expense 25,000
Rent expense 10,000 Supplies expense 1,700
(a) Prepare an income statement,
(b) Statement of owner’s equity, and
(c) Balance sheet as of December 31.
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17. Increases and decreases in various types of accounts are listed below. In each case, indicate by "Dr." or "Cr." (a)
whether the change in the account would be recorded as a debit or a credit and (b) whether the normal balance of the
account is a debit or a credit.
(a) (b)
Recorded Normal

As Balance
(1) Increase in Denice Dickenson, Capital ________ _______
(2) Increase in Denice Dickenson, Drawing ________ _______
(3) Decrease in Accounts Receivable ________ _______
(4) Increase in Notes Payable ________ _______
(5) Increase in Accounts Payable ________ _______
(6) Decrease in Supplies ________ _______
(7) Decrease in Salaries Expense ________ _______
(8) Increase in Accounts Receivable ________ _______
(9) Increase in Cash ________ _______
(10) Decrease in Land ________ _______
18. Record the following selected transactions for April in a two-column journal, identifying each entry by letter:
(a) Received $18,000 from Katie Long, owner.
(b) Purchased equipment for $27,000, paying $10,000 in cash and giving a note
payable for the remainder.
(c) Paid $2,300 for rent for April.
(d) Purchased $1,500 of supplies on account.
(e) Recorded $9,800 of fees earned on account.
(f) Received $7,500 in cash for fees earned.
(g) Paid $1,200 to creditors on account.
(h) Paid wages of $3,425.
(i) Received $7,900 from customers on account.
(j) Recorded owner's withdrawal of $1,875.
ANSWER:
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19. For the following, mark a “D” if the following account normally has a debit balance and mark a “C” if the
following account normally has a credit balance.
_____1. Notes Payable

_____2. Mortgage Payable
_____3. Drawing
_____4. Accounts Receivable
_____5. Capital
_____6. Rent Revenue
_____7. Unearned Income
_____8. Utility Expense
_____9. Automobiles
20. The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances.
Accounts Payable $1,500 Fees Earned $3,600

Accounts Receivable 1,800 Insurance Expense 1,300
Prepaid Insurance 2,000 Land 3,000
Cash 3,200 Wages Expense 1,400
Drawing 1,200 Capital 8,800
Prepare a trial balance.

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Financial Accounting 1 Student Name & Section:

Quiz # 1 Student ID Number:

Circle/Highlight the correct answer

1. Which of the following best describes accounting?

2. Which of the following is a service business?

3. Managerial accountants would be responsible for providing information regarding

5. The objectivity concept requires that

7. Which of the following is not a business transaction?

8. Expenses are recorded when

11. The debit side of an account

12. A cash payment is recorded in the cash account as

13. Which group of accounts is comprised of only assets?

15. A credit may signify a

(a) Prepare an income statement,

(b) Statement of owner’s equity, and

(c) Balance sheet as of December 31.

_____1. Notes Payable

Accounts Payable $1,500 Fees Earned $3,600

Prepare a trial balance.

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