Question

1. Unearned revenues refer to a(n):

a. Asset that will be used over time.

b. Expense incurred because a customer has paid in advance.

c. Liability that is settled in the future when a company delivers its products or services.

d. Increase in revenues as a result of delivering products or services to a customer.

e. Decrease in an asset.

2. Prepaid accounts (also called prepaid expenses) are generally:

a. Payments made for products and services that never expire.

b. Classified as liabilities on the balance sheet.

c. Decreases in equity.

d. Assets that represent prepayments of future expenses.

e. Promises of payments by customers.

3. The record of all accounts and their balances used by a business is called a:

a. Journal.

b. Book of original entry.

c. General Journal.

d. Balance column journal.

e. Ledger (or General Ledger).

4. A debit:

a. Always increases an account.

b. Is the right-hand side of a T-account.

c. Always decreases an account.

d. Is the left-hand side of a T-account.

e. Is not needed to record a transaction.

5. Identify the statement below that is incorrect.

a. The normal balance of accounts receivable is a debit.

b. The normal balance of owner's withdrawals is a debit.

c. The normal balance of unearned revenues is a credit.

d. The normal balance of an expense account is a credit.

e. The normal balance of the owner's capital account is a credit.

6. An account balance is:

a. The total of the credit side of the account.

b. The total of the debit side of the account.

c. The difference between the total debits and total credits for an account including the beginning balance.

d. Assets = liabilities + equity.

e. Always a credit.

7. A double-entry accounting system is an accounting system:

a. That records each transaction twice.

b. That records the effects of transactions and other events in at least two accounts with equal debits and credits.

c. In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits.

d. That may only be used if T-accounts are used.

e. That insures that errors never occur.

8. When closing entries are made:

a. All ledger accounts are closed to start the new accounting period.

b. All temporary accounts are closed but permanent accounts are not closed.

c. All real accounts are closed but nominal accounts are not closed.

d. All permanent accounts are closed but nominal accounts are not closed.

e. All balance sheet accounts are closed.

9. Which of the following statements is incorrect?

Permanent account is another name for nominal account.

a. Temporary accounts carry a zero balance at the beginning of each accounting period.

b. The Income Summary account is a temporary account.

c. Real accounts remain open as long as the asset, liability, or equity items recorded in the accounts continue in existence.

d. The closing process applies only to temporary accounts.

10. Assets, liabilities, and equity accounts are not closed; these accounts are called:

a. nominal accounts

b. temporary accounts

c. permanent accounts

d. contra accounts

e. accrued accounts

Answer 1