Continuing Education Accounting Questions

For each account listed below indicate whether it ordinarily has a debit (D) or a credit (C) balance:

A. Advertising expense         Debit        
B. Accounts payable          Credit         
C. Retained earnings          Credit         
D. Prepaid insurance         Debit        
E. Accounts receivable         Debit        
F. Property & equipment         Debit        
G. Deferred income taxes          Credit         
H. Accumulated depreciation          Credit         
I. Accrued salaries          Credit         
J. Sales          Credit         
K. Common stock          Credit         
L. Investments         Debit        
M. Notes payable          Credit         

The chart of accounts for Baker Company, a wholesale merchant, who uses the accrual basis of accounting is as follows:

A. Cash
B. Accounts receivable
C. Reserve for bad debt
D. Marketable securities
E. Inventory
F. Equipment
G. Accumulated depreciation
H. Prepaid expense
I. Accounts payable
J. Notes payable
K. Deferred income
L. Capital stock
M. Retained earnings
N. Sales
O. Cost of goods sold
P. Other income accounts
Q. Various general and administrative expense accounts
R. Income tax expense

For the monthly transactions listed below indicate (by letter) the account(s) that should be debited and credited:

1. Merchandise for resale is purchased on credit. Debit      E      Credit      I     
2. Payment is received for merchandise previously sold. Debit      A      Credit      B     
3. Marketable securities are sold at a gain. Debit      A      Credit       D,P      
4. The company sells capital stock for cash. Debit      A      Credit      L     
5. Payment is made for the merchandise purchased on credit. Debit      I     Credit      A     
6. Bills for telephone, office supplies and auto repairs are received but not paid
this month. Debit      Q      Credit      I     
7. Merchandise received from a supplier is found defective and returned for credit
before payment has been made. Debit      I      Credit      E     
8. A truck is purchased. The seller accepts a note in addition to a cash down payment.
Debit      F      Credit       A,J      
9. Monthly interest on the note is recorded. Debit      Q      Credit           I(or J)          
10. Merchandise for resale is purchased on credit. Debit      Q      Credit      G     
11. The office rent for the current month is paid. Debit      Q      Credit      A     
12. Merchandise is sold on credit. Debit      B      Credit      N     
13. An estimate of uncollectible accounts is recorded. Debit      Q      Credit      C     
14. An account is written off as uncollectible. Debit      C      Credit      B     
15. Inventory is adjusted to record merchandise sold. Debit      O      Credit      E     
16. Merchandise purchased in a prior month is returned by a customer for credit (show
all related entries). Debit           N&E           Credit           B&O          
17. Expired insurance for the month is recorded. Debit      Q      Credit      H     
18. While reconciling the bank statement it is discovered that the rent check for $500
was recorded in the Journal as $5,000 and a correcting entry is made. Debit      A      Credit      Q     
19. Salesmen's "commissions" were imporperly recorded as "salaries" and a correcting
entry is made. Debit      Q      Credit      Q     
20. Accrued income taxes are paid. Debit      I      Credit      A     
21. A tenant pays one year's rent in advance. Debit      A      Credit      K     
22. A dividend is declared and paid. Debit      M      Credit      A     

Number in sequential order the following steps of a normal accounting cycle:

     5      A. Taking a trial balance
     6      B. Journalizing and posting adjusting and closing entries
     1      C. Collecting transaction data
     3      D. Journalizing transactions
     7      E. Preparing financial statements
     2      F. Analyzing transactions
     4      G. Posting the the ledger

Match the following definitions with the proper financial statements:

A. The statement of assets, liabilities, and owners' equity
B. The statement of cash inflows and outflows
C. The statement of revenues and expenses
D. The statement of sources and uses of owners' equity

     C      1. Income Statement
     A      2. Balance Sheet
     B      3. Statement of Cash Flows
          B&C           4. Which of the two above statements report data for a period of
time as opposed to a specific date in time?

Number the following items in the order of their usual appearance on an income statement:

     2      1. Cost of goods sold
     5      2. Income tax expense
     7      3. Net income
     6      4. Extraordinary gains and losses (net of tax)
     3      5. Other income
     1      6. Sales
     4      7. General and administrative expense

Which of the following journals should be used to record the transactions listed below:

Journals:
CR = Cash Receipts Journal
CD = Cash Disbursements Journal
G = General Journal
S = Sales Journal
P = Purchases Journal

1. Borrowed cash from a bank.        CR/G       
2. Sold merchandise for cash.        CR/S       
3. Recorded depreciation expense for the year.      G     
4. Paid rent expense.      CD     
5. Paid an account payable.      CD     
6. Accrued payroll taxes.      G     
7. Amortized prepaid insurance.      G     
8. Returned merchandise to a supplier for credit.       P/G      
9. Sold merchandise for credit.      S     
10. Sold common stock for cash.      CR     
11. Write off an account receivable to bad debt expense.      G     
12. Collected an account receivable.      CR     

Which of the following statements is true?

1. to decrease a receivable, debit the account
2. to decrease revenue, debit the account
3. to increase owner's equity, debit the account
4. to increase an expense account, credit the account

Number the following items in the order of their usual appearance on a balance sheet:

     8      1. Retained earnings
     1      2. Cash
     3      3. Inventory
     7      4. Contributed capital
     4      5. Fixed assets
     6      6. Long-term liabilities
     5      7. Accounts payable
     2      8. Accounts receivable

What is the accounting equation most stated as?

1. Owners equity = Liabilities + Assets
2. Assets = Liabilities + Owners Equity
3. Liabilities = Assets + Owners equity
4. All of the above

Variable costs change in direct proportion with a change in the volume of activity, while fixed costs remain unchanged within the relevant range of activity.

1. True
2. False

Which of the following statements is false?

1. to increase cash, debit the account
2. to increase revenue, credit the account
3. to decrease a receivable, debit the account
4. to increase a receivable, debit the account

Total Payroll for a two week period is $40,000. Within that two week period, 4 of the working days were in August, and 6 were in September. How much should be accrued in August?          24,000         

Indirect labor is charged to the product, while direct labor is considered overhead.

1. True
2. False

An asset purchased ten years ago for $100,000 has accumulated
depreciation of $100,000 at the end of its tenth year. What amount
should be charged to depreciation if the asset is used in its eleventh
year?

1. 9090
2. 1000
3. 0
4. 10000

Checks written by a company but not yet clearing its bank checking
account are referred to as               outstanding              checks.

Under accrual accounting, amounts received in advance of providing
a service should be reported as

1. A liability
2. Revenue
3. Not reported

When a purchase is made on credit, Accounts           Payable          is
credited.

Accruing wages expense as of December 31 has what effect on the
December 31 balance sheet?

1. Assets decrease
2. Liabilities increase
3. Owner's equity increases

A company's bank statement shows a balance of $1,234 on
December 31. The company's general ledger shows a balance
of $658. The bank statement reports a service charge of $14.
The amount of outstanding checks is $590. The adjusted or
correct cash balance to be reported on the balance sheet for
this account is                                                    $644.00 (1,234.00 - 590.00) and (658.00 - 14.00)                                                   .

A corporation's failure to accrue an expense will cause expenses and
                to be understated.

1. Assets
2. Liabilities
3. Owner's Equity