Accounting Principles And Concepts Quiz Questions And Answers

Of course, debits equal credits, debits are customarily recorded on the left, and the chart of accounts is a listing of accounts in use (and their corresponding reference number). The correct entry to record utilities consumed is to debit Utilities Expense and credit Utilities Payable. Because this was not done, liabilities and expenses are understated.

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The understatement of expense causes income and equity to be overstated. Assets are not impacted. Sales is a revenue item for the income statement. Accounts receivable and cash are assets and accounts payable is a liability. This Accounting Test is designed to help you assess your knowledge of essential accounting principles and basic concepts.

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1.4All of the following are sustainable methods businesses can use to raise capital (funding) except for ________. Access and download collection of free Templates to help power your productivity and performance.

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This is also a useful resource for employers to examine the technical knowledge of the candidates during an accounting or finance interview. In accounting, decision-making is the process of choosing between two or more courses of action to achieve the desired outcome. Factors that should be considered when making decisions include the company’s financial position, Cash Flow, profitability, and business strategy. Accountants use the information to make decisions by analyzing data and trends to make informed decisions to help the company achieve its goals. The trial balance provides a listing of the balance of each active account. Notice that the original entry is backwards.

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Trade receivables arise from the sale of products or services to customers. They typically comprise the majority of total receivables and are reported as current assets. Trade receivables contrast with nontrade receivables which arise from advances to employees, deposits with utilities, and so forth. The $3,000 must be removed from the Revenue account (debited) because it has not yet been earned.

Notice that assets are correct. Preparation is the key to success when trying to pass your accounting class. The best way to prepare for your next accounting test or quiz is to work on accounting problems you’re likely to see on your test. This free accounting principles practice test assesses your knowledge of some of the most common questions that students encounter on their accounting exams. It will help you quickly identify your strengths and focus your efforts on where you need more study and practice. Journalization is the process of converting transactions to their debit/credit form and recording them in the general journal.

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With these assessment tools, you can see how much information you’ve retained regarding the seven accounting principles discussed in the corresponding lesson. The quiz and worksheet combo will test your understanding of these principles and their purposes. CFI is the official global provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst. Enroll now to gain the skills you need to take your career to the next level. Common accounting decision-making models include the rational decision model, the incremental decision model, and the satisficing decision model. Each of these models has its own set of steps that should be followed when deciding.

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Cash is not impacted and should not be debited or credited. The increase in revenue will ultimately cause an increase in owner’s equity — but this occurs through financial statement preparation, not a direct credit to Capital Stock. There’s no need to feel confused about these basic accounting principles or stressed out because there’s never enough time to finish all the questions on your accounting quizzes and tests.

Quizzes

Take the test and evaluate yourself. Also, make your learning better here with us. The journal entry reflects the recording of expense and the establishment of an allowance for $21,000 ($700,000 X 3%). The allowance is increased for the calculated amount because the percentage of sales (i.e., income statement approach) technique is in use. Generally accepted accounting principles require the use of an allowance method if uncollectibles are material in amount. Lundstrom’s use of the direct write-off approach resulted in recording no uncollectible accounts expense in 20X1, even though the credit sales which triggered the uncollectibles were recorded in that year.

Because total assets increased $240,000 and liabilities increased $120,000, the increase in equity must have been $120,000 ($240,000 – $120,000). Net income increases equity ($180,000) and dividends decrease equity. The increase in equity of $120,000 is therefore comprised of $180,000 in income (add) and $60,000 of dividends (subtract).

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For fill-in-the-blank questions, press or click on the blank space provided. The formula is the amount of the loan (principal) times the interest rate per period (rate) times the number of periods (time). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice.

• To reinstate a previously written-off account requires a reversal of the entry which was made at the time of write off.
• Capital Stock is also increased and should be credited.
• Transposition is the accidental reversing of two digits in a number.
• The allowance is increased for the calculated amount because the percentage of sales (i.e., income statement approach) technique is in use.
• This amount needs to be recorded into the Unearned Revenue account (credited).

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Chapter 1 Quiz

Posting only the debit portion of a particular entry will cause debits to exceed credits — an error that will be revealed by a trial balance. The other errors do not cause out-of-balance conditions. LO
1.2External users of financial regressive vs proportional vs progressive taxes accounting information include all of the following except ________. $128,000. The net realizable value of accounts receivable is $140,000 (the gross accounts receivable) less $12,000 (the allowance amount), or $128,000.

The general ledger is posted from transactions recorded in the general journal. The general journal is a chronological record of transactions. Invoices, checks, receipts, shipping reports, and numerous other items provide the source documents for recording transactions into the general journal; the trial balance is a listing of account balances.