97 test bank for financial accounting 2nd edition kemp

97 Test Bank for Financial Accounting 2nd Edition
Kemp
Multiple Choice Questions
Which of the following is NOT a revenue account?
1.

A) Salaries

2.

B) Sales

3.

C) Fees Earned

4.

D) Professional Fees

Accounts that start with the numbers 6-9 would probably be:
1.

A) other revenues and expenses.

2.

B) other assets and liabilities.

3.

C) other stockholders' equity.

4.

D) other assets and revenues.

Which of the following would start with a 1 in the chart of
accounts?
1.

A) Land and Buildings

2.

B) Depreciation Expense and Marketing Expense

3.

C) Merchandise Sales and Rent Revenue

4.

D) Common Stock and Cash

Payment of a telephone bill which was not previously recorded
represents a(n):
1.

A) asset.

2.

B) liability.

3.

C) revenue.


4.

D) expense.

Expenses paid in advance such as rent and insurance are
classified as prepaid expenses. Into what category are they
placed?
1.

A) Liabilities

2.

B) Revenues

3.

C) Expenses

4.

D) Assets

Obligations owed by a company to banks, for instance, are
called:
1.

A) notes receivable.

2.

B) notes payable.

3.

C) accounts receivable.

4.

D) accounts payable.

Dividends, revenues, and expenses all:
1.

A) start with the same chart of account number.

2.

B) start with different chart of accounts numbers.

3.

C) appear in the chart of accounts under assets.

4.

D) appear in the chart of accounts under liabilities.

Obligations that are owed to others due to past transactions are
categorized as:
1.

A) stockholders' equity.

2.

B) expenses.

3.

C) assets.

4.

D) liabilities.


Marketing expenditures account 511 would belong to what
category of accounts?
1.

A) Assets

2.

B) Expenses

3.

C) Revenues

4.

D) Liabilities

Which of the following is an expense account?
1.

A) Prepaid Insurance

2.

B) Advertising

3.

C) Accounts Payable

4.

D) Cash

Accounts payable, taxes payable, and notes payable:
1.

A) increase on the debit side, decrease on the credit side and are assets.

2.

B) decrease on the debit side, increase on the credit side and are liabilities.

3.

C) increase on the debit side, decrease on the credit side and are
expenses.

4.

D) decrease on the debit side, increase on the credit side and are
revenues.

Which of the following is TRUE regarding the accounts supplies
payable and supplies expense?
1.

A) These account titles both mean the same thing and are used
interchangeably.

2.

B) Supplies payable represents the cost of supplies bought on account but

not yet paid for, while supplies expense represents the cost of the supplies
which have been paid for.

3.

C) Supplies payable represents the cost of supplies bought on account but
not yet paid for, while supplies expense represents the cost of supplies used
to deliver goods or services to customers.


4.

D) Supplies expense represents the cost of supplies bought on account but
not yet paid for, while supplies payable represents the cost of supplies used
to deliver goods or services to customers.

An account starting with a number 1 would indicate:
1.

A) an asset.

2.

B) stockholders' equity.

3.

C) a revenue.

4.

D) a liability.

All payables are listed as:
1.

A) assets.

2.

B) liabilities.

3.

C) stockholders' equity.

4.

D) revenue.

Which of the following would start with a 2 in the chart of
accounts?
1.

A) Income Taxes Payable and Salaries Payable

2.

B) Common Stock and Dividends

3.

C) Cash and Accounts Receivable

4.

D) Sales and Service Revenue

A chart of accounts does NOT include:
1.

A) stockholders' equity.

2.

B) assets.

3.

C) names of customers.

4.

D) liabilities.


A type of company asset in which a customer owes the company
money would be a:
1.

A) dividend.

2.

B) receivable.

3.

C) payable.

4.

D) sale.

Dividends, Accounts Receivable, and Buildings have normal
balances of:
1.

A) credit, debit, and debit, respectively.

2.

B) debit, debit, and credit, respectively.

3.

C) credit, credit, and credit, respectively.

4.

D) debit, debit, and debit, respectively.

The order in which accounts appear in the chart of accounts is:
1.

A) liabilities, assets, revenues, stockholders' equity, expenses.

2.

B) stockholders' equity, expenses, revenue, liabilities, assets.

3.

C) assets, stockholders' equity, revenues, expenses, liabilities.

4.

D) assets, liabilities, stockholders' equity, revenues, expenses.

Net income and dividends are part of:
1.

A) liabilities.

2.

B) stockholders' equity.

3.

C) assets.

4.

D) net income.

Monies owed to a company on a written promise to pay a fixed
amount of money by a certain date would be called a(n):
1.

A) note payable.


2.

B) note receivable.

3.

C) account payable.

4.

D) account receivable.

Accounts starting with the number 4 would represent:
1.

A) assets.

2.

B) liabilities.

3.

C) revenues.

4.

D) expenses.

Collection of money from a cash customer represents a(n):
1.

A) liability.

2.

B) expense.

3.

C) revenue.

4.

D) stock.

Cash, Common Stock, and Advertising Expense have normal

balances of:
1.

A) credit, credit, and credit, respectively.

2.

B) debit, credit, and debit, respectively.

3.

C) debit, debit, and credit, respectively.

4.

D) credit, debit, and debit, respectively.

The stockholders' equity accounts dividends, revenues and
expenses have normal balances of:
1.

A) credit, debit, and debit, respectively.

2.

B) debit, credit, and credit, respectively.

3.

C) debit, credit, and debit, respectively.

4.

D) credit, credit, and credit, respectively.

Dividends are paid with cash to shareholders. Dividends are in
what category of the chart of accounts?
1.

A) Revenue

2.

B) Assets

3.

C) Stockholders' equity

4.

D) Liabilities

A promissory note owed to another company would most likely
appear in which of the following accounts?
1.

A) Accounts Receivable

2.

B) Accounts Payable

3.

C) Notes Receivable

4.

D) Notes Payable

How does an account receivable differ from a note receivable?
1.

A) A note receivable is an asset while an account receivable is not.

2.

B) An account receivable is a written pledge while a note receivable is not.

3.

4.

C) An account receivable is always an amount due from the company's
customers while a note receivable is always an amount due from a bank.
D) Notes receivable are written pledges while accounts receivable are not.

Items such as salaries and interest that have been incurred, but

not yet paid, are called:
1.

A) accrued assets.

2.

B) accrued liabilities.

3.

C) accrued revenues.

4.

D) accrued notes.


Which is NOT a part of stockholders' equity?
1.

A) Revenues

2.

B) Expenses

3.

C) Accounts Receivable

4.

D) Dividends

Land, Cash, Office Equipment and Accounts Receivable belong
to what category of accounts?
1.

A) Liabilities

2.

B) Revenues

3.

C) Expenses

4.

D) Assets

97 Free Test Bank for Financial Accounting 2nd
Edition Kemp Multiple Choice Questions - Page 2
ARCO pays wages in the amount of $13,579. This transaction
includes a:
1.

A) debit to Cash.

2.

B) credit to Wages Expense.

3.

C) credit to Cash.

4.

D) credit to Revenue.

A T-account has a $509 debit balance. This account is most likely
NOT:
1.

A) Common Stock.

2.

B) Land.

3.

C) Advertising Expense.

4.

D) Dividends.

Debit means:
1.

A) decrease.

2.

B) increase.

3.

C) the right side of an account.

4.

D) the left side of an account.

An example of accounts with normal debit balances would be:
1.

A) liabilities.

2.

B) expenses.

3.

C) revenues.

4.

D) stockholders' equity.

The account "Notes Payable" began with a zero balance and then
had the following changes: increase of $500, increase of $200,
decrease of $550, and an increase of $250. The final balance is
a:
1.

A) credit balance of $550.

2.

B) debit balance of $950.

3.

C) credit balance of $400.

4.

D) debit balance of $400.

T-accounts aid in separating:
1.

A) increases and decreases in an account.

2.

B) the equality of the credits.

3.

C) the equality of debits and credits in the accounting equation.

4.

D) the balances of all of the accounts.

A T-account has which of the following three major parts?
1.

A) A debit side, a credit side, and a balance


2.

B) A debit side, a credit side, and a total column

3.

C) A title, a current date, and a balance

4.

D) A title, a debit side, and a credit side

A T-account has a $759 credit balance. This account is most
likely NOT:
1.

A) Accounts Payable.

2.

B) Sales Revenue.

3.

C) Accounts Receivable.

4.

D) Common Stock.

The account "Cash" began with a zero balance and then had the
following changes: increase of $250, decrease of $75, increase of
$113 and a decrease of $35. The final balance is a:
1.

A) debit balance of $253.

2.

B) credit balance of $253.

3.

C) debit balance of $363.

4.

D) credit balance of $110.

The fact that each transaction has a dual effect on the accounting
equation provides the basis for what is called:
1.

A) single-entry accounting.

2.

B) double-entry accounting.

3.

C) compound-entry accounting.

4.

D) multiple-entry accounting.

The fourth step in analyzing a transaction is to determine:
1.

A) if the account balance will increase or decrease.

2.

B) the accounts that are involved.


3.

C) the type of accounts that are involved.

4.

D) which accounts are to debited and credited.

A T-account has a $382 debit balance. This account is most
likely:
1.

A) Income Taxes Payable.

2.

B) Common Stock.

3.

C) Cash.

4.

D) Magazine Sales.

A T-account has a $922 credit balance. This account is most
likely:
1.

A) Office Equipment.

2.

B) Rent Expense.

3.

C) Dividends.

4.

D) Sales Revenue.

Office Furniture, Wages Payable and Dividends have normal
balances of:
1.

A) credit, credit, and credit, respectively.

2.

B) debit, credit, and debit, respectively.

3.

C) debit, debit, and credit, respectively.

4.

D) credit, debit, and debit, respectively.

The second step in analyzing a transaction is to determine:
1.

A) if the account balance will increase or decrease.

2.

B) the accounts that are involved.

3.

C) the type of accounts that are involved.

4.

D) which accounts are to debited and credited.


The third step in analyzing a transaction is to determine:
1.

A) if the account balance will increase or decrease.

2.

B) the accounts that are involved.

3.

C) the type of accounts that are involved.

4.

D) which accounts are to debited and credited.

Revenues, Accounts Receivable, and Common Stock have
normal balances of:
1.

A) credit, debit, and credit, respectively.

2.

B) debit, debit, and credit, respectively.

3.

C) credit, credit, and credit, respectively.

4.

D) debit, debit, and debit, respectively.

A T-account has a $299 credit balance. This account is most
likely NOT:
1.

A) Accounts Receivable.

2.

B) Bicycle Repair Revenue.

3.

C) Wages Payable.

4.

D) Common Stock.

The total amount of debits must equal the total amount of credits.
This is a rule of:
1.

A) T-accounts.

2.

B) the chart of accounts.

3.

C) double-entry accounting.

4.

D) normal balances.


A company has a fifty million dollar debit balance in its' cash
account. Given this information, which of the following is a TRUE
statement?
1.

2.
3.

4.

A) It is not normal for a business to have this much cash, therefore this is
NOT a normal account balance.
B) It is NOT ever normal for the cash account to have a debit balance.
C) Normal account balances differ from company to company; therefore it is
impossible to evaluate the given statement without more information.
D) It is ALWAYS normal for the cash account to have a debit balance.

An investment of cash in a business:
1.

A) represents an obligation of the business.

2.

B) decreases stockholders' equity.

3.

C) increases cash.

4.

D) appears in a liability account.

The difference between the total debits and total credits of an
account is called a:
1.

A) trial balance.

2.

B) sub-total.

3.

C) ruling.

4.

D) balance.

The first step in analyzing a transaction is to determine:
1.

A) if the account balance will increase or decrease.

2.

B) the accounts that are involved.

3.

C) the type of accounts that are involved.

4.

D) which accounts are to be debited and credited.

The general ledger is arranged in the:


1.

A) numerical order of the chart of accounts.

2.

B) alphabetical order of the account names.

3.

C) order with normal debit balance accounts first.

4.

D) order with normal credit balance accounts first.

When the bank takes money out of a company's account, why
does the bank say that they have debited that account?
1.

A) The bank has increased the company's assets and assets increase with
debits.

2.

B) The bank has decreased its' liability to the company and liabilities
decrease with debits.

3.

C) The bank has decreased the company's assets and assets decrease
with debits.

4.

D) The bank has increased its' liability to the company and liabilities
increase with debits.

A T-account has a $388 credit balance. This account is most
likely:

1.

A) an expense.

2.

B) a dividend account.

3.

C) an asset.

4.

D) a stock account.

Credit means:
1.

A) decrease.

2.

B) increase.

3.

C) the right side of an account.

4.

D) the left side of an account.

An example of accounts with normal credit balances would be:


1.

A) revenues.

2.

B) assets.

3.

C) expenses.

4.

D) dividends.

Which of the following is an unofficial tool of accounting?
1.

A) Account

2.

B) T-account

3.

C) Debit

4.

D) Credit

97 Free Test Bank for Financial Accounting 2nd
Edition Kemp Multiple Choice Questions - Page 3
Xenon, Inc. collected $600 from one of its customers for payment
on their account. The journal entry would include a:
1.

A) debit to Accounts Receivable and a credit to Cash.

2.

B) debit to Cash and a credit to Accounts Payable.

3.

C) debit to Cash and a credit to Accounts Receivable.

4.

D) debit to Cash and a credit to Sales Revenue.

Allied, Inc. sold season tickets for $7,000 on account. The journal

entry would be to:
1.

A) debit Cash and credit season Ticket Sales Revenue.

2.

B) debit Accounts Receivable and credit season Ticket Sales Revenue.

3.

C) debit Cash and credit Accounts Payable.

4.

D) debit Cash and credit Accounts Receivable.

Every entry in the general journal should include all of the
following EXCEPT:


1.

A) the title of each account affected.

2.

B) the amounts of debits and credits.

3.

C) a brief description of the transaction.

4.

D) the balance of the accounts affected.

A trial balance will determine if:
1.

A) an entry was recorded twice.

2.

B) an entry was posted twice.

3.

C) debits equal credits.

4.

D) the right accounts were debited or credited.

Only the ________ accounts from the trial balance will be used to
prepare the income statement.
1.

A) asset and liabilities

2.

B) liabilities and retained earnings

3.

C) revenue and expense

4.

D) stockholders' equity and asset

Salaries of $675 were paid in cash. The journal entry would
include a:
1.

A) debit to Salaries Expense and a credit to Cash.

2.

B) credit to Salaries Expense and a debit to Cash.

3.

C) debit to Accounts Payable and a credit to Cash.

4.

D) debit to Accounts Payable and a credit to Salary Expense.

Instead of T-accounts, businesses more than likely use a:
1.

A) chart of accounts.

2.

B) balance sheet.


3.

C) general ledger.

4.

D) general journal.

Which of the following has a four column format?
1.

A) Income statement

2.

B) Balance sheet

3.

C) General ledger sheet

4.

D) General journal

The columns on a trial balance represent:
1.

A) revenues and expenses.

2.

B) debits and credits.

3.

C) common stock and dividends.

4.

D) subtotals and totals.

The first step in recording a transaction in the general journal is to
record the:
1.

A) explanation of the entry.

2.

B) account(s) to be credited and the amount(s).

3.

C) date of the entry.

4.

D) account(s) to be debited and the amount(s).

Jill invested $25,000 in her business, Nails by Jill. The journal
entry would include a:
1.

A) debit to Cash for $25,000 and a credit to Sales for $25,000.

2.

B) debit to Cash for $25,000 and a credit to Common Stock for $25,000.

3.

C) credit to Cash for $25,000 and a debit to Common Stock for $25,000.

4.

D) debit to Cash for $25,000 and a credit to Dividends for $25,000.


Mackay, Inc. paid one of its creditors $678 on their balance due.

The journal entry would require a:
1.

A) debit to Cash and a credit to Accounts Payable.

2.

B) debit to Cash and a credit to Accounts Receivable.

3.

C) credit to Cash and a debit to Accounts Receivable.

4.

D) debit to Accounts Payable and credit to Cash.

The ________ indicates where the information originated and to
where the information was transferred.
1.

A) general journal

2.

B) balance sheet

3.

C) general ledger

4.

D) posting reference

The fourth step in recording a transaction in the general journal is
to record the:
1.

A) explanation of the entry.

2.

B) account(s) to be credited and the amount(s).

3.

C) date of the entry.

4.

D) account(s) to be debited and the amount(s).

Which would be best at proving the accounts balance?
1.

A) General journal

2.

B) General ledger

3.

C) Trial balance

4.

D) Income statement

Which of the financial statements covers a period of time?
1.

A) Income statement


2.

B) Balance sheet

3.

C) Statement of retained earnings

4.

D) Both A and C

The information from the general journal is transferred to the:
1.

A) balance sheet.

2.

B) income statement.

3.

C) general ledger.

4.

D) statement of retained earnings.

The trial balance:
1.

A) lists only the accounts, with their balances, which are used to prepare
the balance sheet.

2.

B) lists only the accounts, with their balances, which are used to prepare
the income statement.

3.

C) lists account names but no balances.

4.

D) lists all accounts, with their balances, on a given date.

The ________ keeps a running balance of an individual account.
1.

A) general journal

2.

B) balance sheet

3.

C) general ledger

4.

D) posting reference

Office equipment was purchased for $2,400 on account from
Office Express. The journal entry would include a:
1.

A) debit to Office Equipment and a credit to Cash.

2.

B) credit to Cash and a debit to Office Equipment Expense.

3.

C) debit to Office Equipment and a credit to Accounts Payable.


4.

D) debit to Accounts Payable and a credit to Cash.

The third step in recording a transaction in the general journal is
to record the:
1.

A) explanation of the entry.

2.

B) account(s) to be credited and the amount(s).

3.

C) date of the entry.

4.

D) account(s) to be debited and the amount(s).

Journalizing does NOT include:
1.

A) debiting account(s) that are affected.

2.

B) crediting account(s) that are affected.

3.

C) posting the debits and credits to the accounts.

4.

D) entering the date of the transaction.

The posting reference column of the general journal provides a
cross-reference between the:
1.

A) ledger and accounts.

2.

B) journal and ledger.

3.

C) ledger and financial statements.

4.

D) journal and financial statements.

On the trial balance, which account balances should be listed in
the debit column?
1.

A) Assets, revenues, and dividends

2.

B) Liabilities, revenues, and Common Stock

3.

C) Assets, Dividends, and expenses

4.

D) Liabilities, revenues, and Dividends


Binford Corporation purchased a $600 two-year insurance policy
for cash. The journal entry would require a:
1.

A) debit to Prepaid Insurance and a credit to Cash.

2.

B) debit to Insurance Expense and credit to Cash.

3.

C) debit to Insurance Expense and a credit to Accounts Payable.

4.

D) debit to Insurance Expense and a credit to Retained Earnings.

Where is the best place for a company's accountant to find the
information necessary to review the activity in the cash account?
1.

A) General journal

2.

B) General ledger

3.

C) Trial balance

4.

D) Bank statement

On the trial balance, which account balances should be listed in
the credit column?

1.

A) Liabilities, Retained Earnings, and revenues

2.

B) Assets, Retained Earnings, and expenses

3.

C) Liabilities, Common Stock, and expenses

4.

D) Assets, Dividends, and expenses

Apex Corporation purchased $350 of office supplies on account
and treated the supplies as a prepaid expense. The journal entry
would require a:
1.

A) debit to Office Supplies Expense and a credit to Cash.

2.

B) debit to Office Supplies and a credit to Cash.

3.

C) debit to Office Supplies and a credit to Accounts Payable.

4.

D) debit to Office Supplies Expense and a credit to Office Supplies.


A $375 purchase of supplies on account was recorded by debiting
Supplies for $375 and crediting Cash for $375. The entry needed
to correct this error is:
1.

A) Debit Accounts Payable for $375 and credit Cash for $375.

2.

B) Debit Accounts Receivable for $375 and credit Cash for $375.

3.

C) Debit Cash for $375 and credit Accounts Payable for $375.

4.

D) Debit Cash for $375 and credit Accounts Receivable for $375.

A cash payment was made to pay for delivery expenses, but was
mistakenly charged to Advertising Expense. What effect will this
have on the trial balance?
1.

A) Advertising Expense will be understated.

2.

B) Delivery Expense will be overstated.

3.

C) The trial balance will still balance.

4.

D) Cash will be overstated.

The sequence of steps used to record and report business
transactions is referred to as:
1.

A) transaction analysis.

2.

B) the accounting cycle.

3.

C) journalizing.

4.

D) the accounting period.

Once you post the transaction to the general ledger, you must go
back to the general journal and fill in:
1.

A) the date.

2.

B) the amount debited or credited.

3.

C) the posting reference column with the account number of the posting.

4.

D) the account name that was involved in the transaction.


The second step in recording a transaction in the general journal
is to record the:
1.

A) explanation of the entry.

2.

B) account(s) to be credited and the amount(s).

3.

C) date of the entry.

4.

D) account(s) to be debited and the amount(s).

Motor Work, Inc.'s trial balance contains the following balances:
Cash $367 Accounts payable $267 Revenue $632 Accounts
receivable $429 Expenses $103 What is the amount of total
debits for this trial balance?
1.

A) $ 899

2.

B) $ 735

3.

C) $1798

4.

D) $ 796

One of the customers of Rodriguez Roofing, Inc. paid $223 on her

bill. The journal entry that Rodriguez Roofing, Inc. would record
is:
1.

A) debit Accounts Receivable and credit Sales.

2.

B) debit Cash and credit Sales.

3.

C) debit Accounts Receivable and credit Cash.

4.

D) debit Cash and credit Accounts Receivable.

Able and Sons, Inc. purchases a building for $35,000 cash. The
journal entry would include a:
1.

A) debit to Building and a credit to Cash.

2.

B) debit to Common Stock and a credit to Building.

3.

C) debit to Building and a credit to Accounts Payable.


4.

D) debit to Building and a credit to Common Stock.

The account "Salaries Expense" began with a zero balance and
then had the following changes: increase of $450, decrease of
$175, increase of $600, and an increase of $350. The final
balance is a:
1.

A) credit balance of $1,225.

2.

B) debit balance of $1,225.

3.

C) credit balance of $1,575.

4.

D) debit balance of $1,575.