125 test bank for financial accounting 2nd edition kemp overview

125 Test Bank for Financial Accounting 2nd
Edition Kemp Overview
True - False Questions
Items of value that a company owns are called stockholders'
equity.
1.

True

2.

False

If debits equal credits on the trial balance, it means that the trial
balance is correct.
1.

True

2.

False

An account numbered 321 would be considered a stockholders'
equity account as it begins with a 3.
1.

True

2.

False

The required accounting period for a trial balance is one year.
1.

True

2.

False

Once the trial balance is correct, the next step is to prepare the
financial statements, beginning with the income
statement.
1.

True

2.

False

The act of recording a transaction is called "journalizing."
1.

True


2.

False

Chronological order dictates the order in which transactions are
journalized.
1.

True

2.

False

A trial balance is a list of the accounts and their balances taken
from the general journal.
1.

True

2.

False

Transactions are recorded in order of the dollar amount of the
transaction.
1.

True

2.

False

The posting reference column of the general journal will include
the number of the account to which the information is
being posted.
1.

True

2.

False

Normal balance refers to the positive increase of an account and
identifies the side of the account (Debit or Credit) to which
this positive balance is recorded.
1.

True

2.

False

Journalizing is the transfer of information from the general
journal to the general ledger.
1.

True

2.

False


The debit (left) side of an account always indicates an increase in
the value of the account.
1.

True

2.

False

The posting reference column of the general ledger shows the
sources of the transferred information.
1.

True

2.

False

The stockholders' equity section would include the accounts
such as retained earnings and revenues.
1.

True

2.

False

A T-account is a way to visualize the increases and decreases to
the value of an account.
1.

True

2.

False

Account titles such as Marketing Expense and Depreciation
Expense would be numbered starting with a 3.
1.

True

2.

False

If a total debits and total credits on a trial balance do not equal,
redo the addition of the debit and credit columns.
1.

True

2.

False

The credit (right) side of an account shows an increase or
decrease depending upon the type of account.
1.

True

2.

False


An entry could have been posted twice and the trial balance
might still balance.
1.

True

2.

False

Accounts that increase on the credit side are liabilities, common
stock, revenues and retained earnings (LCR).
1.

True

2.

False

Accounts that increase on the credit side are assets, dividends
and expenses (ADE).
1.

True

2.

False

Double-entry accounting requires that every business
transaction impact at least two different accounts.
1.

True

2.

False

A listing of all accounts in numerical order is called a chart of
accounts.
1.

True

2.

False

The trial balance is an official financial statement.
1.

True

2.

False

The general journal was developed to organize transactions by
account.
1.

True

2.

False


A trial balance contains the name of the company, the words
"trial balance" and the date of the statement.
1.

True

2.

False

The general journal is used to record the events (transactions) of
a business.
1.

True

2.

False

Multiple Choice Questions - Page 1
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.

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.

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 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.

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.

A chart of accounts does NOT include:
1.

A) stockholders' equity.

2.

B) assets.

3.

C) names of customers.

4.

D) liabilities.

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


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.

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.

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.

4.

D) Notes receivable are written pledges while accounts receivable are not.

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.

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

A) liability.

2.

B) expense.

3.

C) revenue.

4.

D) stock.

Which of the following is an expense account?
1.

A) Prepaid Insurance

2.

B) Advertising

3.

C) Accounts Payable

4.

D) Cash


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.

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

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.

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

Which of the following is NOT a revenue account?
1.

A) Salaries

2.

B) Sales

3.

C) Fees Earned

4.

D) Professional Fees


Net income and dividends are part of:
1.

A) liabilities.

2.

B) stockholders' equity.

3.

C) assets.

4.

D) net income.

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.

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

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

A) Revenues

2.

B) Expenses

3.

C) Accounts Receivable

4.

D) Dividends

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.


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.

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.

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.

Accounts starting with the number 4 would represent:
1.

A) assets.

2.

B) liabilities.

3.

C) revenues.

4.

D) expenses.

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


All payables are listed as:
1.

A) assets.

2.

B) liabilities.

3.

C) stockholders' equity.

4.

D) revenue.

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.

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.


97 Free Test Bank for Financial Accounting 2nd
Edition Kemp Multiple Choice Questions - Page 2
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.

A) It is not normal for a business to have this much cash, therefore this is NOT a normal
account balance.

2.

B) It is NOT ever normal for the cash account to have a debit balance.

3.

C) Normal account balances differ from company to company; therefore it is impossible
to evaluate the given statement without more information.

4.

D) It is ALWAYS normal for the cash account to have a debit balance.

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.

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.

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.


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.

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.

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.

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.


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.

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

A) Account

2.

B) T-account

3.

C) Debit

4.

D) Credit

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.

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 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.


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.

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 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.

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.

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.

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

A) liabilities.

2.

B) expenses.

3.

C) revenues.

4.

D) stockholders' equity.

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.

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.

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.

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.


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

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.

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.

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.

Debit means:
1.

A) decrease.

2.

B) increase.

3.

C) the right side of an account.

4.

D) the left side of an account.


97 Free Test Bank for Financial Accounting 2nd
Edition Kemp Multiple Choice Questions - Page 3
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.

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

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 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).

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).

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.

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

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.


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.

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.

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

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.

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.


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.

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.

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.

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

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

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.

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

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

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).

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.

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.

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

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.

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

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.

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 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.

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).

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.

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.

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.

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.