Semester 2 Final Exam

1. Planning, recording, analyzing, and interpreting financial information is called

a. organizing.
b. accounting.
c. profiting.
d. formatting.
ANS: b
2. Financial reports that summarize the financial condition and operations of a business
are called financial
a. summaries.
b. records.
c. statements.
d. outputs.
ANS: c
3. A business that performs an activity for a fee is called a
a. proprietorship.
b. corporation.
c. service business.
d. online business.
ANS: c
4. A business owned by one person is called a
a. proprietorship.
b. corporation.
c. partnership.
d. common-law business.
ANS: a
5. Anything of value that is owned is called a(n)
a. expense.
b. asset.
c. liability.
d. possession.
ANS: b
6. Financial rights to the assets of a business are called liens.
a. True
b. False
ANS: b
7. The amount remaining after the value of all liabilities is subtracted from the value of all
assets is called

a. profit.
b. loss.
c. owner's equity.
d. account balance.
ANS: c
8. A business activity that changes assets, liabilities, or owner's equity is called a
a. deposit.
b. withdrawal.
c. deal.
d. transaction.
ANS: d
9. Each part of the accounting equation consists of one or more accounts.
a. True
b. False
ANS: a
10. An account balance is a term applied when both sides of the accounting equation are
equal, or, in balance.
a. True
b. False
ANS: b
11. The account used to summarize the owner's equity in a business is called
a. capital.
b. a record.
c. a transaction.
d. an account balance.
ANS: a
12. When a business pays cash for supplies,
a. accounts payable increases.
b. cash increases.
c. owner's equity increases.
d. supplies increases.
ANS: d
13. A sale for which cash will be received at a later date is called accounts payable.
a. True
b. False
ANS: b
14. Which of the following is not a transaction that will affect owner's equity?

a. paid cash for supplies

b. received cash from sales
c. sold services on account
d. received cash from owner as an investment
ANS: a
15. The account used to summarize the owner's equity in a business is called capital.
a. True
b. False
ANS: a
16. A decrease in owner's equity resulting from the operation of a business is called an
expense.
a. True
b. False
ANS: a
17. When a company receives cash from a customer for a prior sale, the transaction
a. increases cash, decreases accounts receivable.
b. increases accounts receivable, decreases cash.
c. increases both cash and accounts receivable.
d. decreases both cash and accounts receivable.
ANS: a
18. Understanding accounting helps managers and owners make better business
decisions.
a. True
b. False
ANS: a
19. Inaccurate accounting records is used to make the business appear to be more
successful than it really is, and thereby can help the business really succeed.
a. True
b. False
ANS: b
20. Suppliers that extend credit to a business and institution have no stake in that
organization's success or failure.
a. True
b. False
ANS: b
21. All accounting transactions are recorded in the accounting equation.
a. True

b. False
ANS: b
22. The total of amounts on the left side of the accounting equation must always equal
the total of amounts on the right side.
a. True
b. False
ANS: a
23. A record summarizing all the information pertaining to a single item in the accounting
equation is known as a(n)
a. transaction.
b. balance.
c. record.
d. account.
ANS: d
24. An accounting device used to analyze transactions is called a(n)
a. T account.
b. calculator.
c. record.
d. ledger.
ANS: a
25. In a T account, amounts recorded on the left side are called credits.
a. True
b. False
ANS: b
26. The side of the account that is increased is called the
a. debit.
b. credit.
c. normal balance.
d. average balance.
ANS: c
27. The owner's capital account is on the right side of the accounting equation and has a
normal credit balance.
a. True
b. False
ANS: a
28. Account balances increase on the normal balance side of an account.
a. True

b. False
ANS: a
29. A list of accounts used by a business is called a(n)
a. list.
b. chart of accounts.
c. accounting record.
d. database.
ANS: b
30. If one account is increased, another account on the same side of the equation
a. must also increase.
b. must stay the same.
c. must be decreased.
d. is moved to the other side of the equation.
ANS: c
31. Every transaction must affect accounts on both sides of the accounting equation.
a. True
b. False
ANS: b
32. Which one of the following questions is not asked every time a transaction is
analyzed into its debit and credit parts?
a. Which accounts are affected?
b. How is each account classified?
c. How is each account changed?
d. What is the new balance of each account?
ANS: d
33. A business paid cash for supplies. How is this transaction recorded?
a. debit cash, debit supplies
b. credit cash, credit supplies
c. debit cash, credit supplies
d. credit cash, debit supplies
ANS: d
34. Revenue increases owner's equity and decreases cash.
a. True
b. False
ANS: b
35. A business sold services on account. How is this transaction recorded?
a. debit accounts receivable, debit sales

b. credit accounts receivable, credit sales

c. debit accounts receivable, credit sales
d. credit accounts receivable, debit sales
ANS: c
36. A business bought supplies on account. How is this transaction recorded?
a. debit supplies, credit cash
b. debit supplies, credit accounts payable
c. credit supplies, debit cash
d. credit supplies, debit accounts payable
ANS: b
37. A business paid cash on account. This transaction is recorded by debiting cash and
crediting accounts payable.
a. True
b. False
ANS: b
.
38. A business received cash from owner as an investment. This transaction is recorded
by debiting cash and crediting Capital.
a. True
b. False
ANS: a
39. A business paid cash for insurance. How is this transaction recorded?
a. credit cash, debit insurance
b. debit cash, credit insurance
c. credit accounts payable, debit insurance
d. debit accounts payable, credit insurance
ANS: a
40. A business received cash on account. How is this transaction recorded?
a. debit cash, credit accounts receivable
b. debit cash, credit accounts payable
c. credit cash, debit accounts receivable
d. credit cash, debit accounts payable
ANS: a
41. The source document for cash payments is a(n)
a. invoice.
b. receipt.
c. calculator tape.
d. check.
ANS: d

42. A journal with two amount columns in which all kinds of entries can be recorded is
called a(n)
a. special journal.
b. general journal.
c. bi-column journal.
d. multi-purpose journal.
ANS: b
43. Transactions are recorded in a journal in
a. alphabetical order.
b. chronological order.
c. order of importance.
d. amounts least to greatest.
ANS: b
44. To keep from getting overloaded, businesses usually record transactions as soon as
they occur.
a. True
b. False
ANS: b
45. A business paper from which information is obtained for a journal entry is called a(n)
a. source document.
b. receipt.
c. invoice.
d. check.
ANS: a
46. A form describing the goods or services sold, the quantity, and the price is called a(n)
a. memorandum.
b. proof of purchase.
c. invoice.
d. receipt.
ANS: c
47. Which of the following is not part of an entry?
a. signature
b. source document
c. date
d. debit
ANS: a
48. Account balances increase on the normal balance side of an account.
a. True

b. False
ANS: a
49. A business form giving written acknowledgement for cash received is called a sales
invoice.
a. True
b. False
ANS: b
50. A journal page is complete
a. at the end of the day.
b. when all the lines are filled.
c. when there is insufficient space to record any more entries.
d. all of the answers are correct.
ANS: c
51. Because expenses decrease owner's equity, increases in expenses are recorded as
credits.
a. True
b. False
ANS: b
52. Before a transaction is recorded in a journal, the transaction is analyzed into its debit
and credit parts.
a. True
b. False
a. ANS: a
53. A revenue account has a normal debit balance.
a. True
b. False
ANS: b
54. Splitting up a journal entry to fill up a general journal page is sometimes necessary
so there are no blank lines for anyone to think the page is incomplete.
a. True
b. False
ANS: b
55. To prove a journal page, you must verify that the total debits on the page equal the
total credits.
a. True
b. False

ANS: a
56. When services are sold on account,
a. Accounts Payable is debited and Sales is credited.
b. Sales is debited and Accounts Payable is credited.
c. Accounts Receivable is debited and Sales is credited.
d. Sales is debited and Accounts Receivable is credited.
ANS: c
57. Errors are corrected
a. so that no one can tell that an error was made in the first place.
b. at the end of the month.
c. by someone other than the person who made the error in the first place.
d. in a way that does not cause doubts about what the correct information is.
ANS: d
58. Dollars and cents signs and decimals points are always used when writing amounts
on ruled accounting paper so as not to be confusing.
a. True
b. False
ANS: b
59. If you pay $300.00 cash on account to Supply Depot you would
a. debit Cash for $300.00 and credit Accounts Payable--Supply Depot for $300.00.
b. debit Supplies for $300.00 and credit Cash for $300.00.
c. debit Cash for $300.00 and credit Supplies for $300.00.
d. debit Accounts Payable--Supply Depot for $300.00 and credit for Cash $300.00.
ANS: d
60. When you prove Cash at the end of each month, the difference between the totals of
the debits and credits is the amount of profit earned during the month.
a. True
b. False
ANS: b
61. Posting sorts journal entries so that all debits and credits affecting each account are
brought together in one place.
a. True
b. False
ANS: a
62. A separate form for each account is used to summarize all the changes to a single
account.
a. True
b. False

ANS: a
63. A list of account titles and numbers showing the location of each account in a ledger
is known as a(n)
a. chart of accounts.
b. account summary.
c. T account form.
d. balance-ruled account form.
ANS: a
64. A group of accounts is called a(n)
a. ledger.
b. group.
c. account summary.
d. chart of accounts.
ANS: a
65. A general ledger contains all accounts needed to prepare financial statements.
a. True
b. False
ANS: a
66. A chart of accounts is a
a. line graph showing increases and decreases of account balances in the past year.
b. list of all the accounts on the balance sheet.
c. list of all the accounts on the income statement.
d. None of the answers are correct.
ANS: d
67. Accounts in a general ledger are arranged in the same order as they appear on
financial statements.
a. True
b. False
ANS: a
68. Each business has a unique chart of accounts.
a. True
b. False
ANS: a
69. Which of the following is not part of file maintenance?
a. arranging accounts in a general ledger
b. proving a five-column journal
c. assigning account numbers

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d. keeping records current

ANS: b
70. When an account is no longer needed, it is removed from the general ledger and the
chart of accounts; but the now unused number cannot be reassigned.
a. True
b. False
ANS: b
71. Transferring information from a journal entry to a ledger account is called
a. posting.
b. transferring.
c. copying.
d. summarizing.
ANS: a
72. The posting reference is the first step recorded in the posting procedure.
a. True
b. False
a. ANS: b
73. All journal entry amounts are posted to the general ledger from the general journal.
a. True
b. False
ANS: a
74. A withdrawal account has a normal credit balance.
a. True
b. False
ANS: b
75. To prove a journal page, you must verify that the total debits on the page equal the
total credits.
a. True
b. False
ANS: a
76. Determining that the amount of cash agrees with the accounting records is called
a. balancing the account.
b. verifying records.
c. proving cash.
d. ruling.

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ANS: c
77. A correcting entry is an additional journal entry to add on to a previous transaction.
a. True
b. False
ANS: b
78. The four steps in making a journal entry are reversed when making a correcting
entry.
a. True
b. False
ANS: b
79. A journal entry made to correct an error in the ledger is called a(n)
a. adjusting entry.
b. reversing entry.
c. error reversal.
d. correcting entry.
ANS: d
80. The numbers in the Post. Ref. columns of the general ledger account and the journal
serve which purpose?
a. An entry in an account can be traced to its source in a journal.
b. An entry in a journal can be traced to where it was posted in an account.
c. If posting is interrupted, the accounting personnel can easily see which entries in the
journal still need to be posted.
d. All of the answers are correct.
ANS: d

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