Question 1

Which of the following is not a major step necessary to complete the accounting cycle?

Accepted Answer

The adjusted trial balance is prepared after adjusting entries are made and posted to the ledger, but it is not considered a major step in completing the accounting cycle. The major steps include recording transactions, preparing adjusting entries, preparing and posting closing entries, and preparing financial statements. The adjusted trial balance is more of a step in the process of ensuring the ledger is accurate before preparing financial statements, rather than a step in completing the accounting cycle itself.

Question 2

Which of the following is a permanent account?

Accepted Answer

Allowance for Doubtful Accounts is a permanent account because it is a contra asset account related to accounts receivable and remains on the balance sheet from one accounting period to the next, adjusting to reflect the estimated uncollectible accounts.

Question 3

Which of the following rules is incorrect?

Accepted Answer

Common stock accounts, being part of equity, are increased by credit entries and decreased by debit entries, contrary to what option D states.

Question 4

Which of the following is not a component of an accounting system?

Accepted Answer

All of the listed options (input source documents, the framework for operation, and output reports) are essential components of an accounting system, making D the correct choice as it states that all the given choices are indeed components of an accounting system.

Question 5

Which T-account is incorrect?

Accepted Answer

The answer of Which T-account is incorrect? ...

Question 6

The adjustment to convert cash-basis collections from customers to accrual-basis revenue earned requires adding the ending balance in accounts receivable and subtracting the beginning balance in accounts receivable.

Accepted Answer

To convert cash-basis collections to accrual-basis revenue, you add the ending accounts receivable (revenue earned but not yet collected) and subtract the beginning accounts receivable (revenue collected that was earned in a prior period).

Question 7

Which accounts are increased by using debits?

Accepted Answer

Assets, Cost of Goods Sold, and Expenses are increased by debits according to the rules of debit and credit in accounting.

Question 8

When you prepare a journal entry, the standard format is to list all

Accepted Answer

In standard accounting practice, when preparing a journal entry, accounts to be debited are listed first, followed by accounts to be credited. This format helps in maintaining the double-entry accounting system's requirement that debits and credits for each transaction must balance.

Question 9

In terms of debits and credits, which types of accounts have the same debit or credit) normal balances?

Accepted Answer

Dividends, expenses, and assets all have debit normal balances in accounting. Assets increase with debits and decrease with credits. Expenses and dividends, when recorded, also increase with debits.

Question 10

The accounting cycle is a series of steps that process the accounting information contained in its transactions, events, and arrangements. What are the steps involved in this task?

Accepted Answer

The accounting cycle typically involves recording transactions, organizing them in a meaningful way, summarizing the information into financial statements, and then reporting these statements to stakeholders.

Question 11

The basic purpose of a trial balance is to

Accepted Answer

The basic purpose of a trial balance is to verify that the total credits equal the total debits, ensuring that the accounting equation is in balance. A and B are partially correct but do not fully capture the primary purpose of a trial balance. Option C, while important, is not the primary purpose of a trial balance.

Question 12

Which of the following is the third major step in the accounting cycle?

Accepted Answer

The third major step in the accounting cycle is to prepare and post adjusting entries, which are made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Question 13

Which of the following is a temporary account?

Accepted Answer

Purchases Returns and Allowances is a temporary account used to track returns or allowances over an accounting period, and its balance is closed to the income summary at the end of the period.

Question 14

Which of the following errors will be detected by a trial balance?

Accepted Answer

A trial balance primarily checks for mathematical accuracy in the ledger accounts, ensuring that debits equal credits. It can detect errors like an incorrectly computed balance (B), but it won't identify errors in judgment or omission, such as posting to the wrong account (A), not recording transactions (C), or forgetting to post transactions (D).

Question 15

The entire group of accounts for a company is referred to as the

Accepted Answer

The general ledger contains all of the accounts for a company, organized by account type (assets, liabilities, equity, revenues, and expenses). The worksheet is a tool used to prepare financial statements and does not contain all of the accounts. The journal is a record of individual transactions, and the document of original entry is the source document that supports a journal entry.

Question 16

Which of the following is true regarding the general journal?

Accepted Answer

The general journal is a fundamental component of the double-entry bookkeeping system, where each financial transaction is entered as both a debit and a credit in separate accounts. This method helps in detecting and preventing errors by ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced after each transaction. Choices A, B, and D describe functions that are not specifically related to the general journal's primary purpose.

Question 17

Which of the following is a major step in completing the accounting cycle?

Accepted Answer

All of these steps are part of the accounting cycle, including preparing financial statements, recording transactions, and preparing adjusting entries.

Question 18

The accounting equation can be expressed as

Accepted Answer

The accounting equation is correctly expressed as Assets - Liabilities = Shareholders' Equity, which shows that what the company owns (assets) minus what it owes (liabilities) equals the owners' stake in the company (shareholders' equity).

Question 19

What relationship exists between the general journal and the general ledger?

Accepted Answer

The general journal records transactions in chronological order, detailing the debits and credits for each transaction. These entries are then posted to the general ledger, which organizes the same information by account, allowing for the preparation of financial statements. The format differs between the two, with the journal focusing on the chronological order of transactions and the ledger organizing these transactions by account.

Question 20

Information related to the Berkley Company for the calendar year 2015 follows:  Assuming no capital stock was issued during 2015, the net income earned by the Berkley Company during 2015 was

Accepted Answer

The answer of Information related to the Berkley Company for...

Quiz 3: Review of a Company S Accounting System