Multiple Choice Questions
1. An account used to record the owner's investments in the business is called a(n):
A) Withdrawals account.
B) Capital account.
C) Revenue account.
D) Expense account.
E) Liability account.
2. Unearned revenues are:
A) Revenues that have been earned and received in cash.
B) Revenues that have been earned but not yet collected in cash.
C) Liabilities created when a customer pays in advance for products or services before the revenue is earned.
D) Recorded as an asset in the accounting records.
E) Increases to owners' equity.
3. A collection of all accounts used by a business and their balances is called a:
A) Journal.
B) Book of original entry.
C) General Journal.
D) Balance column journal.
E) Ledger.
4. A list of all accounts used by a company, and the identification number assigned to each account, is called a:
A) Ledger.
B) Journal.
C) Trial balance.
D) Chart of accounts.
E) General Journal.
5. A simple account form widely used in accounting to illustrate how debits and credits work is called a:
A) Withdrawals account.
B) Capital account.
C) Drawing account.
D) T-account.
E) Balance column sheet.
6. An account balance is:
A) The total of the credit side of the account.
B) The total of the debit side of the account.
C) The difference between the total debits and total credits for an account including the beginning balance.
D) Assets = liabilities + equity.
E) Always a credit.
7. Which of the following is the formula used to calculate the debt ratio?
A) Total Equity/Total Liabilities.
B) Total Liabilities/Total Equity.
C) Total Liabilities/Total Assets.
D) Total Assets/Total Liabilities.
E) Total Equity/Total Assets.
8. A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:
A) Operating cycle of a business.
B) Time period principle.
C) Going-concern principle.
D) Matching principle.
E) Accrual basis of accounting.
9. Interim financial statements refer to financial reports:
A) That cover less than one year, usually spanning one, three, or six-month periods.
B) That are prepared before any adjustments have been recorded.
C) That show the assets above the liabilities and the liabilities above the equity.
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.
10. The accounting principle that requires revenue to be reported when earned is the:
A) Matching principle.
B) Revenue recognition principle.
C) Time period principle.
D) Accrual reporting principle.
E) Going-concern principle.