Accounting Basics Quiz

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Questions and Answers

Which of the following statements about HST is TRUE?

HST is only recoverable on purchases.

HST is only recoverable on sales.

HST is payable on both purchases and sales. (correct)

HST is recoverable on both purchases and sales.

When journalizing an HST refund, which account is debited and credited?

HST Payable DR, HST Recoverable CR, Bank CR

HST Recoverable DR, Bank DR, HST Payable CR

HST Payable DR, Bank DR, HST Recoverable CR

HST Recoverable DR, HST Payable CR, Bank CR (correct)

Which of the following source documents is NOT correctly matched with its purpose?

Sales invoice: sale of goods or services for cash or on account

Cash receipts daily summary: cheques received from customers on account

Check copy: same as cash (correct)

POS summaries: sale of goods or services for cash

What is the primary purpose of 'posting' in accounting?

Transferring information about transactions from a journal to a ledger Signup and view all the answers

If a $850 journal entry is not fully posted, which of the following scenarios would be MOST likely?

Trial balance will not balance but will not be correct Signup and view all the answers

If a $500 debit is mistakenly posted as a credit, what will happen?

Credits greater than debits by $250 Signup and view all the answers

A bank account is mistakenly over-added by $90. What will be the impact?

Credits greater than debits by $90 Signup and view all the answers

If a $20 debit is mistakenly posted as $200, what will be the impact on the trial balance?

Credit greater than debit by $180 Signup and view all the answers

Which of these options correctly describes the accounting entry for a business paying its rent in advance?

Debit Prepaid Rent, Credit Bank Signup and view all the answers

What is the purpose of a bank credit memo/advice?

To reflect a deposit made into the business's bank account. Signup and view all the answers

What is the implication of a debit of $498 to Bank being incorrectly posted to a customer's account?

The trial balance will still balance but will not reflect a correct balance for the Bank account. Signup and view all the answers

What is the primary purpose of the income statement?

To report on the financial performance of the business over a specific period. Signup and view all the answers

Which of these is considered a violation of GAAP?

Recording rent paid for the following month as Rent Expense. Signup and view all the answers

What is the accounting entry when an invoice is received for services provided?

Debit Accounts Receivable, Credit Fees Earned Signup and view all the answers

What is the best description of 'forwarding' in accounting?

An account that has no balance at the beginning of a financial period. Signup and view all the answers

How would the entry for payment of an invoice from TD Insurance be recorded for Morrison Supplies?

Debit Car Expense, Credit Accounts Payable Signup and view all the answers

What is the gross pay for a worker making $11.50 per hour for a 46-hour work week?

$598 Signup and view all the answers

What is the weekly premium for insurance coverage of $32,000 at a rate of 20 cents per $1,000?

$64 Signup and view all the answers

Which of the following best describes remuneration?

Wages, salaries or commissions paid to employees Signup and view all the answers

What must a payroll clerk consult to accurately determine an employee's income tax deduction?

Consult the tax tables for each employee Signup and view all the answers

What is the correct journal entry to record the employer's contribution towards employee insurance?

DR EI expense CR EI payable Signup and view all the answers

Which basic accounting concept allows accountants to produce financial statements at specific points in time?

the time period concept Signup and view all the answers

What is the ending capital for a company with a beginning capital of $82,000, total expenses of $65,000, a net loss of $5,000, and drawings of $5,000?

$70,000 Signup and view all the answers

If a debit of $400 is posted twice, how will that affect the debit and credit balances?

debits will be greater than credit by $800 Signup and view all the answers

Which of the following accounts typically has a credit balance?

accounts payable Signup and view all the answers

If an owner takes $100 worth of photo supplies for personal use, what is the correct journal entry assuming HST is 13%?

debit drawings $113.00 // credit Photo supplies $100; HST recoverable $13.00 Signup and view all the answers

What will be the effect if an entire journal entry of $50 is posted in reverse?

credit will be greater than debit by $50 Signup and view all the answers

In accounting, what is the first book where all transactions are recorded?

journal Signup and view all the answers

Which of the following statements about journal entries is false?

every sales invoice can also be a purchase invoice Signup and view all the answers

Which of the following ratios would be of least interest to a banker considering a short-term loan?

debt ratio Signup and view all the answers

When calculating the inventory turnover ratio, which value is necessary?

average merchandise inventory Signup and view all the answers

Which statement about the synoptic journal is true?

it should be cross balanced before the final totals are inked Signup and view all the answers

What does the debt ratio indicate regarding a business?

the extent a business is financed by debt Signup and view all the answers

How is the Price Earnings Ratio calculated?

market price per share / earnings per share Signup and view all the answers

If Partners X and Y share a net income of $60,000 in a 3:2 ratio after contributing equal capital, what amount does each partner receive?

X: $36,000 Y: $24,000 Signup and view all the answers

Which statement regarding sales journals is accurate?

All sales of merchandise are recorded in the sales journal Signup and view all the answers

For a partnership with net earnings of $28,000 and specific salary and return allocations, what are Ford and Lincoln's respective shares?

$12,000, $16,000 Signup and view all the answers

Which statement about petty cash accounts is true?

it is for reducing cheque issuance Signup and view all the answers

What is subtracted from the bank's statement balance in a bank reconciliation?

NSF cheques Signup and view all the answers

Which statement about the payroll register is incorrect?

RPP is a fixed amount regardless of income Signup and view all the answers

What does the accounts payable ledger function as?

A subsidiary ledger Signup and view all the answers

Which option is part of the five journal system?

Cash receipts journal Signup and view all the answers

When journalizing a corporation's earnings, which entry is correct?

DR Income Summary CR Retained Earnings Signup and view all the answers

At the month-end, the entries from the cash payments journal for drawings are posted as:

A debit entry to a general ledger account Signup and view all the answers

Which of the following is not part of the five journal system?

General ledger Signup and view all the answers

Study Notes

Multiple Choice Questions (Part A)

Business Types: A merchandising business buys and resells goods for a profit.
Auditing: This involves testing a company's records and procedures for accuracy.
Accounting Equation Impact: If total assets increase by $10,000 and total liabilities decrease by $10,000, the capital remains unchanged.
Business Transaction: Liquidation is the selling of a business's assets for cash.
Financial Position: The financial position of a business is represented by the sum of its assets, liabilities, and capital (equity).
Owner Investment: When owners invest cash in the business, it increases both the capital account and the cash account.
Accounting Equation: The accounting equation is represented by: A = L + E. (Assets = Liabilities + Equity).
Balance Sheet Function: A balance sheet shows the financial position of a business at a specific point in time

Multiple Choice Questions (Part B)

GAAP: GAAP stands for Generally Accepted Accounting Principles
Balance Sheet: A balance sheet shows a business's financial position on a certain date.
Accounting Cycles: The outer ring in an accounting cycle represents monthly activities, while inner ring activities are typically done weekly.
Balance Sheet Information: The balance sheet reveals the business's assets, liabilities, and the owner's investment or equity.
Violating Accounting Principles: Violating accounting principles includes recording personal transactions as business transactions, not using source documents, and not complying with the business entity concept.
Owner's Equity Calculation: A balance sheet should show the calculations used to arrive at the owner's equity at the end of an accounting period.
Financial Statement Time Periods: Accountants use specific time periods for financial statements, like months or quarters.

Multiple Choice Questions (Part C)

Bank Account Entries: Collecting a $600 account receivable increases an asset (account receivable) and decreases an asset (cash), increasing owner's equity.
Transactions and Account Balances: Accounts with normal debit balances include assets, dividends, expenses, while the accounts with normal credit balances consist of liabilities, owner's equity, revenues.
Account Balances & Errors: A debit entry to an asset account and a credit entry to a liability account are equal.
Financial Statements: The financial statements show a specific point in time, not over a period of time
Accounting Equation: The accounting equation relates assets, liabilities, and equity: Assets = Liabilities + Equity.
Account Balances: The balance sheet includes the balance in various accounts.
Journal Entries: Errors in journal entries can impact the trial balance.
Consistency in Accounting (GAAP): The accounting methods and principles need to be applied consistently.

Multiple Choice Questions (Part D)

Accounting Process, Terms: Reconciliation involves comparing cash receipts to source documents for accuracy.
Correct Journal Entries: When recording the expense of credit cards, the correct entry is a debit to Credit Card Expense and a credit to Bank.
Corporation Dividends: Declaring dividends affects retained earnings and dividends payable.
Cash Over/Short: When cash receipts count more or less than the register tape (or expected cash value), an adjusting entry for Cash Short or Over is used.
Ratio Calculations: The current ratio is calculated by dividing current assets by current liabilities
Financial Ratios: A quick ratio is a measure of a company's ability to meet short-term obligations.
Journal Types: A sales journal records transactions made to customers.

Multiple Choice Questions (Part E)

Accounts Payable Ledger: The accounts payable ledger is a subsidiary ledger used to record information, such as account numbers and balances of each account.
Journal Entries: The cash receipts, payments, and subsidiary journals are part of the general journal.
Correct Journal Entries: An entry should be made in the cash receipts journal if the person collecting the debt keeps the money for personal use.
Checking for Accuracy: Errors in recording journal entries or amounts can cause incorrect trial balances.
General Business Accounting: A business's accounting involves several different types of journals.
Recording Transactions: The cash payments journal is used to record cash payments.
Partnership Features: Partnerships have a limited life and are subject to pass-through taxation.

Multiple Choice Questions (Part F)

Defining Ratios: The debt ratio measures financing through loans, while the acid-test ratio evaluates short-term payment ability.
Ratio Calculations: An earnings ratio like the price-to-earnings ratio relates a company's market performance to its earnings.
Partnership Profit Sharing: Partner profit sharing, without a written agreement, follows an equal split.

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Description

Test your knowledge of fundamental accounting concepts with this quiz covering business types, auditing, the accounting equation, and financial positions. You'll also explore the importance of owner investments and balance sheets. Perfect for students studying accounting principles.

Accounting Basics Quiz - Part A & B

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