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    Principles of Accounting: Practice Exam Questions.

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    1.  The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital.
      TRUE
      FALSE
    2.  At the end of the fiscal period, prepaid expenses are reported on the Income Statement as expenses.
      TRUE
      FALSE
    3.  After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.
      TRUE
      FALSE
    4.  If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.
      TRUE
      FALSE
    5.  During the end-of-period processing which of the following best describes the logical order of this process:???? 
      Preparation of adjustments, adjusted trial balance, financial statements.
      Preparation of Income Statement, adjusted trial balance, Balance Sheet.
      Preparation of adjusted trial balance, cross-referencing, journalizing.
      Preparation of adjustments, adjusted trial balance, posting.
    6.  Which of the following is not true about closing entries?? 
      There are four closing entries that update the owner's equity account.
      After the second closing entry, the income summary account is equal to the net income or (loss) for the period.
      All real accounts are closed at the end of the period.
      By closing nominal accounts at the end of the period to zero, it is possible to isolate next period's information correctly.
    7.  Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $5,400 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense and prepaid insurance during the closing process at the end of Amir's first month of operations on March 31st?? 
      $5,400
      $540
      $450
    8.  The proper sequence for the steps in the accounting cycle is a follows:? 
      analyze and record transactions, post transaction to the ledger, prepare a trial balance, prepare financial statements, journalize closing entries, analyze adjustment data and prepare adjusting entries.
      prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger, analyze and record transactions, post transactions to the ledger.
      analyze and record transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger.
    9.  Which of the statements below indicates that a company earned a net income for the period?? 
      The sum of the credits exceeds the sum of the debits in the Balance Sheet columns on the work sheet.
      The sum of the credits exceeds the sum of the debits in the Income Statement columns on the work sheet.
      The sum of the debits exceeds the sum of the credits in the Income Statement columns on the work sheet.
      The sum of the debits exceeds the sum of the credits in the Income Statement columns on the work sheet.
    Cash inflows exceeded cash outflows.
    10.  The work sheet at the end of July has $5,350 in the Balance Sheet credit column for Accumulated Depreciation. The work sheet at the end of August has $6,700 in the Balance Sheet credit column for Accumulated Depreciation. What was the amount of the depreciation expense adjustment for the month of August?? 
      amount can not be determined
      $6,700
      $5,350
      $1,350
    11.  The income statement columns in the worksheet show that debits are equal to $55,800 and credits are $62,705. What does this information mean to the accountant?? 
      Net income of $6,905
      Net loss of $6,905
      The accounts are out of balance, indicating an error has been made.
      The accounts have not been updated.

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    Solution Preview

    Principles of accounting practice exam questions
    1. The usual presentation of the statement of owner's equity is (1) Beginning capital, (2) Net income or loss, (3) Drawing, (4) Owner's contributions, (5) Ending capital.
    TRUE
    FALSE ** Retained earnings is only for corporations so no drawing. It does not have owner's contribution in it.

    2. At the end of the fiscal period, prepaid expenses are reported on the Income Statement as expenses.
    TRUE
    FALSE *** Balance Sheet

    3. After the account balances have been extended from the Adjusted Trial Balance columns on the work sheet, the difference between the initial totals of the Balance Sheet debit and credit columns is Net Income or Net Loss.
    TRUE ***
    FALSE

    4. If the totals of the Income Statement debit and credit columns of a work sheet are $27,000 and $29,000, respectively, after all account balances have been extended, the amount of the net loss is $2,000.
    TRUE
    FALSE** credits are revenue so if they are more than expenses, you have profit

    5. During the end-of-period processing which of the following best describes the logical ...

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