FBLA Accounting I Practice Questions with Explanations
Questions
The process of recording, summarizing, analyzing, and reporting financial information is:
- Accounting
- Auditing
- Bookkeeping for taxes
- Budgeting for the next year
The basic accounting equation is:
- Assets = Liabilities + Owner's Equity
- Assets + Liabilities = Owner's Equity
- Assets = Revenue - Expenses
- Liabilities = Assets + Owner's Equity
Anything of value that a business owns is a(n):
- Asset
- Liability
- Expense
- Withdrawal
An amount owed by a business is a(n):
- Liability
- Asset
- Revenue
- Owner's equity
The amount remaining after the value of all liabilities is subtracted from the value of all assets is:
- Owner's equity
- Net income
- Revenue
- Working capital for the period
A business has assets of $42,000 and liabilities of $15,000. Owner's equity is:
- $27,000
- $57,000
- $15,000
- $42,000
A business has liabilities of $8,000 and owner's equity of $22,000. Total assets are:
- $30,000
- $14,000
- $22,000
- $8,000
The concept that a business's financial records are kept separate from the owner's personal records is the:
- Business entity concept
- Going concern concept
- Matching principle
- Realization of revenue concept
The concept that assumes a business will continue operating indefinitely is the:
- Going concern concept
- Business entity concept
- Consistent reporting concept
- Historical cost concept
The concept that revenue is recorded when it is earned, not necessarily when cash is received, is the:
- Realization of revenue concept
- Matching expenses with revenue concept
- Objective evidence concept
- Business entity concept
The concept that expenses are recorded in the same period as the revenue they helped earn is the:
- Matching expenses with revenue
- Realization of revenue
- Going concern
- Unit of measurement concept
The concept requiring that a source document be prepared for each transaction is:
- Objective evidence
- Adequate disclosure
- Materiality
- Consistent reporting
The concept stating that the same accounting procedures should be used each period is:
- Consistent reporting
- Going concern
- Historical cost
- Conservatism in estimates
The concept that assets are recorded at their original price paid is the:
- Historical cost concept
- Market value concept
- Going concern concept
- Realization concept
The rules and standards for financial accounting in the United States are called:
- Generally Accepted Accounting Principles
- International Financial Reporting Rules (IFRR)
- Internal Revenue Code
- Sarbanes-Oxley Act standards
The private organization that sets GAAP in the United States is the:
- FASB
- IRS
- SEC
- AICPA Board of Examiners
A business that sells services rather than products is a:
- Service business
- Merchandising business
- Manufacturing business
- Wholesale business
A business that purchases goods to resell to customers is a:
- Merchandising business
- Service business
- Manufacturing business
- Nonprofit
A business owned by one person is a:
- Proprietorship
- Partnership
- Corporation
- Cooperative
An accounting device used to analyze transactions, shaped like the letter T, is a(n):
- T account
- Journal
- Trial balance
- Worksheet
The left side of an account is the:
- Debit side
- Credit side
- Balance side
- Normal side for liabilities
The right side of an account is the:
- Credit side
- Debit side
- Asset side
- Expense side
The normal balance of an asset account is a:
- Debit
- Credit
- Zero balance
- Credit or a debit, depending on the asset
The normal balance of a liability account is a:
- Credit
- Debit
- Zero balance
- Debit, because it is on the left of the equation
The normal balance of the owner's capital account is a:
- Credit
- Debit
- Zero balance
- Debit when the owner invests cash
The normal balance of a revenue account is a:
- Credit
- Debit
- Zero
- Debit, because revenue increases cash
The normal balance of an expense account is a:
- Debit
- Credit
- Zero
- Credit, because expenses reduce equity
The normal balance of the owner's drawing account is a:
- Debit
- Credit
- Zero
- Credit, because it is an equity account
Which account is increased by a debit?
- Supplies
- Accounts Payable
- Sales
- Owner's Capital
Which account is increased by a credit?
- Accounts Payable
- Cash
- Rent Expense
- Owner's Drawing
In every transaction, total debits must equal:
- Total credits
- Total assets
- Net income
- The cash balance
Recording each transaction with at least one debit and one credit is called:
- Double-entry accounting
- Single-entry bookkeeping
- Cash-basis reporting
- Posting
A business pays cash for supplies. Which accounts are affected?
- Supplies is debited and Cash is credited
- Cash is debited and Supplies is credited
- Supplies is debited and Accounts Payable is credited
- Cash is debited and Capital is credited
A business buys equipment on account. The entry is:
- Debit Equipment, credit Accounts Payable
- Debit Accounts Payable, credit Equipment
- Debit Equipment, credit Cash
- Debit Cash, credit Equipment
The owner invests $5,000 cash in the business. The entry is:
- Debit Cash, credit Owner's Capital
- Debit Owner's Capital, credit Cash
- Debit Cash, credit Sales
- Debit Owner's Drawing, credit Cash
The business receives cash for services performed. The entry is:
- Debit Cash, credit Sales
- Debit Sales, credit Cash
- Debit Cash, credit Owner's Capital
- Debit Accounts Receivable, credit Cash
The business pays the monthly rent in cash. The entry is:
- Debit Rent Expense, credit Cash
- Debit Cash, credit Rent Expense
- Debit Rent Expense, credit Accounts Payable
- Debit Prepaid Rent, credit Owner's Capital
The owner withdraws cash for personal use. The entry is:
- Debit Owner's Drawing, credit Cash
- Debit Cash, credit Owner's Drawing
- Debit Salary Expense, credit Cash
- Debit Owner's Capital, credit Sales
The business pays cash on an amount owed to a creditor. The entry is:
- Debit Accounts Payable, credit Cash
- Debit Cash, credit Accounts Payable
- Debit Supplies, credit Cash
- Debit Accounts Payable, credit Supplies
The business performs services on account (on credit). The entry is:
- Debit Accounts Receivable, credit Sales
- Debit Sales, credit Accounts Receivable
- Debit Cash, credit Sales
- Debit Accounts Receivable, credit Cash
The business receives cash on account from a customer. The entry is:
- Debit Cash, credit Accounts Receivable
- Debit Accounts Receivable, credit Cash
- Debit Cash, credit Sales
- Debit Sales, credit Accounts Receivable
A business paper from which information is obtained for a journal entry is a:
- Source document
- Ledger
- Chart of accounts
- Trial balance
The source document for a cash payment is usually a:
- Check
- Calculator tape
- Sales invoice
- Memorandum
A form describing goods sold, including quantity and price, is a(n):
- Invoice
- Receipt
- Memorandum
- Bank statement
A business form giving written acknowledgment that cash was received is a:
- Receipt
- Check
- Purchase order
- Memorandum
A brief written message describing a transaction, often used when no other source document exists, is a:
- Memorandum
- Invoice
- Receipt
- Check stub
A form for recording transactions in chronological order is a(n):
- Journal
- Ledger
- Trial balance
- Worksheet
Recording transactions in a journal is called:
- Journalizing
- Posting
- Footing
- Ruling
A journal with special amount columns for frequently used accounts is a(n):
- Special journal
- General ledger
- Chart of accounts
- Subsidiary ledger
A list of account titles and numbers showing the location of each account in a ledger is a:
- Chart of accounts
- Trial balance
- Journal
- Balance sheet