Blue Nile College

SAMPLE TRUE/FALSE QUESTIONS

1. When the chart of accounts is prepared in an organization we say the journal is opened.
opened.
2. Assets could be tangible or intangible and current or non-current.
3. Revenues are increase in owner’
owner’s equity resulting from incidental operations of the business.
business.
4. Unearned revenue is a revenue account.
5. All assets other than current assets are called non- current assets.
assets.
6. Debit is the right side of an account and credit is the left side of an account.
7. Today, most software fully automates the accounting cycle, which results in less human effort and
errors associated with manual processing.
8. Preparation of financial statements is the final step in the accounting cycle.
9. The general journal provides a breakdown of all accounting activities by account.
10. A worksheet is one of the financial statements.
11. The final step “ Closing the books” refers to make the balance of temporary accounts to zero.
12. All balance sheet accounts are permanent and all income statement accounts are temporary accounts.
13. Adjusting entries are correcting entries made to correct errors.
14. The trial balance provides complete proof of the accuracy of the ledger, if the debit total equals
to the credit total.
15. A transposition occurs when the order of the digits is copied incorrectly, such as writing $542 as
$452 or $524.
SAMPLE CHOICE QUESTIONS

1. _____ is a subdivision under the three elements of the accounting equation used to record the
changes over a single element in the financial statements.
A. A ledger. B. A journal. C. An account D. All
2. The list of accounts used by an organization and their codes is called _____.
A. ledger. B. Trial balance. C. account. D. chart of accounts
3. ____ are debts that are not required to be paid within the next accounting period.
A. Current liabilities B. Non-current liabilities
C. Current assets. D. Non-current assets
4. ____ refers to decreases in owner’
owner’s equity in the process of earning revenue.
revenue.
A. Revenues. B. Owner’
Owner’s equity. C. Expenses. D. Losses
5. One is not current asset.
A. Patent. B. Building. C. Equipment. D. Land. E. None
6. Assets that have physical substance are referred to as:
A. Tangible assets. B. Intangible assets. C. Patents. D. Copyright
7. Assets can be listed in the chart of accounts in the order of :
A. Liquidity. B. Frequency of use. C. Alphabetical order. D. All
8. Resources owned by a business or individual are called ______.
A. assets B. liabilities. C. net assets. D. Capital
9. Which one is/are income statement account?
A. Prepaid expenses. B. Unearned fees. C. Accumulated depreciation D. Depreciation expense
10. Which accounts have a normal balance of credit side ?
A. Cash , Accounts Receivable and Supplies.
B. Cash, withdrawals and expenses.
C. Liabilities, Accumulated depreciation and capital
D. All except “C”

Prepared for the course Fundamentals of Accounting I -1-

 Blue Nile College
11. Which one is false about the accounting cycle?
A. It is a collective process of identifying, analyzing, and recording the accounting events.
B. It is a standard 8-step process that begins when a transaction occurs and ends with its inclusion
in the financial statements.
C. The accounting cycle is a process designed to make financial accounting of business activities
easier for business owners.
D. The accounting cycle generally comprises a year or other accounting period.
E. All of the above.
12. The first five key steps in the eight-step accounting cycle before financial statements include:
A. journalizing, Identifying transactions, posting, preparing trial balances and adjusting entries.
B. Identifying transactions, Posting, journalizing , preparing trial balances and adjusting entries.
C. Identifying transactions,journalizing, posting, preparing trial balances, and adjusting entries.
D. journalizing, posting, preparing adjusting entries,financial statements and trial balances.
13. Entries that are the result of corrections made on the worksheet and the results from the passage of
time are :
A. Journal entries. B. Adjusting entries. C. Closing entries D. Opening entries
14. An entity finalizes temporary accounts, revenues, and expenses, at the end of the period are :
A. Journal entries. B. Adjusting entries. C. Closing entries D. Opening entries
15. The
The process of transferring the information from a source document into a journal is called ___.
A. Posting. B. Journalizing. C. Preparing source documents. D. Closing entries.
16. Which one is false about a ledger?
A. The group of accounts used by an organization is called ledger.
ledger.
B. Ledger summarizes the information in a journal in their respective accounts.
C. A ledger is called a book of primary entry because there is no recording or entry after posting.
D.A summarized balance of each account in the ledger is then used to prepare financial statements.
17. One is not temporary or nominal account:
A. Revenues B. Expenses. C. Withdrawal. D. Accumulated depreciation E. None
18. _____ is a two column listing of the accounts in the ledger and their balance to make sure that the
total of debit balances equals the total of credit balances.
A. A worksheet. B. A trial balance C. A chart of account. D. All
19. Which one is an error that may take place without affecting the trial l balance totals?
totals?
A. Failure to record a transaction or to post a transaction
B. Recording the same erroneous amount for both the debit and the credit parts of a transaction.
C. Recording the same transaction more than once.
D. All of the above

Prepared for the course Fundamentals of Accounting I -2-

 Blue Nile College

SAMPLE WORKOUT QUESTIONS

1. The following unadjusted trial balance was prepared at the end of the fiscal year
December 31,2000 for Fine service Company:
FINE COMPANY
Unadjusted Trail Balance
December 31, 2000
Accounts Debit Credit
Cash……………………………………….. $ 33,800
Accounts Receivable ................................... 20,000
Supplies……..…………………….. 3,300
Prepaid Insurance…....…………………… 4,500
Store equipment………………………….. 41,200
Accumulated depreciation-Store Equipment… $ 15,000
Accounts payable……………………… 9,000
John, capital…………………… 36,000
John, withdrawals …………...…. 3,200
Fees earned…………………………………… 105,000
Depreciation expense – Store equipment…
Salaries expense………………………… 31,000
Insurance expense………………………
Rent expense…………..……………….. 14,000
Supplies expense………
Advertising expense…..…………….. 14,000
Totals………………………………… $165,000 $165,000

Additional information (Adjustment)

a) Physical count revels that supplies on hand on December 31 is $150
b) Insurance expired during the period is $ 3,000
c) Un billed fess during the period total $ 10,000
d) Accrued wage on December 31 total $ 5,000
e) Depreciation expense of store equipment is $ 900
Required:
1. Prepare adjusting entries for the above a) to e) transactions
2. Prepare adjusted trial balance as of December 31,2000.
3. Prepare Income statement ,Statements of Owner’s Equity and
Balance Sheet
4. Prepare the necessary closing entries.

2. Purchase of supplies on account birr 500 is posted as a debit to equipment and a credit to cash as
birr 50
Required prepare correcting entries.

Prepared for the course Fundamentals of Accounting I -3-