Accounting Test

Question 1

What are intangible assets?

Answer 1

Assets that do not have physical substance.

Examples include licenses, goodwill, trademarks, patents, and copyrights.

Question 2

Define goodwill in accounting.

Answer 2

an intangible asset that accounts for the excess purchase price of another company

Question 3

List examples of intangible assets.

Answer 3

• Licenses
• Goodwill
• Trademarks
• Patents
• Copyrights

Question 4

What is the formula for straight-line depreciation?

Answer 4

SL Depr = (Cost - Salvage Value) / Useful Life

Question 5

What does DR stand for in accounting entries?

Answer 5

Debit

Question 6

What does CR stand for in accounting entries?

Answer 6

Credit

Question 7

What is the purpose of adjusting entries?

Answer 7

To update the accounts before financial statements are prepared.

Question 8

Fill in the blank: Unearned revenue is paid for a service you haven’t provided _______.

Answer 8

before year end

Question 9

What is the journal entry for recognizing unearned revenue?

Answer 9

DR Unearned Revenue
CR Revenue

Question 10

What is the current ratio formula?

Answer 10

Current Ratio = CA / CL

Question 11

What are the components of a classified balance sheet?

Answer 11

Assets
* Current Assets
* Long-Term Investments
* Fixed Assets / Property, Plant & Equipment
* Intangible Assets
Liabilities
* Current Liabilities
* Long-Term Liabilities
Owner’s Equity
* Owner’s Name, Capital

Question 12

What does the term ‘working capital’ refer to?

Answer 12

The difference between current assets and current liabilities.

Question 13

What is the formula for the acid-test ratio?

Answer 13

Acid Test Ratio = (Cash + Short Term Investments + Receivables) / CL

Question 14

What are the financial statements typically prepared?

Answer 14

• Income Statement
• Statement of Owner’s Equity
• Balance Sheet

Question 15

What is the first step in the accounting cycle?

Answer 15

Analyze business transactions

Question 16

True or False: Closing entries involve transferring net income to capital.

Answer 16

True

Question 17

What is the purpose of reversing entries?

Answer 17

simplify recordkeeping and reduce the number of mistakes in the monthly accounting process.

Question 18

Fill in the blank: Depreciation would not ______.

Answer 18

reverse

Question 19

What are correcting entries used for?

Answer 19

To fix a prior error in journalizing.

Question 20

What is the journal entry for accruing wages?

Answer 20

DR Wages / Salaries Expense
CR Wages / Salaries Payable

Question 21

What is the journal entry for depreciation expense?

Answer 21

DR Depr. Exp. - ‘Thing’
CR Accumulated Depreciation - ‘Thing’

Question 22

What are late arriving invoices?

Answer 22

Bills from suppliers that arrive after the accounting period in which the expense was incurred.

Question 23

What is the entry for late arriving invoices?

Answer 23

DR Expense
CR A/P

Question 24

What is the entry for late issuing of invoices?

Answer 24

DR A/R
CR Revenue

Question 25

What is the formula for interest expense calculation on notes payable?

Answer 25

(Note Payable or Bank Loan or Mortgage Payable) x annual interest rate / 12 x number of months passed since last interest payment.

Question 26

What is the journal entry for interest expense?

Answer 26

DR Interest Expense CR Interest Payable

Question 27

What is the journal entry for interest earned on notes receivable?

Answer 27

DR Interest Receivable CR Interest Earned

Question 28

What are the components of owner's equity?

Answer 28

* Owner's Capital * Retained earnings * Drawings * Net income/loss

Question 29

What does 'notes payable' refer to?

Answer 29

a written promise to pay a specific amount of money at a specified future date or on demand

Question 30

What does 'notes receivable' refer to?

Answer 30

asset accounts tied to an underlying promissory note

Question 31

What is the definition of prepaid expenses?

Answer 31

Current assets that are paid for in advance and need to be adjusted at year-end.