Bookkeeping basics

Question 1

True or False:​ Journal entries require a good understanding of debits and credits.

Answer 1

True

Question 2

When would it be acceptable to use Manual Journal entries to hide or disguise certain financial transactions?

Answer 2

Never

Question 3

True or False:​ Journal entries should not be used during year-end adjustments.

Answer 3

False

Question 4

Who should decide what to manually enter into general journal entries?

Answer 4

Accountant

Question 5

True or False:​ Journal entries should not be used to enter depreciation.

Answer 5

False

Question 6

What are the six steps in the accounting cycle?

Answer 6

Collect and analyze transactions

Record/Post transactions to the ledger

Prepare an unadjusted trial balance

Prepare adjusting entries at the end of the period

Prepare an adjusted trial balance

Prepare Financial Statements.

Question 7

What is a general ledger?

Answer 7

A set of numbered accounts a business uses to keep track of its financial transactions and to prepare financial reports. Each account is a unique record summarizing a specific type of asset, liability, equity, revenue or expense.

Question 8

What is posting to the ledger?

Answer 8

Reorganization of all the journal entries and grouping like items together. Like assets starting at 101 being assets and ending with 606 being expenses.

Question 9

What is step one in the accounting process?

Answer 9

Collect and analyze transactions.

Question 10

What is step two in the accounting process?

Answer 10

Record/Post transactions to the ledger

Question 11

What is step three in the accounting process?

Answer 11

Prepare an unadjusted trial balance

Question 12

What is step four in the accounting process?

Answer 12

Prepare adjusting entries at the end of the period

Question 13

What is step five in the accounting process?

Answer 13

Prepare an adjusted trial balance

Question 14

What is step 6 in the accounting process?

Answer 14

Prepare Financial Statements.

Question 15

A numbered list that contains all accounts needed to prepare financial statements is known as?

Answer 15

The General Ledger

Question 16

Reorganizing journal entries and grouping them by account is known as?

Answer 16

P​osting to the ledger

Question 17

To find the balance of the account types that increase with a debit (asset and expense accounts), bookkeepers will?

Answer 17

Subtract total credits from total debits (Debits - Credits)

Question 18

The accounting cycle starts with the?

Answer 18

Analysis of business transactions

Question 19

After analysis, the business transaction is recorded in the journal in

Answer 19

Chronological order

Question 20

The names of ALL ACCOUNTS that a company has identified and made available for recording transactions in its general ledger is known as a:

Answer 20

C​hart of Accounts

Question 21

A form or statement that lists the titles and balances of all ledger accounts at a given date is known as:

Answer 21

Trial balance

Question 22

Sydney is entering a transaction in QuickBooks. What are the two steps of manual accounting that will happen simultaneously as she does this?

Answer 22

Creating a journal entry and posting to the ledger

Question 23

The digits of the account numbers assigned to general ledger accounts often have significance. For example, an account number beginning with a “1” might signify that the account is an asset account, a “6” might signify an operating expense, etc.

Answer 23

True

Question 24

A trial balance where total debits equal total credits indicates:

Answer 24

The ledger is in balance.

Question 25

Zach needs to determine what his company’s financial position was on March 31st of last year. Where should he look?

Answer 25

B​alance sheet

Question 26

Which of the following financial statements reports the sources and uses of cash by a business?

Answer 26

S​tatement of Cash Flow

Question 27

This lists general ledger account balances at the end of a reporting period, before any adjusting entries are made?

Answer 27

Unadjusted Trial Balance

Question 28

A trial balance that is prepared after taking into account all the adjusting entries is known as:

Answer 28

Adjusted Trial Balance

Question 29

The preparation of financial statements and closing the books is the ______ step of the accounting cycle.

Answer 29

last

Question 30

Rudiger has just recorded and posted his business transactions to the ledger. His next step in the accounting cycle is to _______.

Answer 30

prepare an unadjusted trial balance

Question 31

Francis enters a $100 check received from a customer into QuickBooks online. If she views the Transaction Journal, which account would show as being debited $100?

Answer 31

Business bank account

Question 32

The double-entry system of bookkeeping normally results in which of the following balances in the ledger accounts?

Answer 32

Debit: Assets and expenses Credit: Liabilities, equity, and revenue

Question 33

In the first month of operations, Pepper Consulting’s total debit entries to the cash account amounted to $900, and the total credit entries to the cash account amounted to $600. The cash account has a:

Answer 33

$300 debit balance

Question 34

Pepper Consulting bought computers with credit from PYO Suppliers and entered the purchase into QuickBooks. The transaction journal for Pepper Consulting would show the following entry:

Answer 34

Debit: Computers Credit: PYO Credit Payable

Question 35

True or False: The difference between a sales receipt and an invoice is whether or not the customer pays at the time of the sale or service.

Answer 35

True

Question 36

What is the “undeposited funds” account?

Answer 36

A temporary account that holds payments you plan to deposit later.​

Question 37

When would the undeposited funds feature not be necessary?

Answer 37

When you’ve already deposited the funds during the receive payment process.

Question 38

What is a deferral?

Answer 38

Deferrals remove transactions that belong to a different time period. Example: Paid upfront but the job hasn't been completed yet.

Question 39

What is an accrual?

Answer 39

Accruals are the opposite of deferrals. They concern the future payment or expenses. Example: Did a job for a customer but havent paid YOU yet.

Question 40

What is a Missing Transaction?

Answer 40

Transaction that slips through the cracks and is not recorded right away.

Question 41

What is a tax adjustment?

Answer 41

Tax adjustments usually happen once a year and are related to tax filings. Example: File a tax return and discovered he received a tax credit. The credit was then posted to his book as an adjustment.

Question 42

True or False: It is always the bookkeeper’s responsibility to identify the need for adjusting journal entries.

Answer 42

False

Question 43

True or False:​ Once the adjusted trial balance has been prepared, it’s time to create the financial statements.​

Answer 43

True

Question 44

If you’re increasing an Interest Expense account, you _____ it.

Answer 44

Debit

Question 45

Which report includes the assets, liabilities, and owner's equity on a specific date?

Answer 45

The Balance Sheet

Question 46

Which report provides a summary of changes in an owner's equity?

Answer 46

The Statement of Equity

Question 47

Which report provides a summary of cash movement over a specific time period?

Answer 47

The Cash Flow Statement.

Question 48

Which report is used to calculate net income?

Answer 48

The Income Statement

Question 49

Which of the following financial statements provides a summary of a company’s revenue and expenses over a period of time?

Answer 49

The Income Statement

Question 50

Question 2 Which of the following financial statements provides you with the owner’s change in capital over time?

Answer 50

The Statement of Equity

Question 51

Which of the following financial statements shows the balances of a company’s assets, equity, and liability?

Answer 51

The Balance Sheet

Question 52

Which of the following financial statements provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investments?

Answer 52

The Statement of Cash Flow

Question 53

A seasonal business like Lou’s Landscaping can have decreased cash during off-season months. Which financial statement would show the cash inflows and outflows for a particular month?

Answer 53

Cash Flow Statement

Question 54

Which of these accounts would have a balance of $0 at the beginning of each new accounting period?

Answer 54

R​evenue

Question 55

A business owner performs a service and is paid when the job is completed. The owner would then enter this transaction into accounting software as

Answer 55

A Sales Receipt

Question 56

A business owner performs a service but is not paid when the job is performed. Using their accounting software, the owner would enter the transaction as:

Answer 56

An Invoice

Question 57

True or False: The ending cash balance on the Statement of Cash Flow should not equal the cash balance reported on the Balance Sheet.

Answer 57

F​alse

Question 58

A customer paid in advance for a service. They need to cancel the service. If the business owner wishes to apply that money towards the customer’s next service, the owner would enter that transaction into their accounting software as:

Answer 58

A Credit Memo

Question 59

True or False: In order to complete a Statement of Equity, you will need the net profit from the Income Statement.

Answer 59

True

Question 60

True or False: Business owners should use the General Ledger to make business decisions.

Answer 60

False

Question 61

A Balance Sheet has four parts: a heading, assets, liabilities, and ______.

Answer 61

equity

Question 62

True or False: Financial reports should be produced before any adjustments have been made.

Answer 62

False

Question 63

An owner has deposited several payments they’ve received from customers into the business’s bank account. The owner would then enter this transaction in their accounting software as:

Answer 63

A Bank Deposit

Question 64

After the Unadjusted Trial Balance is created, the process of going back and updating information is known as:

Answer 64

Making adjustments

Question 65

A business owner had a piece of equipment serviced and paid for the repair with a check. The owner would then enter the transaction into their accounting software as:

Answer 65

A Vendor Check

Question 66

The document that shows all of the account balances after adjustments have been made is known as:

Answer 66

The Adjusted Trial Balance

Question 67

Becky provided a service to a customer, and they have yet to pay. Which type of journal entry would need to be made?

Answer 67

An Accrual

Question 68

True or False: The depreciation of a vehicle is not something that can be entered as an adjustment.

Answer 68

False

Question 69

This type of assumption/principle requires a business to disclose all information about the business that is important for a lender or investor to know in financial statements in the financial statement notes.

Answer 69

Full Disclosure Principle

Question 70

The Economic Entity Assumption states:

Answer 70

Business and personal financial activities must be separate for business owners.

Question 71

When the bookkeeper or accountant has a choice between two acceptable alternatives, they should choose the one that will report less profit, less asset amount, or a greater liability amount. This is based upon which assumption/principle?

Answer 71

Conservatism Assumption

Question 72

Your client Rosie Fern wants to add the cost of the trellises she built for her herbal gardening business but can’t find a receipt or proof that she paid.

Answer 72

The Reliability Assumption

Question 73

When a bookkeeper is using the US dollar as currency in accounting and is not considering changes in the value of that currency she is employing the:

Answer 73

Monetary Unit Assumption

Question 74

This assumption / principle is very subjective and should be used with caution outside of rounding to the nearest dollar when entering financial information.

Answer 74

Materiality Principle

Question 75

A company is considered a Going Concern when it:

Answer 75

Is stable, able to operate and able to meet its financial obligations.

Question 76

Cecilia Tubular sells 1980s themed enamel pins. She has a huge inventory she purchased in 1984 at $0.10 each. They are now worth $1 each. According to the Monetary Unit Assumption, you:

Answer 76

Keep the value of the pins at $0.10 each.

Question 77

If a business is using the Consistency Principle they will:

Answer 77

Adopt a specific accounting method and will enter all similar items in the exact same way in the future.

Question 78

True or False: According to the Periodicity Assumption, companies can only review their financial health at the end of their fiscal year?

Answer 78

False

Question 79

A client owns a small vinyl sign printing company called Printing Pros. They completed a print job for a customer on August 10, but the customer did not pay for the service until October 15. In which month should the revenue be recognized for this big print job?

Answer 79

A​ugust

Question 80

P​rinting Pros had another big job to do in April and needed to hire additional help to make their deadline. The new employee received their first paycheck at the beginning of May. When should Printing Pros recognize the expense of paying their employee?

Answer 80

April

Question 81

According to the Revenue Recognition Principle, when should a business recognize its revenue?

Answer 81

When it is earned.

Question 82

Which of the following best describes the Periodicity Assumption?

Answer 82

Companies can assume that business activity can be broken up into smaller measurements of time.

Question 83

Which of the following statements would best describe the Matching Principle?

Answer 83

Expenses like manufacturing costs or depreciation should be recognized in the same period as the revenue it helped generate.

Question 84

According to the Cash-Basis accounting method, when would a business recognize its expenses?

Answer 84

When the expense is paid out

Question 85

True or False: An advantage of using the Accrual Method of accounting is that it provides a fuller picture of the state of the business.

Answer 85

True

Question 86

It is permissible to use a combination of the Cash-Basis and Accrual methods of accounting as long as it is applied consistently and clearly and reflects the business's income and expenses.

Answer 86

True