Multiple Choice questions based on basics of accounts.

1. Communication of economic events is the part of the accounting process that involves

a.         Identifying economic events.

b.        quantifying transactions into dollars and cents.

c.         preparing accounting reports.

d.        recording and classifying information.

2. Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

a.         The appointment of a new CPA firm to perform an audit.

b.        The purchase of a new computer.

c.         The sale of store equipment.

d.        Payment of income taxes.

3. Which of the following would not be considered an internal user of accounting data for the XYZ Company?

a.         President of the company

b.        Production manager

c.         Merchandise inventory clerk

d.        President of the employees' labor union

4. Generally accepted accounting principles are

a.         income tax regulations of the Internal Revenue Service.

b.        standards that indicate how to report economic events.

c.         theories that are based on physical laws of the universe.

d.        principles that have been proven correct by academic researchers.

5. The cost of an asset and its fair market value are

a.         never the same.

b.        the same when the asset is sold.

c.         irrelevant when the asset is used by the business in its operations.

d.        the same on the date of acquisition.

6. The left side of an account is

a.         blank.

b.        a description of the account.

c.         the debit side.

d.        the balance of the account.

7. Credits

a.         decrease both assets and liabilities.

b.        decrease assets and increase liabilities.

c.         increase both assets and liabilities.

d.        increase assets and decrease liabilities.

8. The normal balance of any account is the

a.         left side.

b.        right side.

c.         side which increases that account.

d.        side which decreases that account.

9. An accountant has debited an asset account for $1,000 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?

a.         Credit an asset account for $500.

b.        Credit another liability account for $500.

c.         Credit and stockholders' equity account for $500.

d.        Debit and stockholders' equity account for $500.

10. At January 1, 2008, Burton Industries reported stockholders' equity of $130,000. During 2008, The Company had a net loss of $30,000 and paid dividends of $20,000. At December 31, 2008, the amount of stockholders' equity is

a.         $130,000.

b.        $140,000.

c.         $100,000.