Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Principles of Accounting, Volume 1: Financial Accounting

Multiple Choice

Principles of Accounting, Volume 1: Financial AccountingMultiple Choice
Menu
Table of contents
  1. Preface
  2. 1 Role of Accounting in Society
    1. Why It Matters
    2. 1.1 Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting
    3. 1.2 Identify Users of Accounting Information and How They Apply Information
    4. 1.3 Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities
    5. 1.4 Explain Why Accounting Is Important to Business Stakeholders
    6. 1.5 Describe the Varied Career Paths Open to Individuals with an Accounting Education
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
  3. 2 Introduction to Financial Statements
    1. Why It Matters
    2. 2.1 Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate
    3. 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses
    4. 2.3 Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Analyzing and Recording Transactions
    1. Why It Matters
    2. 3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements
    3. 3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions
    4. 3.3 Define and Describe the Initial Steps in the Accounting Cycle
    5. 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements
    6. 3.5 Use Journal Entries to Record Transactions and Post to T-Accounts
    7. 3.6 Prepare a Trial Balance
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  5. 4 The Adjustment Process
    1. Why It Matters
    2. 4.1 Explain the Concepts and Guidelines Affecting Adjusting Entries
    3. 4.2 Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries
    4. 4.3 Record and Post the Common Types of Adjusting Entries
    5. 4.4 Use the Ledger Balances to Prepare an Adjusted Trial Balance
    6. 4.5 Prepare Financial Statements Using the Adjusted Trial Balance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  6. 5 Completing the Accounting Cycle
    1. Why It Matters
    2. 5.1 Describe and Prepare Closing Entries for a Business
    3. 5.2 Prepare a Post-Closing Trial Balance
    4. 5.3 Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity
    5. 5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  7. 6 Merchandising Transactions
    1. Why It Matters
    2. 6.1 Compare and Contrast Merchandising versus Service Activities and Transactions
    3. 6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems
    4. 6.3 Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System
    5. 6.4 Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System
    6. 6.5 Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods
    7. 6.6 Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies
    8. 6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  8. 7 Accounting Information Systems
    1. Why It Matters
    2. 7.1 Define and Describe the Components of an Accounting Information System
    3. 7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
    4. 7.3 Analyze and Journalize Transactions Using Special Journals
    5. 7.4 Prepare a Subsidiary Ledger
    6. 7.5 Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Fraud, Internal Controls, and Cash
    1. Why It Matters
    2. 8.1 Analyze Fraud in the Accounting Workplace
    3. 8.2 Define and Explain Internal Controls and Their Purpose within an Organization
    4. 8.3 Describe Internal Controls within an Organization
    5. 8.4 Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries
    6. 8.5 Discuss Management Responsibilities for Maintaining Internal Controls within an Organization
    7. 8.6 Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries
    8. 8.7 Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  10. 9 Accounting for Receivables
    1. Why It Matters
    2. 9.1 Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions
    3. 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches
    4. 9.3 Determine the Efficiency of Receivables Management Using Financial Ratios
    5. 9.4 Discuss the Role of Accounting for Receivables in Earnings Management
    6. 9.5 Apply Revenue Recognition Principles to Long-Term Projects
    7. 9.6 Explain How Notes Receivable and Accounts Receivable Differ
    8. 9.7 Appendix: Comprehensive Example of Bad Debt Estimation
    9. Key Terms
    10. Summary
    11. Multiple Choice
    12. Questions
    13. Exercise Set A
    14. Exercise Set B
    15. Problem Set A
    16. Problem Set B
    17. Thought Provokers
  11. 10 Inventory
    1. Why It Matters
    2. 10.1 Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions
    3. 10.2 Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method
    4. 10.3 Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method
    5. 10.4 Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet
    6. 10.5 Examine the Efficiency of Inventory Management Using Financial Ratios
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  12. 11 Long-Term Assets
    1. Why It Matters
    2. 11.1 Distinguish between Tangible and Intangible Assets
    3. 11.2 Analyze and Classify Capitalized Costs versus Expenses
    4. 11.3 Explain and Apply Depreciation Methods to Allocate Capitalized Costs
    5. 11.4 Describe Accounting for Intangible Assets and Record Related Transactions
    6. 11.5 Describe Some Special Issues in Accounting for Long-Term Assets
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Current Liabilities
    1. Why It Matters
    2. 12.1 Identify and Describe Current Liabilities
    3. 12.2 Analyze, Journalize, and Report Current Liabilities
    4. 12.3 Define and Apply Accounting Treatment for Contingent Liabilities
    5. 12.4 Prepare Journal Entries to Record Short-Term Notes Payable
    6. 12.5 Record Transactions Incurred in Preparing Payroll
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  14. 13 Long-Term Liabilities
    1. Why It Matters
    2. 13.1 Explain the Pricing of Long-Term Liabilities
    3. 13.2 Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method
    4. 13.3 Prepare Journal Entries to Reflect the Life Cycle of Bonds
    5. 13.4 Appendix: Special Topics Related to Long-Term Liabilities
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  15. 14 Corporation Accounting
    1. Why It Matters
    2. 14.1 Explain the Process of Securing Equity Financing through the Issuance of Stock
    3. 14.2 Analyze and Record Transactions for the Issuance and Repurchase of Stock
    4. 14.3 Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits
    5. 14.4 Compare and Contrast Owners’ Equity versus Retained Earnings
    6. 14.5 Discuss the Applicability of Earnings per Share as a Method to Measure Performance
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  16. 15 Partnership Accounting
    1. Why It Matters
    2. 15.1 Describe the Advantages and Disadvantages of Organizing as a Partnership
    3. 15.2 Describe How a Partnership Is Created, Including the Associated Journal Entries
    4. 15.3 Compute and Allocate Partners’ Share of Income and Loss
    5. 15.4 Prepare Journal Entries to Record the Admission and Withdrawal of a Partner
    6. 15.5 Discuss and Record Entries for the Dissolution of a Partnership
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  17. 16 Statement of Cash Flows
    1. Why It Matters
    2. 16.1 Explain the Purpose of the Statement of Cash Flows
    3. 16.2 Differentiate between Operating, Investing, and Financing Activities
    4. 16.3 Prepare the Statement of Cash Flows Using the Indirect Method
    5. 16.4 Prepare the Completed Statement of Cash Flows Using the Indirect Method
    6. 16.5 Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency
    7. 16.6 Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  18. A | Financial Statement Analysis
  19. B | Time Value of Money
  20. C | Suggested Resources
  21. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
  22. Index
1.

LO 7.1So far, computer systems cannot yet ________.

  1. receive data and instructions from input devices such as a scanner.
  2. decide how to record a business transaction.
  3. communicate with other computers electronically.
  4. recognize that you made a mistake entering $100 when you meant to enter $101.
2.

LO 7.1Any device used to provide the results of processing data is a(n) ________ device.

  1. sources
  2. input
  3. output
  4. storage
3.

LO 7.1Source documents ________.

  1. are input devices
  2. are output devices
  3. do not have to be on paper
  4. cannot be electronic files
4.

LO 7.1All of the following can provide source data except ________.

  1. a scanning device at the grocery store
  2. a utility bill received in the mail
  3. a bar code reader
  4. software to process the source data
5.

LO 7.1A document that asks you to return an identifying part of it with your payment is a(n) ________.

  1. source document
  2. cloud document
  3. point-of-sale document
  4. turn-around document
6.

LO 7.1Which of the following is false about accounting information systems?

  1. They provide reports that people analyze.
  2. They prevent errors and stop employees from stealing inventory.
  3. They are designed to gather data about the company’s transactions.
  4. They consist of processes that involve input of data from source documents, processing, output, and storage.
7.

LO 7.2An unhappy customer just returned $50 of the items he purchased yesterday when he charged the goods to the company’s store credit card. Which special journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
8.

LO 7.2A customer just charged $150 of merchandise on the company’s own charge card. Which special journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
9.

LO 7.2A customer just charged $150 of merchandise using MasterCard. Which special journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
10.

LO 7.2The company just took a physical count of inventory and found $75 worth of inventory was unaccounted for. It was either stolen or damaged. Which journal would the company use to record the correction of the error in inventory?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
11.

LO 7.2Your company paid rent of $1,000 for the month with check number 1245. Which journal would the company use to record this?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
12.

LO 7.2On January 1, Incredible Infants sold goods to Babies Inc. for $1,540, terms 30 days, and received payment on January 18. Which journal would the company use to record this transaction on the 18th?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
13.

LO 7.2Received a check for $72 from a customer, Mr. White. Mr. White owed you $124. Which journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
14.

LO 7.2You returned damaged goods you had previously purchased from C.C. Rogers Inc. and received a credit memo for $250. Which journal would your company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
15.

LO 7.2Sold goods for $650 cash. Which journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
16.

LO 7.2Sandren & Co. purchased inventory on credit from Acto Supply Co. for $4,000. Sandren & Co. would record this transaction in the ________.

  1. general journal
  2. cash receipts journal
  3. cash disbursements journal
  4. purchases journal
  5. sales journal
17.

LO 7.3Sold goods for $650, credit terms net 30 days. Which journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
18.

LO 7.3You returned damaged goods to C.C. Rogers Inc. and received a credit memo for $250. Which journal(s) would the company use to record this transaction?

  1. sales journal only
  2. purchases journal and the accounts payable subsidiary ledger
  3. cash receipts journal and the accounts receivable subsidiary ledger
  4. cash disbursements journal and the accounts payable subsidiary ledger
  5. general journal and the accounts payable subsidiary ledger
19.

LO 7.3The sum of all the accounts in the accounts receivable subsidiary ledger should ________.

  1. equal the accounts receivable account balance in the general ledger before posting any amounts
  2. equal the accounts payable account balance in the general ledger before posting any amounts
  3. equal the accounts receivable account balance in the general ledger after posting all amounts
  4. equal the cash account balance in the general ledger after posting all amounts
20.

LO 7.3AB Inc. purchased inventory on account from YZ Inc. The amount was $500. AB Inc. uses an accounting information system with special journals. Which special journal would the company use to record this transaction?

  1. sales journal
  2. purchases journal
  3. cash receipts journal
  4. cash disbursements journal
  5. general journal
21.

LO 7.3You just posted a debit to ABC Co. in the accounts receivable subsidiary ledger. Which special journal did it come from?

  1. sales journal
  2. cash receipts journal
  3. purchases journal
  4. cash disbursements journal
  5. general journal
22.

LO 7.3You just posted a credit to Stars Inc. in the accounts receivable subsidiary ledger. Which special journal did it come from?

  1. sales journal
  2. cash receipts journal
  3. purchases journal
  4. cash disbursements journal
  5. general journal
23.

LO 7.3You just posted a debit to Cash in the general ledger. Which special journal did it come from?

  1. sales journal
  2. cash receipts journal
  3. purchases journal
  4. cash disbursements journal
  5. general journal
24.

LO 7.3You just posted a credit to Accounts Receivable. Which special journal did it come from?

  1. sales journal
  2. cash receipts journal
  3. purchases journal
  4. cash disbursements journal
  5. general journal
25.

LO 7.3You just posted a credit to Sales and a debit to Cash. Which special journal did it come from?

  1. sales journal
  2. cash receipts journal
  3. purchases journal
  4. cash disbursements journal
  5. general journal
26.

LO 7.5An enterprise resource planning (ERP) system ________.

  1. is software to help you prepare your tax return
  2. requires that you pay ransom before you can operate it
  3. is a large, company-wide integrated accounting information system that connects all of a company’s applications
  4. is part of the darknet
27.

LO 7.5Which of the following is not a way to prevent your computer from being attacked by ransomware?

  1. making sure your antivirus security programs are up to date
  2. opening all attachments from emails from unknown senders
  3. using secure (password protected) networks and backing up your files regularly
  4. not using open Wi-Fi (nonpassword, nonencrypted) in public locations
28.

LO 7.5Big data is mined ________.

  1. to find business trends
  2. to record transactions
  3. as an alternative to creating an accounting information system
  4. as an alternative to the darknet
29.

LO 7.5Artificial intelligence refers to ________.

  1. tutorials that can make humans smarter than they naturally are
  2. programming computers to mimic human reasoning and perform tasks previously performed by humans
  3. humans that do not possess reasonably high IQs
  4. a concept that exists only in science fiction but has not yet been achieved today
30.

LO 7.5Blockchain is a technology that ________.

  1. is in the early stages of being developed
  2. was a failed attempt to change the way we do business
  3. refers to an application developed strictly for the real estate business
  4. involves the use of a single shared ledger between the many parties that may be involved in a transaction.
31.

LO 7.5Which of the following is not true about cybercurrency?

  1. Bitcoin is one of several cybercurrencies.
  2. It is an alternate currency that does not go through the banking system.
  3. It does not involve the actual exchange of physical currency.
  4. All of these statements regarding Bitcoin are correct.
PreviousNext
Order a print copy

As an Amazon Associate we earn from qualifying purchases.

Citation/Attribution

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
Citation information

© Jun 8, 2023 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.