This document contains 40 multiple choice questions about accounting concepts related to adjusting entries, the accounting cycle, financial statements, ratios, and closing entries. The questions cover topics such as the purpose of adjusting entries, the order of steps in the accounting cycle, how adjusting entries affect financial statements, examples of adjusting entries for specific accounts like supplies and prepaid rent, liquidity and debt ratios, and the purpose and process of closing entries.

1. Question 1 of 40
The capital balance amount shown in the balance sheet column
of the worksheet represents __________.
B. the beginning capital plus net income less withdrawal
Question 2 of 40
Which of the following would cause a contra-asset to be
credited and an expense debited?
D. All of the above would have that effect.
Question 3 of 40
The entry to record the expiration of part of the prepaid rent
will __________.
A. decrease total assets and increase total expenses at the end of
the month
B. decrease total assets and decrease total expenses at the end
of the month
C. increase total assets and increase total expenses at the end of
the month
D. increase total assets and decrease total expenses at the end of
the month
Question 4 of 40
The adjustment to record supplies used during the period would
be __________.
A. debit Supplies; credit Supplies Expense
B. debit Supplies Expense; credit Cash
C. debit Supplies Expense; credit Supplies
D. debit Supplies; credit Cash
Question 5 of 40
If the Supplies account is not adjusted __________.
A. assets will be overstated and expenses will be understated
B. assets will be overstated and expenses will be overstated
C. assets will be understated and expenses will be overstated
D. assets will be understated and expenses will be understated
Question 6 of 40
It is the year end, but not the pay period end. How will this

2. affect the balance sheet?
A. Assets will be increased.
B. Liabilities will be increased.
C. Owner's equity will be increased.
D. This has no effect on the period end balance sheet.
Question 7 of 40
Which of the following would cause total assets to decrease and
total expense to increase?
A. recording the depreciation of equipment
B. recording the consumption of supplies
C. recording the expiration of prepaid rent
D. All of the above would have that effect.
Question 8 of 40
Which of the following would cause a liability to be credited
and an expense to be debited?
A. recording the adjustment for the expiration of rent
B. recording the depreciation of equipment
C. recording the accrual of salaries incurred
D. purchasing equipment
Question 9 of 40
Bringing account balances up to date before preparing financial
reports is called __________.
A. posting
B. adjusting
C. journalizing
D. analyzing
Question 10 of 40
If the balance of supplies at the start of the month was $900 and
at the end of the month you had $450 on hand, the adjustment
for Supplies would be __________.
A. $450
B. $550
C. $350
D. $900
Question 11 of 40
An adjustment for Prepaid Rent would indicate __________.

3. A. the amount originally paid
B. the amount expired
C. the amount on hand
D. the amount of the trial balance
Question 12 of 40
Not recording the Prepaid Rent used causes __________.
A. assets to be too high
B. assets to be too low
C. expenses to be too high
D. revenue to be too high
Question 13 of 40
The adjusted trial balance columns __________.
A. help to ensure the ledger is still in balance
B. help to identify any errors that may have been made during
adjustment
C. show updated account balances to aid in preparation of the
financial statements
D. All of the above answers are correct..
Question 14 of 40
As Prepaid Rent is used, the asset becomes a(n. __________.
A. liability
B. expense
C. contra-asset
D. revenue
At the start of this year 18 months’ rent was paid. At the year's
end, how will this affect the balance sheet?
A. Assets will be decreased.
B. Liabilities will be increased.
C. Owner's equity will be increased.
D. This has no effect on the period end balance sheet.
Question 16 of 40
The order of the steps to prepare the worksheet are __________.
A. prepare the trial balance, complete adjustments, prepare the
adjusted trial balance, extend the respective totals to the Income
Statement and Balance Sheet columns
B. complete the adjustments, prepare the adjusted trial balance,

4. prepare the trial balance, extend the respective totals to the
Income Statement and Balance Sheet columns
C. extend the totals to the Income Statement and Balance Sheet
columns, prepare the trial balance, complete the adjustments,
prepare the adjusted trial balance
D. prepare the adjusted trial balance, complete the adjustments,
prepare the trial balance, extend the respective totals to the
Income Statement and Balance Sheet columns
Question 17 of 40
If the adjustment for Supplies used during the period was not
made __________.
A. expenses would be too low
B. assets would be too low
C. expenses would be too high
D. revenue would be too high
Question 18 of 40
When historical cost is used in the accounting records, the book
value of the asset is __________.
C. original cost less accumulated depreciation
Question 19 of 40
If Prepaid Rent for the period is not adjusted __________.
A. assets will be overstated and expenses will be overstated
B. assets will be overstated and expenses will be understated
C. assets will be understated and expenses will be overstated
D. assets will be understated and expenses will be understated
Question 20 of 40
It's the end of the accounting period and no electric bill has
been received (but the expense has been incurred.; you should
record an entry that __________.
A. increases the total assets and increases the total expenses
B. decreases the total assets and increases the total expenses
C. increases the total liabilities and increases the total expenses
D. decreases the total liabilities and increases the total expenses
Question 21 of 40
Which of the following is a non-depreciable asset?
A. desk chairs

5. B. land
C. computer
D. building
Question 22 of 40
Which of the following sequence of actions describes the proper
order in the accounting cycle?
A. journalize, post, close, prepare financial statements, adjust,
and analyze transactions
B. prepare financial statements, journalize, post, adjust, analyze
transactions, and close
C. analyze transactions, journalize, post, adjust, prepare
financial statements, and close
D. post, close, prepare financial statements, adjust, analyze
transactions, and journalize
Question 23 of 40
A common-size comparative statement shows __________.
A. percentages
B. dollar increases/decreases
C. whole dollar amounts
D. None of the above answers are correct.
Question 24 of 40
Scott Company had a current ratio of 2.76:1 in Year 1 and
2.57:1 in Year 2. This change in current ratio indicates
__________.
A. the company's debt paying ability has improved
B. the company's debt paying ability has weakened
C. the company's customers are paying their accounts sooner
D. the company is able to sell its inventory faster
Question 25 of 40
The current ratio for a company with current assets of $70,000,
current liabilities of $50,000, total assets of $150,000, and net
sales of $80,000, would be __________.
A. 1.4
B. 0.714
C. 3.0
D. 0.875

6. Question 26 of 40
An account in which the balance is not carried over from one
accounting period to the next is called a __________.
A. permanent account
B. real account
C. temporary account
D. zero account
Question 27 of 40
Debt management ratios measure __________.
A. how effectively a company is using its cash
B. how well a company is using debt versus equity position
C. a company's ability to earn profit
D. a company's ability to meet payable obligations
Question 28 of 40
Debt management ratios measure __________.
A. how effectively a company is using its cash
B. how well a company is using debt versus equity position
C. a company's ability to earn profit
D. a company's ability to meet payable obligations
Question 29 of 40
If current assets are $60,000 and current liabilities are $50,000,
the current ratio is __________.
A. 0.8:1
B. 8.3:1
C. 2.1:1
D. 1.2:1
Question 30 of 40
If management wishes to know the ability to pay off the
upcoming debts of a business, they could use the __________.
A. debt to total assets
B. current ratio
C. inventory turnover ratio
D. times interest earned
Question 31 of 40
Comparative reports in which each item is expressed as a
percentage of a base amount without dollar amounts are called

7. __________.
A. comparative financial statements
B. common-size statements
C. cash flow analysis
D. horizontal analysis
Question 32 of 40
The final step in the accounting cycle is __________.
A. preparing the post-closing trial balance
B. preparing the financial statements
C. journalizing the closing entries
D. journalizing the adjusting entries
Question 33 of 40
Of the following accounts, which might appear in the adjusted
trial balance, but not in the post-closing trial balance?
A. income summary
B. owner's capital
C. accounts payable
D. depreciation expense
Question 34 of 40
Liquidity ratios measure __________.
A. how effectively a company is using its equity
B. how effectively a company is using its liabilities
C. a company's ability to pay shareholders
D. a company's ability to pay off short-term debts
Question 35 of 40
Liquidity ratios measure __________.
A. how effectively a company is using its equity
B. how effectively a company is using its liabilities
C. a company's ability to pay shareholders
D. a company's ability to pay off short-term debts
Question 36 of 40
Income Summary __________.
A. is a temporary account
B. is a permanent account
C. summarizes revenue and expenses and transfers the balance
to Capital

8. D. Both A and C are correct.
Question 37 of 40
How do you close the expense accounts?
A. debit Capital; credit the expense accounts
B. credit Capital; debit the expense accounts
C. credit Income Summary; debit the expense accounts
D. debit Income Summary; credit the expense accounts
Question 38 of 40
Closing entries are prepared __________.
A. to clear all temporary accounts to zero
B. to update the Capital balance
C. at the end of the accounting period
D. All of the above answers are correct.
Question 39 of 40
Closing entries __________.
A. need not be journalized since they appear on the worksheet
B. need not be posted if the financial statements are prepared
from the worksheet
C. are not needed if adjusting entries are prepared
D. must be journalized and posted
Question 40 of 40
For vertical analysis purposes, a base item on a balance sheet is
__________.
A. total assets
B. total equity
C. total liabilities
D. net equity