Chapter End Question: Introduction to Accounting

What is the primary purpose of financial accounting?

Aid internal management
Provide information to external stakeholders
Calculate tax obligations
All of the above

Which of the following is a financial statement?

Balance sheet
Sales report
Inventory ledger
Payroll statement

Who are the internal users of financial accounting information?

Creditors
Management
Customers
Suppliers

Which accounting type focuses on preparing financial statements for external users?

Managerial accounting
Financial accounting
Cost accounting
Tax accounting

Which concept assumes a business will continue indefinitely?

Accrual concept
Consistency concept
Going concern concept
Realization concept

What is the primary regulatory framework for financial accounting?

IFRS
ISO standards
EPA regulations
IEEE standards

What is the matching concept in accounting?

Matching expenses with revenues
Matching assets with liabilities
Matching sales with purchases
Matching profits with losses

What does the accrual concept recognize?

Transactions when cash is exchanged
Transactions when they occur
Only cash transactions
Only credit transactions

Which statement summarizes a company’s financial position at a specific point in time?

Income statement
Cash flow statement
Balance sheet
Sales report

What does the term ‘equity’ represent in financial statements?

Company liabilities
Company's ownership stake
Company's debts
Company's revenue

Which accounting principle states that assets should be recorded at cost, not market value?

Conservatism
Historical cost concept
Revenue recognition
Materiality concept

Analyze how the rules of debit and credit contribute to maintaining the double-entry system.

By distinguishing asset and liability accounts
By ensuring transactions are posted to the correct accounts
By facilitating the preparation of financial statements
By creating a comprehensive record of each transaction

How does journalizing contribute to the process of ledger balancing?

By recording each transaction in two accounts
By simplifying the posting process
By ensuring consistency in account balances
By providing a basis for financial reporting

A company purchases inventory worth $5,000 on credit. What will be the journal entry impact on the accounts?

Debit Inventory $5,000; Credit Accounts Payable $5,000
Debit Inventory $5,000; Credit Cash $5,000
Debit Accounts Receivable $5,000; Credit Sales $5,000
Debit Cash $5,000; Credit Inventory $5,000

If a company records a payment of $2,000 towards an accounts payable, what will be the impact on the journal entry?

Debit Accounts Payable $2,000; Credit Cash $2,000
Debit Cash $2,000; Credit Accounts Payable $2,000
Debit Accounts Payable $2,000; Credit Sales $2,000
Debit Cash $2,000; Credit Inventory $2,000

A business pays $500 for office supplies. What will be the journal entry?

Debit Office Supplies $500; Credit Cash $500
Debit Cash $500; Credit Office Supplies $500
Debit Office Supplies $500; Credit Accounts Payable $500
Debit Accounts Payable $500; Credit Cash $500

A company receives $1,000 in cash from a customer for a previous credit sale. What will be the journal entry?

Debit Accounts Receivable $1,000; Credit Cash $1,000
Debit Cash $1,000; Credit Accounts Receivable $1,000
Debit Sales $1,000; Credit Accounts Receivable $1,000
Debit Cash $1,000; Credit Sales $1,000

A business acquires a piece of equipment for $10,000, paying $2,000 in cash and the remainder on credit. What is the correct journal entry?

Debit Equipment $10,000; Credit Cash $10,000
Debit Equipment $10,000; Credit Cash $2,000; Credit Accounts Payable $8,000
Debit Cash $2,000; Debit Accounts Payable $8,000; Credit Equipment $10,000
Debit Equipment $10,000; Credit Accounts Payable $10,000

A company issues $3,000 in salaries to employees, which is paid in cash. What is the journal entry?

Debit Cash $3,000; Credit Salaries Expense $3,000
Debit Salaries Expense $3,000; Credit Accounts Payable $3,000
Debit Salaries Expense $3,000; Credit Cash $3,000
Debit Accounts Payable $3,000; Credit Cash $3,000

If a business borrows $15,000 from a bank and deposits the amount into its bank account, what is the journal entry?

Debit Cash $15,000; Credit Loan Payable $15,000
Debit Loan Payable $15,000; Credit Cash $15,000
Debit Bank $15,000; Credit Loan Receivable $15,000
Debit Loan Payable $15,000; Credit Bank $15,000

A customer returns goods worth $1,200, originally sold on credit. What will be the journal entry?

Debit Sales Returns $1,200; Credit Accounts Receivable $1,200
Debit Sales $1,200; Credit Accounts Payable $1,200
Debit Accounts Receivable $1,200; Credit Sales Returns $1,200
Debit Cash $1,200; Credit Sales Returns $1,200

If a business pays $300 in interest on a loan, what is the correct journal entry?

Debit Loan Payable $300; Credit Cash $300
Debit Interest Expense $300; Credit Cash $300
Debit Cash $300; Credit Interest Payable $300
Debit Interest Payable $300; Credit Cash $300

A company purchases office furniture worth $4,000 on credit. What is the journal entry?

Debit Office Furniture $4,000; Credit Accounts Payable $4,000
Debit Office Furniture $4,000; Credit Cash $4,000
Debit Accounts Payable $4,000; Credit Office Furniture $4,000
Debit Cash $4,000; Credit Office Furniture $4,000

A company earns $7,500 in service revenue but hasn’t yet received the payment. What is the journal entry?

Debit Cash $7,500; Credit Service Revenue $7,500
Debit Service Revenue $7,500; Credit Accounts Receivable $7,500
Debit Accounts Receivable $7,500; Credit Service Revenue $7,500
Debit Service Revenue $7,500; Credit Cash $7,500

If a business pays $200 for advertising expenses in cash, what is the journal entry?

Debit Advertising Expense $200; Credit Cash $200
Debit Advertising Expense $200; Credit Accounts Payable $200
Debit Cash $200; Credit Advertising Expense $200
Debit Accounts Payable $200; Credit Cash $200

A company receives a bill of $500 for utilities that will be paid next month. What is the journal entry?

Debit Utilities Expense $500; Credit Accounts Payable $500
Debit Utilities Expense $500; Credit Cash $500
Debit Accounts Payable $500; Credit Utilities Expense $500
Debit Cash $500; Credit Utilities Expense $500

A business sells merchandise on credit for $1,800. What is the correct journal entry?

Debit Accounts Receivable $1,800; Credit Sales $1,800
Debit Sales $1,800; Credit Accounts Receivable $1,800
Debit Cash $1,800; Credit Sales $1,800
Debit Sales $1,800; Credit Cash $1,800

A company receives $2,000 in advance from a customer for future services. What is the journal entry?

Debit Cash $2,000; Credit Unearned Revenue $2,000
Debit Cash $2,000; Credit Service Revenue $2,000
Debit Service Revenue $2,000; Credit Cash $2,000
Debit Unearned Revenue $2,000; Credit Cash $2,000

If a business purchases a vehicle for $12,000 by paying $4,000 in cash and the remaining $8,000 on credit, what is the journal entry?

Debit Vehicle $12,000; Credit Cash $12,000
Debit Vehicle $12,000; Credit Cash $4,000; Credit Accounts Payable $8,000
Debit Cash $4,000; Debit Accounts Payable $8,000; Credit Vehicle $12,000
Debit Vehicle $12,000; Credit Accounts Payable $12,000

A company declares a dividend of $5,000, which is to be paid next month. What is the journal entry?

Debit Dividends $5,000; Credit Cash $5,000
Debit Dividends $5,000; Credit Dividends Payable $5,000
Debit Dividends Payable $5,000; Credit Cash $5,000
Debit Cash $5,000; Credit Dividends $5,000

Chapter End Question: Introduction to Accounting

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