Accounting Fall Semester Test Study Guide

What is the accounting equation?

• Owner's Equity = Assets - Liability

• Liability = Owner's Equity - Assets

• Liability = Assets - Owner's Equity

• Assets = Liability + Owner's Equity

What is the purpose of accounting records?

• To interpret financial information

• To organize business's financial records

• To analyze the financial operations of a business

• To summarize the financial conditions of a business

What is the definition of an expense in accounting?

• An increase in liabilities resulting from the operation of a business

• A decrease in assets resulting from the operation of a business

• A decrease in owner's equity resulting from the operation of a business

• An increase in owner's equity resulting from the operation of a business

What is the purpose of a sales invoice?

• To organize business's financial records

• To summarize the financial conditions of a business

• To order a bank to pay cash from a bank account

• To record a sale on account

What is the first step in the posting procedure?

• Writing the account title

• Writing the date

• Writing the account number

• Writing the amount

What is the purpose of a bank statement?

• To report deposits, withdrawals, and bank balances

• To summarize the financial conditions of a business

• To transfer funds without the use of checks

• To guide the ethical behavior of a company

What is the purpose of a debit card?

• To restrict further transfer of a check's ownership

• To automatically deduct the amount of a purchase from the checking account

• To endorse a check

• To transfer ownership of a check

What is the purpose of a work sheet in accounting?

• To summarize the general ledger information needed to prepare financial statements

• To prove the quality of debits and credits in a general ledger

• To transfer information from a journal entry to a ledger account

• To record transactions in chronological order

What is the purpose of a fiscal period in accounting?

• To summarize and report financial information for a specific length of time

• To transfer funds without the use of checks

• To determine the amount of cash agrees with the accounting records

• To summarize the financial conditions of a business

What is the purpose of a code of conduct in accounting?

• To guide the ethical behavior of a company and its employees

• To automatically deduct the amount of a purchase from the checking account

• To summarize the financial conditions of a business

• To restrict further transfer of a check's ownership