Q. In a journal entry, which account is debited when a company pays off a liability?
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A.
Cash
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B.
Liability
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C.
Expense
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D.
Asset
Solution
When a company pays off a liability, the Cash account is credited, and the liability account is debited to reduce the obligation.
Correct Answer:
A
— Cash
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Q. Under which accounting method is inventory valued at the most recent purchase price?
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A.
FIFO
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B.
LIFO
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C.
Weighted Average
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D.
Specific Identification
Solution
LIFO (Last-In, First-Out) values inventory at the most recent purchase price, assuming the latest items purchased are sold first.
Correct Answer:
B
— LIFO
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Q. What is the journal entry for purchasing inventory on credit?
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A.
Debit Inventory, Credit Cash
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B.
Debit Inventory, Credit Accounts Payable
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C.
Debit Accounts Payable, Credit Inventory
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D.
Debit Cash, Credit Inventory
Solution
When inventory is purchased on credit, the inventory account is debited to increase it, and accounts payable is credited to reflect the liability.
Correct Answer:
B
— Debit Inventory, Credit Accounts Payable
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Q. What is the primary focus of the accrual basis of accounting?
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A.
Cash transactions
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B.
Revenue recognition when earned and expenses when incurred
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C.
Tax reporting
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D.
Budgeting
Solution
The accrual basis of accounting focuses on recognizing revenue when earned and expenses when incurred, regardless of cash flow.
Correct Answer:
B
— Revenue recognition when earned and expenses when incurred
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Q. Which of the following is an example of a contra asset account?
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A.
Accumulated Depreciation
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B.
Accounts Receivable
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C.
Inventory
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D.
Cash
Solution
Accumulated Depreciation is a contra asset account that reduces the book value of fixed assets.
Correct Answer:
A
— Accumulated Depreciation
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