Q. If the trial balance does not balance, what is the first step an accountant should take?
A.
Prepare the financial statements
B.
Check for arithmetic errors
C.
Review the journal entries
D.
Consult with a supervisor
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Solution
The first step an accountant should take is to check for arithmetic errors in the trial balance to identify discrepancies.
Correct Answer:
B
— Check for arithmetic errors
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Q. In a trial balance, which of the following accounts would typically have a credit balance?
A.
Accounts Receivable
B.
Inventory
C.
Accounts Payable
D.
Cash
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Solution
Accounts Payable typically has a credit balance, as it represents amounts owed to creditors.
Correct Answer:
C
— Accounts Payable
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Q. What does a trial balance indicate if the total debits exceed total credits?
A.
Net profit
B.
Net loss
C.
Error in accounting
D.
Correct accounting
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Solution
If total debits exceed total credits, it indicates there may be an error in accounting that needs to be investigated.
Correct Answer:
C
— Error in accounting
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Q. What is the effect of recording a purchase of inventory on credit in the trial balance?
A.
Increase in assets and increase in liabilities
B.
Decrease in assets and increase in equity
C.
Increase in liabilities and decrease in equity
D.
No effect on the trial balance
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Solution
Recording a purchase of inventory on credit increases assets (inventory) and increases liabilities (accounts payable).
Correct Answer:
A
— Increase in assets and increase in liabilities
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Q. What is the typical frequency of preparing a trial balance?
A.
Daily
B.
Weekly
C.
Monthly
D.
Annually
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Solution
A trial balance is typically prepared monthly to ensure that the accounts are accurate and up to date.
Correct Answer:
C
— Monthly
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Q. What is the typical outcome if an accountant fails to record an adjusting entry for accrued expenses?
A.
Overstated assets
B.
Understated liabilities
C.
Overstated revenues
D.
Understated equity
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Solution
Failing to record an adjusting entry for accrued expenses results in understated liabilities, as the expenses incurred are not recognized.
Correct Answer:
B
— Understated liabilities
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Q. Which accounting principle requires that expenses be matched with revenues in the trial balance?
A.
Revenue Recognition Principle
B.
Matching Principle
C.
Cost Principle
D.
Conservatism Principle
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Solution
The Matching Principle requires that expenses be matched with revenues in the accounting period in which they are incurred.
Correct Answer:
B
— Matching Principle
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Q. Which of the following is a correct format for a trial balance?
A.
Account Name
B.
Debit
C.
Credit
D.
Debit
.
Credit
.
Account Name
.
Account Name
.
Credit
.
Debit
.
Credit
.
Debit
.
Account Name
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Solution
The correct format for a trial balance is to list the Account Name followed by the Debit and Credit columns.
Correct Answer:
A
— Account Name
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Q. Which of the following is NOT a reason for preparing a trial balance?
A.
To detect errors
B.
To prepare for audits
C.
To calculate tax liabilities
D.
To assist in preparing financial statements
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Solution
Calculating tax liabilities is not a reason for preparing a trial balance; it is primarily used to detect errors and assist in preparing financial statements.
Correct Answer:
C
— To calculate tax liabilities
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