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Basic Balance Sheet MCQ

1. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days. ABC uses the accrual basis of accounting. In December ABC will debit Cash for $1,000. What will be the other account involved in the December accounting entry prepared by ABC (and what type of account is it)?

Accounts Receivable (asset)

Prepaid Services (asset)

Service Revenues (revenue)

Unearned Revenues (liability)

Answer

Correct Answer: Unearned Revenues (liability)

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2. What is the normal balance for liability accounts?

Debit

Credit

Answer

Correct Answer: Credit

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3. What is the normal balance for stockholders' equity and owner's equity accounts?

Debit

Credit

Answer

Correct Answer: Credit

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4. What is the normal balance for contra asset accounts?

Debit

Credit

Answer

Correct Answer: Credit

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5. Which of the following is an asset account?

Accounts Payable

Prepaid Insurance

Unearned Revenue

Answer

Correct Answer: Prepaid Insurance

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6. The balance sheet heading will specify a

Period Of Time

Point In Time

Answer

Correct Answer: Point In Time

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7. Which of the following accounts is a non-current liability?

Trade payables

Share capital

Retained earnings

Investments in associates

Bank loan

Answer

Correct Answer: Bank loan

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8. A balance sheet does not:

Report the assets and claims of an enterprise at a specified moment in time

Show the financial status of an enterprise

Present revenues and expenses of an enterprise

Have two counterbalancing sections

Answer

Correct Answer: Present revenues and expenses of an enterprise

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9. The accounting equation may not be expressed as:

Assets = Liabilities + Equity

Liabilities = Assets - Equity

Equity = Liabilities - Assets

Non-current assets + Current assets = Total liabilities + Equity

Non-current assets + Net current assets = Non-current liabilities + Equity

Answer

Correct Answer: Equity = Liabilities - Assets

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10. Notes Payable could not appear as a line on the balance sheet in which classification?

Current Assets

Long-term Liabilities

Current Liabilities

Answer

Correct Answer: Long-term Liabilities

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11. Which of the following is the accounting equation?

L = A + SE

A = L + SE

A = L - SE

SE = A + L

Answer

Correct Answer: A = L + SE

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12. The third line of the balance sheet at the end of the year should begin with "For the Year Ended".

True

False

Answer

Correct Answer: False

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13. The book value of a corporation is the total amount of stockholders' equity reported on the balance sheet.

True

False

Answer

Correct Answer: True

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