Bookkeeping Basics Trivia Quiz

Answer: Prepaid Expenses

Only Prepaid Expenses meets the definition of an asset, that is, the economic resources of a business that are expected to be of benefit in the future. Service revenue is revenue/income, notes payable are a liability, and withdrawals by the owner is a reduction of equity.

Answer: proprietorship

A proprietorship generally has a single owner. A partnership is a business with two or more co-owners; each co-owner is a partner. A corporation is a legal entity separate from its owners. A corporation's owners are called shareholders.

Answer: Accrued Expense

Accrued expenses include unpaid salaries for employees. For example, if you worked a summer job, then you know that there may be an interval of several days or even a week between the end of your pay period and the date that you receive your paycheck. If an accounting period ends during such an interval, then your employer's salary expense would be accrued for the salary you have earned but have not yet been paid. Prepaid expenses are expenses that are paid in advance. Unearned revenue occurs when cash is received from a customer before work is performed. Accrued revenues have been earned, but payment in cash has not been received.

Answer: invoice

When a merchandiser decides to purchase an inventory, it sends a purchase order to its supplier. The supplier ships the merchandise and sends an invoice, or bill, to the merchandiser. The merchandiser pays the supplier in accordance with the supply/credit terms, e.g. cash on delivery, 7 days after delivery, 30 days from end of month, etc.

Answer: Sales

Sales is a revenue account, and like all revenue accounts has a normal credit balance. The other items listed normally have debit balances.

Answer: $60,000

Let "L" stand for liabilities. Given that total assets equals 3L and that owner's equity equals $40,000, then according to the accounting equation:
3L = L + $40,000
Subtract L from both sides of the equation.
2L = $40,000
L = $20,000
Total Assets = $20,000 + $40,000
Total Assets = $60,000

Answer: credit Purchase Discounts $16

The terms 1/10, n/30 mean that a 1% per cent discount is available if payment is made within 10 days of the invoice date, otherwise the net (total) amount of the invoice is due in 30 days. Since payment is made within the ten day discount period, the journal entry to record the payment is:
Dr Accounts Payable $1,600
Cr Purchase Discounts $16
Cr Cash/Bank Account $1,584

Answer: Purchases

A contra account has two distinguishing characteristics: (1) it always has a companion account, and (2) its normal balance is opposite that of the companion account. Only Purchases is a normal account. The other choices are contra accounts.

Answer: $64

$ 25 Beginning balance in owner's equity
$106 + Net Income
$131 = Subtotal
$ 64 - Withdrawals
$ 67 = Ending balance in owner's equity

In general terms the concept may be stated:
Beginning balance + Additions - Reductions = Ending balance

Answer: Revenues - Expenses

In North America, revenues minus expenses equals net income. Assets minus liabilities equals owner's equity. Liabilities plus owner's equity equals assets. Revenues plus expenses has no meaning.