Problem Set for Part B

1. Which of the following will not be recorded on the debit side of the account?
a) Increase in Expense
b) Increase in Asset
c) Increase in Liability
d) Increase Dividend

2. The normal balance of any account is the

a) left side.
b) right side.
c) side which increases that account.
d) side which decreases that account.

3. Which of the following is a business transaction and needs to be recorded.

i) Infosys pays wages to its workers
ii) Kundu travels discusses a guided trip with a potential customer
iii) Cost of Supplies used by ABC Ltd
a) All three
b) Only (i) and (iii)
c) Only (i)
d) Only (i) and (ii)

4. Which of the following is the Primary book where transactions are recorded in
chronological order.
a) Ledger
b) Journal
c) Balance sheet
d) Cash Flow statement

5. Which of the following journal entries is recorded correctly and in the basic format?.
a) Salaries and Wages Expense 550
Cash 1,500
Marketing Expense 950
b) Salaries and Wages Expense 550
Marketing Expense 950
Cash 1,600
c) Cash 1,500
Salaries and Wages Expense 550
 Marketing Expense 950
d) Salaries and Wages Expense 550
Marketing Expense 950
Cash 1,500
6. An accountant has debited an asset account for INR 1,000 and credited a liability account
for INR 500. What can be done to complete the recording of the transaction?
a) Nothing further must be done.
b) Debit a stockholders’ equity account for INR 500.
c) Debit another asset account for INR 500.
d) Credit a different asset account for INR 500.

7. Which of the following statements is not correct for Trial Balance?

a) Represents the list of accounts & balances on a specific date
b) For every amount of Debit, there should be an equal amount of Credit.
c) Usually prepared at the end of the month or accounting period.
d) It proves that all transactions were analysed correctly.

8. A trial balance will not balance if

a) a correct journal entry is posted twice.
b) a INR 40 cash dividend is debited to dividends for INR 400 and credit to cash for INR
40.
c) a INR 700 payment on accounts payable is debited to accounts payable for INR 70 and
credited to cash for INR 70.
d) a transaction is not posted at all.

9. The accountant for Vega Stores, Inc. should have recorded the following correct entry:
Jan. 15 Notes Receivable 243
Equipment 243
Instead, he misunderstood the transaction and recorded an incorrect entry. Which of the
following wrong entries pertaining to this transaction could have been detected as
erroneous when using a trial balance?
a) Jan 15 Notes Payable 243
Cash 243
b) Jan 15 Notes Receivable 234
Equipment 234
c) Jan 15 Equipment 243
Notes Receivable 243
d) Jan 15 Notes Receivable 243
Equipment 234

10. In which of the following case Adjusting entry will not be passed?
a) Amount received from the customer in advance.
b) The customer purchased the product in cash.
c) Company-paid the rent for office in advance.
d) All of the above

11. Which of the following is correct for adjusting entries?

a) Include at least one income statement A/C.
b) Include at least one balance sheet A/C.
c) Don’t affect the cash flows in the current period, never affect cash A/C.
d) All of the above

12. The Newage Laundry Company purchased INR 6,500 worth of laundry supplies on July 1
and recorded the purchase as an asset. On July 31st, an inventory of the laundry supplies
indicated only INR 1,000 on hand. The adjusting entry that should be made by the company
on July 31st is:
a) debit Supplies Expense, INR 1,000; credit Supplies, INR 1,000.
b) debit Supplies, INR 5,500; credit Supplies Expense, INR 5,500.
c) debit Supplies, INR 1,000; credit Supplies Expense, INR 1,000.
d) debit Supplies Expense, INR 5,500; credit Supplies, INR 5,500.

13. If a business has received cash in advance of services performed and credits a liability
account, the adjusting entry needed after the services are performed will be:
a) debit Unearned Service Revenue and credit Cash.
b) debit Unearned Service Revenue and credit Service Revenue.
c) debit Unearned Service Revenue and credit Prepaid Expense.
d) debit Unearned Service Revenue and credit Accounts Receivable.

14. An adjusting entry can include a:

a) debit to liability and a credit to a revenue.
b) debit to a revenue and a credit to an asset.
c) credit to an expense and a debit to a revenue.
d) debit to an expense and a credit to a revenue.

15. If a company fails to adjust for accrued expenses, what effect will this have on that month's
financial statements?
a) Failure to make an adjustment does not affect the financial statements.
b) Expenses will be understated and net income and stockholders’ equity will be over-
stated.
c) Assets will be overstated and net income and stockholders’ equity will be under-stated.
d) Assets will be overstated and net income and stockholders’ equity will be overstated.
16. Which of the following is not a part of the income statement?
a) Rent
b) Depreciation
c) Interest received
d) Notes Payables

17. Which of the statements below is not true?

a) An adjusted trial balance should show ledger account balances.
b) An adjusted trial balance can be used to prepare financial statements.
c) An adjusted trial balance proves the mathematical equality of debits and credits in the
ledger.
d) An adjusted trial balance is prepared before all transactions have been journalized.

18. The primary source used in the preparation of the financial statements is the:
a) trial balance.
b) post-closing trial balance.
c) general trial balance.
d) adjusted trial balance.

19. Which of the following errors, each considered individually, would cause the trial balance
to be out of balance?
a) A payment of INR 148 to a creditor was posted as a debit to Accounts Payable and a
debit of INR 148 to Cash.
b) Cash of INR 530 received from a customer on account was posted as a debit of INR
350 to Cash and as a credit of INR 350 to Accounts Payable.
c) A payment of INR 59 for supplies was posted as a debit of INR 95 to Supplies and a
credit of INR 95 to Cash.
d) A transaction was not posted.

20. At October 1, 2020, CIG Inc. had an Accounts Payable balance of INR 60,000. During
the month, the company made purchases on account of INR 50,000 and made payments
on account of INR 70,000. At October 31, 2020, the Accounts Payable balance is
a) INR 50,000 debit
b) INR 10,000 credit
c) INR 40,000 Credit
d) INR 70,000 credit

21. At January 31, 2021, the balance in Vats Inc.'s supplies account was INR 700. During
February Vats purchased supplies of INR 600 and used supplies of INR 800. At the end
of February, the balance in the Supplies account should be
a) INR 700 debit.
b) INR 900 credit.
 c) INR 2,100 debit.
d) INR 500 debit.

22. Which of the following accounts has a normal debit balance?

a) Accounts Payable
b) Prepaid Rent
c) Retained Earnings
d) Common Stock

23. During January 2021, ABPL Ltd. declared and paid a cash dividends of INR 8,000. This
transaction
a) reduces stockholders' equity by INR 8,000.
b) increases stockholders' equity by INR 8,000.
c) reduces net income by INR 8,000.
d) increases expenses by INR 8,000.

24. In the first month of operations, the total of the debit entries to the Cash account
amounted to INR 1,300 and the total of the credit entries to the Cash account amounted to
INR 700. The Cash account has a
a) INR 700 credit balance.
b) INR 1,300 debit balance.
c) INR 600 debit balance
d) INR 700 credit balance.

25. Bling Corporation issued a one-year 9% INR 400,000 note on April 30, 2021. Interest
expense for the year ended December 31, 2021 was:
a) INR 36,000.
b) INR 30,250.
c) INR 24,000.
d) INR 25,750.

26. Archie’s Retail signs a three-month note payable to help finance increases in inventory
for the Diwali shopping season. The note is signed on October 1 in the amount of INR
20,000 with annual interest of 6%. What is the adjusting entry to be made on December
31 for the interest expense accrued to that date, if no entries have been made previously
for the interest?

a) Interest Expense 100

Interest Payable 100

b) Interest Expense 200

Interest Payable 200

c) Interest Expense 300

Interest Payable 300

d) Interest Expense 1,200

Note Payable 1,200
27. Hope Floats Enterprises purchased and paid for INR 9,000 for an 18-month insurance
policy on May 31, 2021. The December 31, 2021 balance sheet would report Prepaid
Insurance of:
a) INR 0 because Prepaid Insurance is reported on the Income Statement.
b) INR 3,600.
c) INR 5,500.
d) INR 9,000.

28. Fleet Services Company purchased equipment for INR 9,000 on April 1, 2021. The
company expects to use the equipment for 6 years. It has no salvage value. What balance
would be reported on the March 31, 2022 balance sheet for Accumulated Depreciation?
a) $0 because Accumulated Depreciation is reported on the Income Statement.
b) INR 1500
c) INR 7500
d) INR 9000