Recording Income Statement Transactions - Spreadsheet
Easy Practice Test
Introduction to Accounting
Recording Income Statement Transactions – Spreadsheet
Easy Practice Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
1. A revenue account is written on the spreadsheet in the current period when
a. services are provided to a customer this period
b. services are provided to the company this period
c. services are paid for next period
d. income is earned last period
Check Your Answer
A. Revenues are recognized in the current period when a good or service is provided to the customer during this period. (b.) is an expense. (c.) is a prepaid asset. (d.) is a revenue that would have been recorded last period. When payment occurs does not matter.
2. An expense account is written on the spreadsheet this period when
a. services are provided to a customer this period
b. services are provided to the company this period
c. services will be paid for next period
d. income is earned last period
Check Your Answer
B. An expense is recorded when an asset is used or a service is provided to the company that the company must pay for during this period. (a) is a revenue this period. When services are paid for does not matter (c.) Income earned is a revenue.
3. What is recorded when wages are paid to employees who worked this week?
a. an increase in an asset and an increase in a liability
b. an increase in a revenue and an increase in an asset
c. an increase in an expense and a decrease in an asset
d. a decrease in a liability and an increase in a revenue
Check Your Answer
C. Employees working are providing a service to the company that the company must pay for – this is an expense. Since the employees are paid; cash an asset is decreased. Expenses increasing are recorded with a negative amount because expenses are always negative on the spreadsheet.
4. Dividends earned and not yet received are recorded as
a. an increase in an asset and an increase in a liability
b. an increase in a revenue and an increase in an asset
c. an increase in an expense and a decrease in an asset
d. a decrease in a liability and a decrease in cash
Check Your Answer
B. Earned always refers to a revenue. Not yet received is an asset, accounts receivable.
5. Expenses are always increased on the spreadsheet with a
a. positive number
b. negative number
c. with an increase in an asset
d. with an increase in a revenue
Check Your Answer
B. Expenses decrease earning and expenses are increased with a negative number and always have a negative balance. Increasing an expense is always done with a negative amount.
6. Revenues are always increased on the spreadsheet with a
a. positive number
b. negative number
c. with a decrease in an asset
d. with an increase in a liability
Check Your Answer
A. Revenues increase earnings so revenues are always increased with a positive amount. Increasing revenue is always done with a positive number.
7. Using up prepaid rent also results in recording
a. a decrease to a liability
b. an increase in an expense
c. an increase in a revenue
d. an increase to owner’s equity
Check Your Answer
B. Prepaid rent is an asset. When the asset is used for the period the asset must be decreased. Using up an asset is an expense. The account rent expense must increase which is done with a negative amount.
8. Cash paid for salaries owed to employees for working last month is recorded with
a. a decrease to a liability
b. an increase in an expense
c. an increase in a revenue
d. an increase to owner’s equity
Check Your Answer
A. The company would have a liability called salaries payable for what is owed to employees. Paying the liability decreases the liability (the amount owed) and decreases an asset, cash. The expense would have been recorded last period when the work was done.
9. Depreciation expense is recorded in the same transaction as
a. equipment
b. accumulated depreciation
c. accrued expenses
d. prepaid expenses
Check Your Answer
B. Depreciation expense is recorded with a negative amount and accumulated depreciation is recorded with a negative amount. Accumulated depreciation is a contra- asset to P/P/E. Accumulated depreciation is the cumulative amount of depreciation expense so when depreciation expense is recorded, accumulated depreciation must be recorded also.
10. An expense will be recorded in the same transaction as
a. a decrease to a liability
b. an increase in a liability
c. an increase in a revenue
d. an increase to owner’s equity
Check Your Answer
B. An expense occurs when the company is provided a service that must be paid for or an asset is used. An expense will be recorded either with a decrease in an asset (cash, prepaid, or accumulated deprecation) or with an increase in a liability ( ______ payable) if it will be paid for later. Expenses and revenues are never recorded in the same transaction, with the exception of providing goods to customers which uses 4 accounts.
11. A company had the following transactions the first month of business.
Record the transactions on a spreadsheet and total the accounts.
1) Received $150,000 cash from investors for ownership in the company.
2) Purchased inventory to be sold to customers, $45,000 on account.
3) Rented warehouse space, $6,000 was paid for this month.
4) Sold $5,000 of inventory on account (you have not been paid yet), sales price of $7,500.
5) Acquired office furniture for $3,000 cash
6) Paid $12,000 to employees who worked this month.
7) Acquired manufacturing equipment costing $39,000, paid cash.
8) Paid $700 for janitorial service.
9) Received and paid a $100 utility bill for this month.
10) Collected $7,500 owed from customers.
Check Your Answer
12. A company had the following transactions the first month of business.
Record the transactions on a spreadsheet and total the accounts.
1) Borrowed $150,000 cash from the bank to be repaid in 5 years.
2) Purchased inventory to be sold to customers, $38,000 on account.
3) Rented warehouse space, $6,000 was paid for the next 3 months.
4) Paid $300 for advertising run this month.
5) Purchased computer equipment on account, $900.
6) Paid employee health insurance for the month $4,500
7) Sold $12,000 of inventory for a sales price of $22,000 on account.
8) Paid $8,000 for wages to employees for work this month.
9) Acquired manufacturing equipment costing $55,000; agreed to pay in 2 years.
10) Paid $700 for rent on the administrative offices.
11) Received a utility bill for $190 for this month.
12) Paid suppliers $25,000 for amounts owed on account.
Check Your Answer
13. A company had the following transactions the first month of business.
Record the transactions on a spreadsheet and total the accounts.
1) Issued stock to investors for $100,000
2) Purchased office furniture for $11,000, paid cash
3) Purchased office supplies on account for $750, used the supplies this month
4) Purchased office computer equipment for $3,800; agreed to pay in 2 years.
5) Paid $2,000 for rent for office and warehouse space for this month
6) Purchased $29,000 of inventory on account
7) Provided services to customers on account for $2,200
8) Sold goods to customers on account for $11,500. The inventory provided cost the
company $4,800.
9) Employees worked and were paid $1,800
10) Collected $2,200 from customers who were provided the service in 7.
Check Your Answer
