University of Ottawa Financial Accounting Worksheet

10 multiple choice questions  for Business  about ( Accrual Accounting)1)  You operate a lawn care business. On May 1, 20×4, one of your customers paid you $631 for lawn care for the summer of 20×4. What is the effect of this transaction on the accounting equation?

Select one:

a. Liabilities increase by $631 and shareholders’ equity increases by $631 

b. There is no effect on the accounting equation 

c. Assets increase by $631 and shareholders’ equity increases by $631 

d. Assets increase by $631 and liabilities increases by $631

ans: d

2)   Karr Corporation received cash of $6284 on August 1, 20×8 for one year’s rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 20×8 adjusting entry is:

Select one:

a. Debit Rent Revenue and credit Unearned Rent, $2618 

b. Debit Cash and credit Unearned Rent, $3666 

c. Debit Unearned Rent and credit Rent Revenue, $2618 

d. Debit Rent Revenue and credit Unearned Rent, $3666 

ans:D

3)   BC Incorporated is in the process of closing their books at year-end. The following information is reported on the income statement:

Salary Expense

$27

Interest Expense 

$15

Revenue 

$919

Rent Expense 

$32

Which of the following are correct closing entries:

Select one:

a. A credit to retained earnings of $961 

b. A debit to retained earnings of $ 919 

c. A debit to retained earnings of $845 

d. A credit to retained earnings of $ 845

ans: d