ACCT 3110 ENTRANCE EXAM
200 QUESTIONS & ANSWERS
1. Which financial statement reports assets, liabilities, and stockholders' equity?
A. Statement of cash flows
B. Balance sheet ✓
C. Income statement
D. Statement of retained earnings
Correct Answer: B. Balance sheet
Explanation: The balance sheet reports the accounting equation components at a point in time.
2. Which financial statement reports revenues and expenses for a period?
A. Balance sheet
B. Trial balance
C. Statement of cash flows
D. Income statement ✓
Correct Answer: D. Income statement
Explanation: The income statement summarizes revenues and expenses and determines net income or loss.
3. Another name for the balance sheet is the:
A. Statement of earnings
B. Statement of operations
C. Statement of cash receipts
D. Statement of financial position ✓
Correct Answer: D. Statement of financial position
Explanation: The balance sheet is also called the statement of financial position.
4. Which account normally has a debit balance?
A. Common stock
B. Revenue
C. Accounts payable
D. Cash ✓
Correct Answer: D. Cash
Explanation: Cash is an asset, and assets normally carry debit balances.
5. Which account normally has a credit balance?
ACCT 3110 Practice Questions & MARKED Answers | Page 1
,A. Accounts receivable
B. Supplies
C. Unearned revenue ✓
D. Prepaid insurance
Correct Answer: C. Unearned revenue
Explanation: Unearned revenue is a liability and normally has a credit balance.
6. The basic accounting equation is:
A. Liabilities = Assets + Equity
B. Assets = Revenue − Expenses
C. Assets = Liabilities + Equity ✓
D. Equity = Assets + Revenue
Correct Answer: C. Assets = Liabilities + Equity
Explanation: The fundamental equation is Assets = Liabilities + Stockholders' Equity.
7. If assets are $90,000 and liabilities are $35,000, equity is:
A. $90,000
B. $35,000
C. $55,000 ✓
D. $125,000
Correct Answer: C. $55,000
Explanation: Equity = Assets − Liabilities = $90,000 − $35,000 = $55,000.
8. If liabilities are $28,000 and equity is $47,000, total assets are:
A. $56,000
B. $75,000 ✓
C. $47,000
D. $19,000
Correct Answer: B. $75,000
Explanation: Assets = Liabilities + Equity = $28,000 + $47,000 = $75,000.
9. Which is a current asset?
A. Long-term investment
B. Equipment
C. Accounts receivable ✓
D. Land
Correct Answer: C. Accounts receivable
Explanation: Accounts receivable is normally expected to be collected within the operating cycle or one year.
10. Which is a current liability?
A. Common stock
B. Accounts payable ✓
C. Equipment
ACCT 3110 Practice Questions & MARKED Answers | Page 2
,D. Land
Correct Answer: B. Accounts payable
Explanation: Accounts payable is an obligation normally due in the short term.
11. Which item is not an asset?
A. Cash
B. Accounts payable ✓
C. Inventory
D. Prepaid rent
Correct Answer: B. Accounts payable
Explanation: Accounts payable is a liability.
12. Revenue generally increases:
A. Liabilities only
B. Assets or equity ✓
C. Dividends
D. Expenses only
Correct Answer: B. Assets or equity
Explanation: Revenue increases equity and often increases an asset such as cash or receivables.
13. An expense generally:
A. Increases equity
B. Increases contributed capital
C. Decreases equity ✓
D. Creates a liability only
Correct Answer: C. Decreases equity
Explanation: Expenses reduce net income and therefore reduce retained earnings/equity.
14. Dividends paid to shareholders:
A. Increase retained earnings
B. Increase revenue
C. Increase net income
D. Decrease retained earnings ✓
Correct Answer: D. Decrease retained earnings
Explanation: Dividends are distributions to owners and reduce retained earnings.
15. Which statement is prepared first in the usual financial-statement sequence?
A. Balance sheet
B. Statement of stockholders' equity
C. Income statement ✓
D. Statement of cash flows
Correct Answer: C. Income statement
Explanation: Net income from the income statement is used in subsequent statements.
ACCT 3110 Practice Questions & MARKED Answers | Page 3
, 16. Net income equals:
A. Revenues + expenses
B. Revenues − expenses ✓
C. Assets − liabilities
D. Cash receipts − cash payments
Correct Answer: B. Revenues − expenses
Explanation: Net income is revenues less expenses for the period.
17. A net loss occurs when:
A. Revenues exceed expenses
B. Expenses exceed revenues ✓
C. Assets exceed liabilities
D. Cash exceeds receivables
Correct Answer: B. Expenses exceed revenues
Explanation: A net loss results when total expenses are greater than total revenues.
18. The statement of retained earnings explains changes in:
A. Retained earnings ✓
B. Cash
C. Inventory
D. Accounts payable
Correct Answer: A. Retained earnings
Explanation: It reconciles beginning retained earnings with net income and dividends to ending retained earnings.
19. The ending retained earnings balance appears on the:
A. Statement of cash flows only
B. Balance sheet ✓
C. Income statement only
D. Trial balance only
Correct Answer: B. Balance sheet
Explanation: Ending retained earnings is reported within stockholders' equity on the balance sheet.
20. Which account is a contra-asset?
A. Accounts payable
B. Common stock
C. Unearned revenue
D. Accumulated depreciation ✓
Correct Answer: D. Accumulated depreciation
Explanation: Accumulated depreciation reduces the carrying amount of property, plant, and equipment.
21. Which basis recognizes revenue when earned rather than when cash is received?
A. Liquidation basis
B. Accrual basis ✓
ACCT 3110 Practice Questions & MARKED Answers | Page 4
200 QUESTIONS & ANSWERS
1. Which financial statement reports assets, liabilities, and stockholders' equity?
A. Statement of cash flows
B. Balance sheet ✓
C. Income statement
D. Statement of retained earnings
Correct Answer: B. Balance sheet
Explanation: The balance sheet reports the accounting equation components at a point in time.
2. Which financial statement reports revenues and expenses for a period?
A. Balance sheet
B. Trial balance
C. Statement of cash flows
D. Income statement ✓
Correct Answer: D. Income statement
Explanation: The income statement summarizes revenues and expenses and determines net income or loss.
3. Another name for the balance sheet is the:
A. Statement of earnings
B. Statement of operations
C. Statement of cash receipts
D. Statement of financial position ✓
Correct Answer: D. Statement of financial position
Explanation: The balance sheet is also called the statement of financial position.
4. Which account normally has a debit balance?
A. Common stock
B. Revenue
C. Accounts payable
D. Cash ✓
Correct Answer: D. Cash
Explanation: Cash is an asset, and assets normally carry debit balances.
5. Which account normally has a credit balance?
ACCT 3110 Practice Questions & MARKED Answers | Page 1
,A. Accounts receivable
B. Supplies
C. Unearned revenue ✓
D. Prepaid insurance
Correct Answer: C. Unearned revenue
Explanation: Unearned revenue is a liability and normally has a credit balance.
6. The basic accounting equation is:
A. Liabilities = Assets + Equity
B. Assets = Revenue − Expenses
C. Assets = Liabilities + Equity ✓
D. Equity = Assets + Revenue
Correct Answer: C. Assets = Liabilities + Equity
Explanation: The fundamental equation is Assets = Liabilities + Stockholders' Equity.
7. If assets are $90,000 and liabilities are $35,000, equity is:
A. $90,000
B. $35,000
C. $55,000 ✓
D. $125,000
Correct Answer: C. $55,000
Explanation: Equity = Assets − Liabilities = $90,000 − $35,000 = $55,000.
8. If liabilities are $28,000 and equity is $47,000, total assets are:
A. $56,000
B. $75,000 ✓
C. $47,000
D. $19,000
Correct Answer: B. $75,000
Explanation: Assets = Liabilities + Equity = $28,000 + $47,000 = $75,000.
9. Which is a current asset?
A. Long-term investment
B. Equipment
C. Accounts receivable ✓
D. Land
Correct Answer: C. Accounts receivable
Explanation: Accounts receivable is normally expected to be collected within the operating cycle or one year.
10. Which is a current liability?
A. Common stock
B. Accounts payable ✓
C. Equipment
ACCT 3110 Practice Questions & MARKED Answers | Page 2
,D. Land
Correct Answer: B. Accounts payable
Explanation: Accounts payable is an obligation normally due in the short term.
11. Which item is not an asset?
A. Cash
B. Accounts payable ✓
C. Inventory
D. Prepaid rent
Correct Answer: B. Accounts payable
Explanation: Accounts payable is a liability.
12. Revenue generally increases:
A. Liabilities only
B. Assets or equity ✓
C. Dividends
D. Expenses only
Correct Answer: B. Assets or equity
Explanation: Revenue increases equity and often increases an asset such as cash or receivables.
13. An expense generally:
A. Increases equity
B. Increases contributed capital
C. Decreases equity ✓
D. Creates a liability only
Correct Answer: C. Decreases equity
Explanation: Expenses reduce net income and therefore reduce retained earnings/equity.
14. Dividends paid to shareholders:
A. Increase retained earnings
B. Increase revenue
C. Increase net income
D. Decrease retained earnings ✓
Correct Answer: D. Decrease retained earnings
Explanation: Dividends are distributions to owners and reduce retained earnings.
15. Which statement is prepared first in the usual financial-statement sequence?
A. Balance sheet
B. Statement of stockholders' equity
C. Income statement ✓
D. Statement of cash flows
Correct Answer: C. Income statement
Explanation: Net income from the income statement is used in subsequent statements.
ACCT 3110 Practice Questions & MARKED Answers | Page 3
, 16. Net income equals:
A. Revenues + expenses
B. Revenues − expenses ✓
C. Assets − liabilities
D. Cash receipts − cash payments
Correct Answer: B. Revenues − expenses
Explanation: Net income is revenues less expenses for the period.
17. A net loss occurs when:
A. Revenues exceed expenses
B. Expenses exceed revenues ✓
C. Assets exceed liabilities
D. Cash exceeds receivables
Correct Answer: B. Expenses exceed revenues
Explanation: A net loss results when total expenses are greater than total revenues.
18. The statement of retained earnings explains changes in:
A. Retained earnings ✓
B. Cash
C. Inventory
D. Accounts payable
Correct Answer: A. Retained earnings
Explanation: It reconciles beginning retained earnings with net income and dividends to ending retained earnings.
19. The ending retained earnings balance appears on the:
A. Statement of cash flows only
B. Balance sheet ✓
C. Income statement only
D. Trial balance only
Correct Answer: B. Balance sheet
Explanation: Ending retained earnings is reported within stockholders' equity on the balance sheet.
20. Which account is a contra-asset?
A. Accounts payable
B. Common stock
C. Unearned revenue
D. Accumulated depreciation ✓
Correct Answer: D. Accumulated depreciation
Explanation: Accumulated depreciation reduces the carrying amount of property, plant, and equipment.
21. Which basis recognizes revenue when earned rather than when cash is received?
A. Liquidation basis
B. Accrual basis ✓
ACCT 3110 Practice Questions & MARKED Answers | Page 4
