Intuit Bookkeeping Exam Review Questions
with Verified Correct Answers
What is the Purpose of a balance sheet
To determine the financial health of an organization at a point in time.
Financial elements on the income statement:
Expenses, Revenue
Financial elements on the balance sheet:
Assets, Capital, and Liabilities
Accounts that increase with debit
Cash, equipment, assets, expenses, and dividends
Accounts that increase with credit
Contra-Asset : Accumulated Depreciation, Account Payable, common stock, equity, revenue
and liability
Lou has a landscaping company. He received a $10,000 payment for a landscaping job
that he completed for the Rose family. How would you record this transaction?
Debit $10,000 to Cash; Credit $10,000 to Service Revenue - Landscaping
Definition of a debit in double-entry accounting
An increase in assets/expenses and a decrease in liabilities/owner's equity and revenue.
General Ledger
The debits and credits posted to the company's line of credit during the last 6 months
,Transaction Journal
The debits and credits recorded for a rental equipment expense
income statement (profit and loss statement)
Report of all revenue and expenses for the month
Is the ending balance for the inventory on Balance Sheet?
Yes, Ending balance for the inventory
Reasons for making adjusting journal entries (Choose 3)
a. To record expiration of prepaid insurance. b. To record depreciation. c. To recognize
unpaid salaries for the current period.
Economic Entity Assumption
The business is a separate entity, so the activities of a business must be kept separate from
any other financial activities of its business owners.
Reliability Assumption
Makes mandatory for companies to record only accounting transactions that can be verified
through invoices, billing statements and bank statements.
Full Disclosure Principle
All information that is relative to the business and is important to a lender or investor has to
be provided in financial statements or in the notes of the statements.
Conservatism Assumption
When bookkeepers are uncertain and need to determine how to report an item, this guides
them to choose the option that shows less income or asset benefit.
, Going Concern Assumption
Refers to a business that is now stable enough to operate and meet its obligations for the
foreseeable future.
Monetary Unit Assumption
Refers to one monetary unit being used throughout all of the accounting activities.
Consistency Principle
Refers to when a business adopts a specific accounting method that it will enter all similar
items in the exact same way in the future.
Materiality Principle
Refers to an accounting standard that can be ignored if the impact has such a small effect on
the financial statements that it would not be misleading.
On February 28, ABC Company received an invoice for $1,200 for running social media
ads in February. The invoice will be paid in March. Assuming ABC Company uses the
accrual method of accounting, which is correct for February?
Expenses are increased by $1,200.
Which of the following accounts is not considered a long term asset?
Inventory
Difference between current assets and long-term assets
Current assets are expected to be converted to cash within one year, while Long-term assets
are expected to extend beyond a year from the reporting date.
Normal (natural) Debit balance account types
with Verified Correct Answers
What is the Purpose of a balance sheet
To determine the financial health of an organization at a point in time.
Financial elements on the income statement:
Expenses, Revenue
Financial elements on the balance sheet:
Assets, Capital, and Liabilities
Accounts that increase with debit
Cash, equipment, assets, expenses, and dividends
Accounts that increase with credit
Contra-Asset : Accumulated Depreciation, Account Payable, common stock, equity, revenue
and liability
Lou has a landscaping company. He received a $10,000 payment for a landscaping job
that he completed for the Rose family. How would you record this transaction?
Debit $10,000 to Cash; Credit $10,000 to Service Revenue - Landscaping
Definition of a debit in double-entry accounting
An increase in assets/expenses and a decrease in liabilities/owner's equity and revenue.
General Ledger
The debits and credits posted to the company's line of credit during the last 6 months
,Transaction Journal
The debits and credits recorded for a rental equipment expense
income statement (profit and loss statement)
Report of all revenue and expenses for the month
Is the ending balance for the inventory on Balance Sheet?
Yes, Ending balance for the inventory
Reasons for making adjusting journal entries (Choose 3)
a. To record expiration of prepaid insurance. b. To record depreciation. c. To recognize
unpaid salaries for the current period.
Economic Entity Assumption
The business is a separate entity, so the activities of a business must be kept separate from
any other financial activities of its business owners.
Reliability Assumption
Makes mandatory for companies to record only accounting transactions that can be verified
through invoices, billing statements and bank statements.
Full Disclosure Principle
All information that is relative to the business and is important to a lender or investor has to
be provided in financial statements or in the notes of the statements.
Conservatism Assumption
When bookkeepers are uncertain and need to determine how to report an item, this guides
them to choose the option that shows less income or asset benefit.
, Going Concern Assumption
Refers to a business that is now stable enough to operate and meet its obligations for the
foreseeable future.
Monetary Unit Assumption
Refers to one monetary unit being used throughout all of the accounting activities.
Consistency Principle
Refers to when a business adopts a specific accounting method that it will enter all similar
items in the exact same way in the future.
Materiality Principle
Refers to an accounting standard that can be ignored if the impact has such a small effect on
the financial statements that it would not be misleading.
On February 28, ABC Company received an invoice for $1,200 for running social media
ads in February. The invoice will be paid in March. Assuming ABC Company uses the
accrual method of accounting, which is correct for February?
Expenses are increased by $1,200.
Which of the following accounts is not considered a long term asset?
Inventory
Difference between current assets and long-term assets
Current assets are expected to be converted to cash within one year, while Long-term assets
are expected to extend beyond a year from the reporting date.
Normal (natural) Debit balance account types
