Creating Multiple Choice Practice Exams
Prompt:
Create a multiple choice exam with 4 answer choices A B C and D that are very similar and difficult to answer. Also make sure all of the material that is provided to you is touched upon based on the following material and also provide the answer key at the very end of the response:
(have to do this progressively as it fails to cover all material in one response due to its output limitations, 6 pages of notes took me about 7 requests to complete in full. Also it tends to want to put the answer after each individual question and you have to regenerate the response sometimes to get it to have the answers at the very end of each response)
Output Example (Result Of Gradual Input Of Information Through My Study Guide):
1 Multiple Choice Exam: Merchandising Business
What is a merchandising business?
A. A business that purchases and resells goods.
B. A business that produces and sells goods.
C. A business that buys and consumes goods.
D. A business that designs and sells goods.
What is a retail merchandising business?
A. A business that purchases and resells goods.
B. A business that produces and sells goods.
C. A business that sells to those who use or consume goods.
D. A business that buys to resell to other businesses.
What is a wholesale merchandising business?
A. A business that purchases and resells goods.
B. A business that produces and sells goods.
C. A business that sells to those who use or consume goods.
D. A business that buys to resell to other businesses.
What is a corporation?
A. A business that purchases and resells goods.
B. An organization with the legal rights of a person which many people own.
C. A business that sells to those who use or consume goods.
D. A business that buys to resell to other businesses.
What is capital?
A. A list of assets containing the value of items.
B. Assets or other personal resources available to a business.
C. The total shares of ownership in a corporation.
D. A legal document that identifies the basic characteristics of a corporation.
What is capital stock?
A. A list of assets containing the value of items.
B. Assets or other personal resources available to a business.
C. The total shares of ownership in a corporation.
D. A legal document that identifies the basic characteristics of a corporation.
What are articles of incorporation?
A. A list of assets containing the value of items.
B. Assets or other personal resources available to a business.
C. The total shares of ownership in a corporation.
D. A legal document that identifies the basic characteristics of a corporation.
What is a vendor?
A. A business that purchases and resells goods.
B. An organization with the legal rights of a person which many people own.
C. A business that sells to those who use or consume goods.
D. A business where things are purchased.
What is a subsidiary ledger?
A. A ledger that is summarized in a single GL account.
B. A sub-ledger containing vendor accounts.
C. A list of assets containing the value of items.
D. A legal document that identifies the basic characteristics of a corporation.
What is an accounts payable ledger?
A. A ledger that is summarized in a single GL account.
B. A sub-ledger containing vendor accounts.
C. A list of assets containing the value of items.
D. A legal document that identifies the basic characteristics of a corporation.
What is inventory?
A. A business that purchases and resells goods.
B. An organization with the legal rights of a person which many people own.
C. A list of assets containing the value of items.
D. A business where things are purchased.
Answer Key:
A
C
D
B
B
C
D
D
A
B
C
2 Multiple Choice Exam: Merchandise Inventory and Accounts Payable
What is merchandise inventory?
A. Goods a business has on hand for sale to customers.
B. Goods that a business has in storage for future use.
C. Goods that a business has on order from a vendor.
D. Goods that a business has sold to customers.
What is a requisition?
A. A form ordering merchandise.
B. A form requesting payment for merchandise.
C. A form used to record sales transactions.
D. A form used to record inventory adjustments.
What is a cash discount?
A. A deduction that a vendor allows on an invoice amount to encourage prompt payment.
B. A deduction that a customer can take on a merchandise purchase.
C. An additional charge added to an invoice amount for late payment.
D. An additional charge added to an invoice amount for rush delivery.
What is a discount period?
A. The period of time in which a vendor may take a cash discount.
B. The period of time in which a customer may take a cash discount.
C. The period of time in which a vendor may impose a penalty for late payment.
D. The period of time in which a customer may return merchandise for a refund.
What is a purchases discount?
A. When a company that purchases merchandise on account takes a cash discount.
B. When a company that sells merchandise on account takes a cash discount.
C. When a company purchases merchandise with cash.
D. When a company sells merchandise with cash.
What is a schedule of accounts payable?
A. A listing of vendor accounts, account balances, and total amounts due to all vendors.
B. A listing of customer accounts, account balances, and total amounts due from all customers.
C. A summary of all inventory transactions for a period.
D. A summary of all sales transactions for a period.
What is a controlling account?
A. An account in the GL that summarizes all accounts in a subledger.
B. An account in a subledger that summarizes all transactions for a period.
C. An account in the GL that summarizes all transactions for a period.
D. An account in a subledger that summarizes all accounts in the GL.
What is a purchase invoice?
A. A source document for purchases on account.
B. A source document for purchases with cash.
C. A source document for sales on account.
D. A source document for sales with cash.
What is a credit limit?
A. The maximum outstanding balance a customer is allowed by a vendor.
B. The maximum outstanding balance a vendor is allowed by a customer.
C. The maximum amount of credit a customer can receive from a bank.
D. The maximum amount of credit a vendor can receive from a bank.
Answer Key:
A
A
A
B
A
A
A
A
A
3 Why are corporations formed?
A) To make it easier to file taxes
B) To provide liability protection to the owners
C) To avoid paying taxes
D) To make it easier to acquire capital
What is a corporation?
A) An organization owned by a single individual
B) An organization with the legal rights of a person and which many persons own
C) An organization that can only exist in certain industries
D) An organization that cannot own property
What can a corporation do?
A) Only own property
B) Incur liabilities
C) Enter into contracts in its own name
D) None of the above
How is a corporation owned and by who?
A) It is owned by a single individual
B) It is owned by the government
C) It is owned by multiple people through the sale of stock
D) It is not owned by anyone
Where does the main difference in accounting records lie between corporations and proprietorships?
A) In the inventory accounts
B) In the capital accounts
C) In the accounts payable accounts
D) In the sales accounts
What is the difference in capital accounts between corporations and proprietorships?
A) Proprietorships have one capital account, while corporations have separate capital accounts for stock issued and earnings kept in the business
B) Proprietorships have separate capital accounts for stock issued and earnings kept in the business, while corporations have one capital account
C) Proprietorships and corporations have the same type of capital accounts
D) None of the above
What is the Business Entity Concept In Relation to Corporations and Proprietorships?
A) It refers to the concept of separate legal entities for different types of businesses
B) It refers to the concept of the accounting system being kept separate from personal records
C) It refers to the concept of businesses being able to own property
D) It refers to the concept of businesses being able to enter into contracts in their own name
In order to pay vendors on time, businesses must know what?
A) The amount owed to each customer
B) The amount owed to each employee
C) The amount owed to each vendor
D) The amount owed to the government
What is the issue with using the gl when you have a large number of vendors or customers?
A) It is too practical
B) It is not practical because there are too many transactions
C) It is too easy to use
D) It is too difficult to use
Answer key:
D
B
C
C
B
A
B
C
B
4 What is the difference between the perpetual inventory method and the periodic inventory method?
A. The perpetual method is more efficient but less accurate
B. The perpetual method records purchases directly to the merchandise inventory account
C. The periodic method is more accurate but less efficient
D. The periodic method records purchases directly to the expense accounts
What type of account is the purchases account?
A. A liability account
B. A revenue account
C. A temporary account
D. A permanent account
When does a transaction occur for purchases?
A. When the purchase order is prepared
B. When the vendor approves the sale
C. When the customer receives the goods from the vendor
D. When the merchandise is recorded in the inventory account
What is the purchase order used for?
A. To record the cost of merchandise purchased
B. To approve the sale and process the order
C. To record the sale of merchandise
D. To determine the value of inventory
Why do businesses use separate journals instead of a single journal?
A. To increase efficiency
B. To record more transactions
C. To decrease accuracy
D. To record all transactions in one place
Answer Key:
B
C
C
B
A
5 What are the five main journals businesses use to record daily transactions?
A) Purchases journal, Cash payments journal, Sales journal, Cash receipts journal, and General ledger journal
B) Purchases journal, Cash payments journal, Sales ledger journal, Cash receipts ledger journal, and General ledger journal
C) Purchases ledger journal, Cash payments ledger journal, Sales journal, Cash receipts journal, and General journal
D) Purchases journal, Cash payments journal, Sales journal, Cash receipts journal, and General journal
What is a purchases journal used for?
A) For all cash payments
B) For all sales of merchandise on account
C) For purchases of merchandise on account
D) For all other transactions
What is a cash payments journal used for?
A) For all cash payments
B) For all sales of merchandise on account
C) For purchases of merchandise on account
D) For all other transactions
What is a sales journal used for?
A) For all cash payments
B) For all sales of merchandise on account
C) For purchases of merchandise on account
D) For all other transactions
What is a cash receipts journal used for?
A) For all cash payments
B) For all sales of merchandise on account
C) For purchases of merchandise on account
D) For all cash receipts
What is a general journal used for?
A) For all cash payments
B) For all sales of merchandise on account
C) For purchases of merchandise on account
D) For all other transactions
What does using special amount columns do?
A) It eliminates writing gl account titles in the account credited column
B) It eliminates writing gl account titles in the account debited column
C) It eliminates writing gl account titles in both the account debited and credited columns
D) It does not eliminate writing gl account titles
What are the benefits of recording entries in a journal with special amount columns?
A) Saves time
B) Helps reduce mistakes
C) Both A and B
D) Neither A nor B
Answer Key:
D
C
A
B
D
D
A
C
6 What do the entries in the purchases journal affect?
A) The account of the vendor named in the account debited column
B) The account of the vendor named in the account credited column
C) The account of the customer named in the account debited column
D) The account of the customer named in the account credited column
What does posting frequently ensure? (in terms of vendors)
A) That vendor accounts are not paid on time
B) That vendor accounts are paid on time
C) That vendor accounts are paid after the due date
D) That vendor accounts are not paid at all
What does the abbreviation "P" stand for?
A) Purchases discount
B) Cash payments journal
C) Sales journal
D) Purchases journal
What does "P11" mean?
A) Page 11 of the cash payments journal
B) Page 11 of the sales journal
C) Page 11 of the purchases journal
D) Page 11 of the general journal
Why is it necessary to use abbreviations and page numbers in journals?
A) To save time
B) To provide a clear audit trail
C) To confuse the reader
D) To make the journal entry look more professional
What special amount columns are found in a cash payments journal?
A) Accounts receivable, sales discount
B) Accounts payable, purchases discount
C) Accounts payable, sales discount
D) Accounts receivable, purchases discount
How is a trade discount shown in a journal entry?
A) It is not shown
B) It is shown as a debit
C) It is shown as a credit
D) It is shown as a separate journal entry
What happens when a purchases discount is taken?
A) The customer pays more than the invoice amount previously recorded in the purchases account
B) The customer pays the same amount as the invoice amount previously recorded in the purchases account
C) The customer pays less than the invoice amount previously recorded in the purchases account, which reduces the cost of merchandise for the customer
D) The customer does not pay the invoice amount previously recorded in the purchases account
Answer Key:
B
B
D
C
B
B
A
C
7 What does the term "2/10 n30" mean on an invoice?
A) The invoice is due in 2 days and must be paid in full
B) A 2% discount is offered if the invoice is paid within 10 days, otherwise the full amount is due within 30 days
C) The invoice must be paid in full within 2 days, otherwise a 10% penalty will be added
D) The invoice must be paid in full within 30 days, otherwise a 2% penalty will be added
What is the discount period?
A) The period of time during which a customer may take a cash discount
B) The period of time during which a customer must pay an invoice in full
C) The period of time during which a customer may return goods for a refund
D) The period of time during which a customer may file a complaint about the invoice
What are purchase discounts contra to?
A) Sales
B) Expenses
C) Revenues
D) Purchases
What are contra accounts?
A) Accounts that increase related accounts on a financial statement
B) Accounts that do not affect other accounts on a financial statement
C) Accounts that reduce related accounts on a financial statement
D) Accounts that are not shown on a financial statement
What does each entry of accounts payable in the debit column of a cash payments journal affect?
A) Customer accounts
B) Sales accounts
C) Expense accounts
D) Vendor accounts
What does frequent posting ensure for each vendor account?
A) The account is up to date
B) The account is inaccurate
C) The account is neglected
D) The account is overpaid
Why must a business monitor its outstanding accounts payable balances?
A) To ensure that it can continue to purchase goods and services on account
B) To ensure that it is not paying its vendors too much
C) To ensure that it is paying its vendors too little
D) To ensure that it is not exceeding its credit limit
What must a controlling balance do?
A) Equal the balance of the sum of all account balances in a subsidiary ledger
B) Be greater than the balance of the sum of all account balances in a subsidiary ledger
C) Be less than the balance of the sum of all account balances in a subsidiary ledger
D) Have no relation to the balance of the sum of all account balances in a subsidiary ledger
What is a Schedule of Accounts Payable?
A) A listing of customer accounts, account balances, and total amount owed by all customers
B) A listing of employee accounts, account balances, and total amount owed to all employees
C) A listing of vendor accounts, account balances, and total amount owed to all vendors
D) A listing of company accounts, account balances, and total amount owed by the company
Answer Key:
B
A
D
C
D
A
A
A
C
Input Example (Spread Up Into Multiple Inputs):
Chapter 9 Accounting Study Guide
Accounting For Cash Purchases And Cash Payments
James Haimoff
Terms Overview
Merchandising Business
-business that purchases and resells goods
Retail Merchandising Business
-sells to those who use or consume goods
Wholesale Merchandising Business
-buys to resell to other businesses
Corporation
-organization with the legal rights of a person which many people own
Capital
-Assets or other personal resources available to a business
Capital Stock
-total shares of ownership in a corporation
Articles of Incorporation
-legal document that identifies the basic characteristics of a corporation
Vendor
-a business where things are purchased
Subsidiary Ledger
-legger that is summarized in a single gl account
Accounts Payable Ledger
-subledger containing vendor accounts
Inventory
-list of assets containing the value of items
Merchandise Inventory
-goods a business has on hand for sale to customers
Requisition
-form ordering merchandise
Cash Discount
-Deduction that a vendor allows on an invoice amount to encourage prompt payment
Discount Period
-period of time in which a customer may take a cash discount
Purchases Discount
-when a company that purchases merchandise on account takes a cash discount
Schedule Of Accounts Payable
-listing of vendor account, account balances and total amounts due to all vendors
Controlling Account
-an account in the gl that summarizes all accounts in a subledger
Purchase Invoice
-source document for purchases on account
Credit Limit
-max outstanding balance a customer is allowed by a vendor
9-1 Subsidiary Ledgers and Controlling Accounts
Manufacturer to Wholesale Merchandising Business to Retail Merchandising Business
Why are corporations formed?
-because business need amounts of capital that cannot be easily acquired by a proprietorship
What is a corporation?
-an organization with the legal rights of a person and which many persons own
What can a corporation do?
-a corporation can own property, incur liabilities, and enter into contracts in its own name because it exists independent of its owners.
How is a corporation owned and by who?
-a corporation can sell ownership in itself in shares of stock
Where does the main difference in accounting records lie between corporations and proprietorships?
-in the capital accounts
What is the difference in capital accounts between the two?
-Proprietorship: capital accounts are from the single individual owner (ex. Joe smith capital/drawing)
-Corporation: Has separate capital accounts for both the stock issued and for the earnings kept in a business.
What is the Business Entity Concept In Relation to Corporations and Proprietorships?
-when the accounting system is kept separate from personal records
In order to pay vendors on time business must know what?
-amount owed to each vendor
What is the issue with using the gl when you have a large number of vendors or customers?
-it is not practical (too many transactions)
9-2 Accounting For Merchandise Purchases
What are the two methods for determining the value of inventory
-perpetual inventory method
-periodic inventory method
What is the Perpetual Inventory Method?
-you continuously record inventory
-purchases of merchandise are accounted for directly to the merchandise inventory account
-business that use this method usually have computerized accounting systems to efficiently maintain the detailed records that are required
-these provide business with better information for controlling the cost of merchandise it sells (but it is also a lot more time consuming and costly)
What is the Periodic Inventory Method?
-depending on the volume of sales you can conduct a periodic inventory at the end of the fiscal period, every year, every quarter, or every month
-much more efficient and easier to maintain
-merchandising business with manual accounting systems usually use this method
What type of account is purchases?
-normal balance debit account
What is the purchase account used to do?
-record the value of merchandise purchased (when you buy supplies, keep using the supply account)
Is purchases a temporary or permanent account?
-temporary
For a business using the periodic inventory method where is the cost of merchandise purchased recorded directly to?
-the expense accounts
A vendor uses the purchase order to do what two things?
-approve the sale
-process the order
When does a transaction occur for purchases?
-when a customer receives the goods from the vendor, so no journal entry is recorded with the purchase order is prepared
What is the issue with using a single journal for businesses?
-they cannot operate efficiently using a single journal
What do they use instead?
-they use separate journals to develop and record transactions affecting similar accounts to increase efficiency
What are the five main journals businesses use to record daily transactions?
Purchases journal
Cash payments journal
Sales journal
Cash receipts journal
General journal
What is a purchases journal used for?
-purchases of merchandise on account
What is a cash payments journal used for?
-for all cash payments
What is a sales journal used for?
-for all sales of merchandise on account
What is a cash receipts journal used for?
-for all cash receipts
What is a general journal used for?
-for all other transactions
What does using special amount columns do?
-it eliminates writing gl account titles in the account credited column
What are the benefits of recording entries in a journal with special amount columns?
-saves time
-helps reduce mistakes
9-3 Posting From a Purchases Journal
What do the entries in the purchases journal affect?
-the account of the vendor named in the account credited column
What does posting frequently ensure? (in terms of vendors)
-that vendor accounts are paid on time
Abbreviations examples
P
-abbreviation for the purchases journal
P11
-page 11 of the purchases journal
Why is this necessary?
-to provide a clear audit trail
9-4 Accounting For Cash Payments
What special amount columns are in a cash payments journal?
-accounts payable
-purchases discount
How is a trade discount shown in a journal entry?
-its not shown
What occurs when a purchases discount is taken
-the customer pays less than the invoice amount previously recorded in the purchases account which reduces the cost of merchandise for the customer
What does 2/10 n30 mean on an invoice
-if the invoice is paid within tens days of the invoice days 2% will be deducted
What is the discount period?
-the period of time during which a customer may take a cash discount
What are purchase discounts contra to?
-purchases
What are contra accounts?
-accounts that reduce related accounts on a financial statement
-because contra accounts are deducted from their related accounts their normal balances are opposite of the normal balance of the related account
9-5 Posting From A Cash Payments Journal
What does each entry of accounts payable in the debit column of a cash payments journal effect?
-vendor accounts
(Individual amounts in the accounts payable debit column are posted frequently to the proper vendor accounts in the accounts payable ledger)
What does frequent posting ensure for each vendor account?
-the account is up to date
Why must a business monitor its outstanding accounts payable balances?
-to ensure that is can continue to purchase goods and services on account
What must a controlling balance do?
-equal the balance of the sum of all account balances in a subsidiary ledger
(if the two amounts are the same the payable ledger is proved)
What is a Schedule Of Accounts Payable
-a listing of vendor accounts, account balances, and total amount owed to all vendors