Accounting Knowledge practice questions

Payroll, sales tax, 1099s, fixed assets & period close

7 practice questions on payroll, sales tax, 1099s, fixed assets & period close, each with the answer and why it is right. From Questiva Learning' QuickBooks® Online skills test.

1. In a paycheck entry, the taxes withheld from the employee go to:

   1. Payroll Tax Expense.
   2. Payroll Liabilities.
   3. Checking, along with the net pay.
   4. Nowhere. Only the net pay is recorded.

   Answer: B) Payroll Liabilities.. Withheld taxes are the employee's money that you owe the government. They sit in Payroll Liabilities until you pay them, and Wages Expense is the full gross pay.

2. For your financial statements, straight-line depreciation spreads evenly over an asset's useful life:

   1. Its cost, less what you expect to sell it for.
   2. Its full purchase price, whatever it sells for later.
   3. The loan payments on it.
   4. Its drop in market value.

   Answer: A) Its cost, less what you expect to sell it for.. You depreciate the cost less salvage value (what you expect to sell it for), split evenly over the years you use it.

3. Before you hand over last month's financial statements, you should:

   1. Pay every open bill so Accounts Payable is zero.
   2. Delete bank feed transactions that aren't categorized yet.
   3. Run this month's payroll.
   4. Reconcile the bank and credit card accounts.

   Answer: D) Reconcile the bank and credit card accounts.. Reconciling proves every bank and card transaction is in the books once. Until then, you can't trust the cash balance.

4. Your payroll journal records wages and what's owed. The payroll service's withdrawal goes to:

   1. Payroll Expense.
   2. Payroll Liabilities.
   3. Wages Expense and Payroll Tax Expense.
   4. Nowhere. The journal already covers it.

   Answer: B) Payroll Liabilities.. The journal already records the expense and what's owed, so the withdrawal pays down Payroll Liabilities. Coding it to expense counts payroll twice.

5. Can taxes withheld from paychecks pay the rent when cash is short?

   1. Yes, as long as they're deposited before the quarterly return is due.
   2. Yes, if it's recorded as a loan from the owner.
   3. Small amounts, yes.
   4. No. They have to be deposited on time.

   Answer: D) No. They have to be deposited on time.. Withheld taxes are the employees' money, held in trust until they're paid over. Late deposits bring penalties, and the people responsible can be held personally liable.

6. When you refund a sale and its sales tax, you reduce:

   1. Sales and Sales Tax Payable.
   2. Sales, by the full refund.
   3. Sales, and record the tax as a refund expense.
   4. Nothing. The whole refund is an expense.

   Answer: A) Sales and Sales Tax Payable.. The tax was collected for the state. Once you refund it you no longer owe it, so Sales Tax Payable goes down along with Sales.

7. The bank account reconciles, but Undeposited Funds still holds payments that were deposited. Why?

   1. The deposits were entered as new income.
   2. That account always carries a balance.
   3. The deposits are still in transit.
   4. The payments weren't applied to their invoices.

   Answer: A) The deposits were entered as new income.. A deposit entered straight to income skips the payments waiting in Undeposited Funds. They stay there, and the income is counted twice.