Deck 3: Double-Entry Accounting and the Accounting Cycle

Question 1

Salary expense,sales revenue,and depreciation expense are examples of permanent accounts.

Answer 1

False

Question 2

When transactions are recorded in at least two separate accounts that are equal and offsetting,this is referred to as

A)double-entry accounting.
B)posting to the general ledger.
C)date entry.
D)transaction analysis.
E)all of the above

Answer 2

A

Question 3

A Chart of Accounts lists the accounts and balances at a specific time.

Answer 3

False

Question 4

The right side of a T account is also known as the

A)debit side.
B)credit side.
C)asset side.
D)liability side.

Question 5

An income summary account can be used when closing the books.

Question 6

All accounts are increased by credits and decreased by debits.

Question 7

Which of the following relationships best expresses the double-entry nature of an accounting system?

A)assets = liabilities
B)assets = debits
C)liabilities = credits
D)debits = credits

Question 8

Prepaid expenses,inventory and accounts payable are examples of permanent accounts.

Question 9

Net income is calculated as sales revenues minus the cost of goods sold.

Question 10

Cash is normally a credit balance.

Question 11

A major disadvantage of the template approach is the number of columns that can be manageably used.This disadvantage can be eliminated through

A)general ledger accounts.
B)transaction analysis.
C)double-entry accounting system.
D)chart of accounts.

Question 12

Balances in the revenue and expense accounts will affect retained earnings at the end of the period.

Question 13

Increases to assets are recorded on the credit side of a T account.

Question 14

At the beginning of the fiscal year an entity's permanent and temporary accounts should all have a zero balance.

Question 15

All Statement of Financial Position items are temporary and must be closed out annually.

Question 16

Closing entries are done monthly for all companies.

Question 17

Which of the following statements regarding the retained earnings account is not true?

A)It normally has a credit balance.
B)Its balance is increased by revenues.
C)Its balance is decreased by expenses.
D)Its balance is increased by the declaration of dividends.

Question 18

All Statement of Financial Position accounts increase with debits,while all Statement of Income accounts increase with credits.

Question 19

Which of the following statements is true?

A)The normal balance is always on the side of the T account that is increasing.
B)The normal balance is always on the side of the T account that is decreasing.
C)The normal balance is always on the debit side of the T account.
D)The normal balance is always on the credit side of the T account.

Question 20

An adjusting entry can be used to record transactions that have been missed.

Question 21

Which of the following accounts normally has a credit balance?

A)Accumulated depreciation
B)Accounts receivable
C)Dividends declared
D)Rent expense

Question 22

The following accounts are closed directly into retained earnings;therefore,this (these)account(s)are not accounted for separately in the company's chart of accounts:

A)Revenues.
B)Expenses.
C)Dividends.
D)All of the above are correct.
E)None of the above are correct.

Question 23

Which of the following is an example of a temporary account?

A)Accumulated depreciation
B)Retained earnings
C)Unearned revenues
D)Dividends declared

Question 24

Which of the following accounts normally has a debit balance?

A)Accounts payable
B)Retained earnings
C)Land
D)Sales revenue

Question 25

Which of the following results in a debit entry to the account identified?

A)increase in shareholders' equity
B)recording interest revenue
C)payment on accounts receivable
D)decrease in shareholders' equity

Question 26

Which of the following accounts normally has a credit balance?

A)Cash
B)Dividends declared
C)Insurance expense
D)Retained earnings

Question 27

Which of the following is the first step in the accounting cycle?

A)Recognize that a transaction has occurred.
B)Prepare a source document.
C)Prepare a chart of accounts.
D)Journalize a transaction.

Question 28

In practice,an accounting system's chart of accounts includes

A)a numerical identifier.
B)the use of account titles only.
C)statement of financial position accounts only.
D)a restriction on the number of accounts that can be used.

Question 29

Which of the following accounts normally has a debit balance?

A)Accumulated depreciation
B)Prepaid insurance
C)Accounts payable
D)Common shares

Question 30

The process of transferring data from the general journal to the general ledger is called

A)journalizing.
B)ledgerizing.
C)posting.
D)balancing.

Question 31

The use of temporary accounts helps managers,at least in part,to assess

A)liquidity.
B)stability.
C)profitability.
D)efficiency.

Question 32

Which of the following statements about accumulated depreciation is not true?

A)It is a contra asset account.
B)It records the portion or how much of the asset has been used up.
C)It is reflected on the Statement of Financial Position.
D)It helps determine how much an asset can be sold for.

Question 33

Which of the following transactions would involve a debit to an asset account?

A)recording depreciation expense on capital assets
B)payment of an accounts payable
C)payment of a dividend
D)collection of an accounts receivable

Question 34

A list of all the accounts used by the company in its accounting records is referred to as a

A)chart of accounts.
B)adjusted trial balance.
C)general journal.
D)general ledger.

Question 35

The chart of accounts is ___.

A)static
B)dynamic
C)not generally useful
D)contains only permanent accounts

Question 36

Which of the following types of accounts appear on the Statement of Financial Position and Statement of Income respectively? Statement of Financial Position Statement of Income

A)Permanent accounts Permanent accounts
B)Permanent accounts Temporary accounts
C)Temporary accounts Permanent accounts
D)Temporary accounts Temporary accounts

Question 37

Which of the following is not part of the accounting cycle?

A)posting
B)financial statement analysis
C)adjusted trial balance
D)transaction analysis

Question 38

Which of the following sequences concerning the accounting cycle is correct?

A)journalize,post,adjusting entries,financial statements
B)transaction analysis,trial balance,post,adjusted trial balance
C)post,adjusting entries,closing entries,financial statements
D)adjusting entries,closing entries,adjusted trial balance,financial statements

Question 39

Which of the following accounting records is in chronological order?

A)the chart of accounts
B)the general journal
C)the general ledger
D)the statement of income

Question 40

Which of the following accounts would have a balance that carries over from one period to the next?

A)Revenue
B)Insurance expense
C)Prepaid insurance
D)Dividends declared

Question 41

The purchase of land for a combination of cash and a 15-year note would require which of the following entries?

A)Dr.Land,Dr.Cash,Cr.Long-term note payable
B)Dr.Land,Cr.Cash,Cr.Long-term note payable
C)Dr.Cash,Cr.Long-term note payable,Cr.Land
D)Dr.Land,Dr.Long-term note payable,Cr.Cash

Question 42

Which statement regarding adjusting entries is not true?

A)Adjusting entries are made at the end of the accounting period.
B)Adjusting entries can include cash transactions.
C)Adjusting entries are required for accrual accounting.
D)The recognition of depreciation expense is a deferral.

Question 43

A net loss occurs when

A)assets exceed liabilities.
B)expenses exceed revenues for the year.
C)dividends exceed income for the year.
D)cumulative expenses and dividends have exceeded income.

Question 44

The process of recording transactions is called

A)transaction analysis.
B)posting.
C)recognizing.
D)journalizing.

Question 45

Which of the following would be the adjusting journal entry to expense prepaid rent for the period?

A)Dr.Prepaid rent,Cr.Rent expense
B)Dr.Rent expense,Cr.Cash
C)Dr.Prepaid rent,Cr.Cash
D)Dr.Rent expense,Cr.Prepaid rent

Question 46

Which of the following would be the adjusting entry to record accrued interest on a loan made to the business at the end of an accounting period?

A)Dr.Interest expense,Cr.Cash
B)Dr.Interest expense,Cr.Interest payable
C)Dr.Interest payable,Cr.Interest income
D)Dr.Interest payable,Cr.Cash

Question 47

A debit entry made to the unearned revenue account and credit entry made to the revenue account at the end of the period is referred to as a(n)

A)accrual.
B)deferral.
C)correcting entry.
D)closing entry.

Question 48

Which of the following statements about the trail balance is not true?

A)Debit balances must equal credit balances.
B)It includes only assets,liability and equity accounts.
C)It is useful for detecting errors.
D)It is an important step in the accounting cycle.

Question 49

The temporary account used in the closing process is called

A)Income Summary.
B)Revenues.
C)Expenses.
D)Dividends.
E)all of the above

Question 50

Which of the following would normally be recorded with an adjusting entry?

A)sales on account
B)payment for supplies bought on account
C)utilities expense
D)depreciation expense

Question 51

The sale of merchandise to a customer partly for cash and partly on account would require which of the following entries?

A)Dr.Accounts receivable,Dr.Cash,Cr.Sales revenue
B)Dr.Cash,Dr.Accounts payable,Cr.Sales revenue
C)Dr.Cash,Cr.Sales revenue
D)Dr.Accounts payable,Dr.Accounts receivable,Cr.Sales revenue

Question 52

Which of the following is a listing of all the account balances at a specific point in time?

A)the statement of financial position
B)the chart of accounts
C)the general journal
D)the trial balance

Question 53

The purchase of land for a combination of cash and issuance of shares would require which of the following entries?

A)Dr.Land,Cr.Common shares,Cr.Cash
B)Dr.Cash,Dr.Common shares,Cr.Land
C)Dr.Land,Cr.Cash,Dr.Common Shares
D)Dr.Cash,Cr.Land,Cr.Common shares

Question 54

When an inventory item that cost $75 is sold on account for $100,which of the following would be included in the journal entry recording the cost of goods sold?

A)Dr.Cash $100
B)Cr.Cost of goods sold $75
C)Cr.Accounts Receivable $100
D)Cr.Inventory $75

Question 55

Which of the following could cause the trial balance to be out of balance?

A)an entry recorded with only debits
B)an unrecorded entry
C)an entry recorded twice
D)an entry recorded to the wrong accounts

Question 56

An example of a contra asset account is

A)Accumulated depreciation.
B)Depreciation expense.
C)Gain on sale of landd)Prepaid expenses.

Question 57

Which of the following would be the adjusting journal entry to recognize earned but unpaid wages for the period?

A)Dr.Wages Expense,Cr.Cash
B)Dr.Wages Payable,Cr.Cash
C)Dr.Wages Payable,Cr.Wages Expense
D)Dr.Wages Expense,Cr.Wages Payable

Question 58

When the board of directors declares and pays a $500 dividend,which of the following would be included in the resulting journal entry?

A)Dr.Dividends Declared,Cr.Cash
B)Dr.Cash,Cr.Retained Earnings
C)Dr.Retained Earnings,Cr.Dividends declared
D)Dr.Cash,Cr.Dividends payable

Question 59

The closing process includes the following journal entries:

A)Dr.Revenues,Cr.R/E.
B)Dr.R/E,Cr.Expenses.
C)Dr.R/E,Cr.Dividends Declared.
D)all of the above
E)none of the above

Question 60

Which of the following is not an example of an adjusting entry?

A)recording unpaid interest at year end relating to an outstanding loan balance at year end
B)recording depreciation on office equipment purchased during the year
C)recording the gain on the sale of equipment made during the year
D)reducing the prepaid rent account for the portion of rent actually used

Question 61

Which of the following types of entries is used to reset the temporary accounts to zero and update the balance in the retained earnings?

A)journal entries
B)adjusting entries
C)closing entries
D)balancing entries