Deck 2: Analyzing and Recording Transactions

Question 1

The accounting equation is expressed as assets = liabilities - equity

Answer 1

False

Question 2

When a company sells services for which cash will not be received until some future date, the company should credit an unearned revenues account for the amount charged to the customer.

Answer 2

False

Question 3

Debits increase asset and expense accounts

Answer 3

True

Question 4

An account is a detailed record of increases and decreases in a specific asset, liability or 2)equity item.

Question 5

Credits to accounts are always increases

Question 6

As prepaid assets are used up, the costs of the assets become expenses

Question 7

The first step in the accounting cycle is transaction analysis

Question 8

Cash withdrawn by the owner of an unincorporated business in the form of a monthlysalary should be treated as an expense of the business.

Question 9

A T-Account is a formal account frequently used in business

Question 10

A building is an example of an asset that does not provide any benefit to its owner

Question 11

An account balance is the difference between the increases and decreases recorded in an account.

Question 12

Unearned revenues are assets, because a service or product is owed to the customer

Question 13

Double-entry accounting means that every transaction affects and is recorded in at leasttwo accounts.

Question 14

To make it easier for the bookkeeper, the cost of land is separated from the cost of 8)buildings located on the land.

Question 15

The accounting equation can be expressed as liabilities = assets - equity

Question 16

Goods sold on credit to customers are called accounts payable

Question 17

The left side of a T-account is always the credit side, while the right side is always the debit side.

Question 18

Withdrawals are a type of transaction that affects equity

Question 19

A ledger is a type of account

Question 20

In a double-entry accounting system, total debits must always equal total credits

Question 21

A compound journal entry usually affects three or more accounts

Question 22

A transaction that increases an asset account and decreases a liability account must also affect another account.

Question 23

Debits to accounts are normally decreases

Question 24

Prepaid Insurance is an expense account which is used for recording expenses that havebeen paid in advance.

Question 25

The normal balance of an account refers to the debit or credit side where increases are recorded.

Question 26

Because they decrease equity, withdrawals made by a business owner are credited tohis/her withdrawals account.

Question 27

Increases in liabilities are recorded as debits

Question 28

The chart of accounts is a list of all the accounts used by a company

Question 29

Purchasing supplies on credit increases assets while decreasing liabilities

Question 30

When a business sends a bill for $200 to a customer for services rendered, the journal entry to record this transaction will include a $200 credit to Accounts Receivable.

Question 31

A chart of accounts lists the accounts and balances at a specific time

Question 32

To credit an expense account means to decrease it

Question 33

Asset accounts normally have credit balances and expense accounts normally have debit balances.

Question 34

All increases and decreases in cash are not necessarily recorded in the Cash account

Question 35

If a company purchases land, paying part with cash and issuing a note payable for the balance, the journal entry to record this transaction will include a debit to Cash.

Question 36

A transaction that decreases an asset account and increases a liability account must also affect another account.

Question 37

A credit purchase of a business expense item should be recorded with a debit to an expense account and a credit to Accounts Payable.

Question 38

Step Two of the accounting cycle requires that we record transactions in a record called a journal.

Question 39

A revenue account normally has a debit balance

Question 40

If a company sells products and receives from the customer a formal written promise to pay a definite sum of money on demand or on a defined future date (or dates), the seller should debit the promised amount to Accounts Receivable.

Question 41

A trial balance that is in balance is proof that no errors were made in journalizing thetransactions, posting to the ledger, and preparing the trial balance.

Question 42

If an account was incorrectly debited for $300 instead of correctly credited for $300, the account is out of balance by $300.

Question 43

An account used to record the owner's investments in the business plus any more or less permanent changes in the equity is called a(n):

A)Expense account.
B)Revenue account.
C)Capital account.
D)Asset account.
E)Withdrawals account.

Question 44

The trial balance is a list of the accounts that have balances in the ledger

Question 45

If an error is discovered in either the journal or the ledger, it must be corrected by erasing the incorrect amount and entering the corrected amount.

Question 46

Which of the following statements is correct? 54)

A)Goods and services are commonly sold to customers on the basis of oral or implied promises of future payment, called promissory notes.
B)Increases and decreases in cash are always recorded in the equity account.
C)An account called Land is commonly used to record increases and decreases in the land and buildings owned by a business.
D)When an insurance premium is paid in advance, the payment is normally recorded in a liability account called Prepaid Insurance.
E)None of these statements are correct.

Question 47

Unearned revenues are

A)Liabilities created by advance cash payments from customers for products or services.
B)Revenues that have been earned and received.
C)Revenues that have been earned but not yet collected.
D)Recorded as an asset in the accounting records.
E)Increases to owners' equity.

Question 48

The account sometimes referred to as the owner's personal account or drawing account is called a(n):

A)Revenue account.
B)Withdrawals account.
C)Expense account.
D)Liability account.
E)Capital account.

Question 49

An unconditional written promise to pay a definite sum of money on demand or on adefined future date (or dates)is a(n):

A)Unearned revenue.
B)Promissory note.
C)Account payable.
D)Account receivable.
E)Prepaid expense.

Question 50

Since all figures are eventually posted to the ledger, the posting reference column in a journal is not necessary.

Question 51

Prepaid expenses are

A)Always debited to an expense account.
B)Payments made for economic benefits that never expire.
C)Generally all combined into one account called "Miscellaneous Expenses".
D)Classified as liabilities on the balance sheet.
E)Assets created by payments for economic benefits that are not used up until later.

Question 52

A place or location within an accounting system in which the increases and decreases ina specific asset, liability, or equity item is recorded and stored is called a(n):

A)Journal.
B)Chart of accounts.
C)Ledger.
D)Trial balance.
E)Account.

Question 53

Which of the following statements is correct? 57)

A)The right side of a T-account is the debit side.
B)Entries that decrease asset and expense accounts, or increase liability, equity, and revenue accounts are posted as debits.
C)The left side of a T-account is the debit side.
D)The left side of a T-account is the credit side.
E)Entries that increase asset, expense, and revenue accounts are posted as debits.

Question 54

A general journal entry usually includes information about the date of a transaction,titles of affected accounts, dollar amount of each debit and credit and an explanation of the transaction.

Question 55

An abnormal balance in an account refers to a balance on the side where decreases are recorded.

Question 56

The accounting cycle begins with

A)Posting to the ledger.
B)Presentation of financial information to decision makers.
C)Analysis of economic events and recording their effects.
D)Preparing financial statements and other reports.
E)None of these answers is correct.

Question 57

The total dollar value of all debits and credits recorded in a journal entry must be equal

Question 58

A simple account form widely used in accounting education to illustrate how debits and credits work is called a:

A)Ledger.
B)Balance column account.
C)T-account.
D)Capital account.
E)Withdrawals account.

Question 59

An account balance is

A)The same as the balance sheet equation.
B)Not used in the real world.
C)The total of the debit side of the account.
D)The total of the credit side of the account.
E)The difference between the increases (including the beginning balance)and decreases recorded in the account.

Question 60

Posting is the process of copying the debit and credit amounts from a journal to the ledger accounts.

Question 61

A credit is used to record

A)An increase in a revenue account.
B)An increase in an unearned revenue account.
C)A decrease in an asset account.
D)A decrease in an expense account.
E)All of these answers are correct.

Question 62

The process of copying journal information to the ledger is called

A)Double-entering.
B)An external business transaction.
C)Posting.
D)Journalizing.
E)An internal business transaction.

Question 63

An asset created by a payment for economic benefits that does not expire until some later time is:

A)Recorded as a debit to an unearned revenue account.
B)Recorded as a credit to a prepaid expense account.
C)Recorded as a credit to an unearned revenue account.
D)Recorded as a debit to a prepaid expense account.
E)Not recorded in the accounting records.

Question 64

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

A)Recorded as a credit to a prepaid expense account.
B)Recorded as a credit to an unearned revenue account.
C)Recorded as a debit to a prepaid expense account.
D)Recorded as a debit to an unearned revenue account.
E)Not recorded in the accounting records.

Question 65

A debit entry

A)Increases asset and expense accounts.
B)Decreases revenue accounts.
C)Decreases liability and equity accounts.
D)Increases the owner's withdrawals account.
E)All of these answers are correct.

Question 66

If Girard Don, the owner of Girard's Software proprietorship, uses cash of the business to purchase a personal computer, the business should record this use of cash with anentry to:

A)Debit Salary Expense and credit Cash.
B)Debit Cash and credit Girard Don, Withdrawals.
C)Debit Girard Don, Withdrawals and credit Cash.
D)Debit Girard Don, Salary and credit Cash.
E)Debit Girard Don, Capital and credit Cash.

Question 67

Double-entry accounting is

A)An accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits.
B)An accounting system that disregards the accounting equation, A = L + E.
C)An accounting system in which errors never occur.
D)An accounting system in which the sum of the debit account balances never equals the sum of the credit account balances.
E)An accounting system in which each transaction affects and is recorded in two or more accounts with unequal debits and equal credits.

Question 68

On May 31, Don Company had an Accounts Payable balance of $57,000. During the month of June, total credits to Accounts Payable were $34,000, which resulted frompurchases on credit. The June 30 Accounts Payable balance was $32,000. What was the amount of payments made during June?

A)$34,000.
B)$59,000.
C)$57,000.
D)$32,000.
E)$84,000.

Question 69

The right side of a T-account is a(n)

A)Debit.
B)Credit.
C)Increase.
D)Decrease.
E)Account balance.

Question 70

Of the following accounts, the one that normally has a credit balance is

A)Sales Salaries Expense.
B)Cash.
C)Office Equipment.
D)Sales Salaries Payable.
E)Ted Neal, Withdrawals.

Question 71

A list of all accounts used by a company, including the identification number assignedto each account, is called a:

A)Trial balance.
B)Ledger.
C)General Journal.
D)Chart of accounts.
E)Journal.

Question 72

The following transactions occurred during July for Hurley Services:(1)Received $800 cash for photography services provided to customer during the month.(2)Received $500 cash from Barbara Blanc, the owner of the business.(3)Received $300 from a customer in partial payment of his account receivable which arose as a result of sales during June.(4)Rendered photography services to a customer on credit, $1,500Borrowed $800 from the bank by signing a promissory note.(6)Received $500 from a customer in payment for services to be rendered next year.How much revenue was earned in July?

A)$1,200.
B)$2,300.
C)$2,800.
D)$7,000.
E)$5,500.

Question 73

On June 30, the Cash account of Lutness Company had a normal balance of $4,300.During July the account was debited for a total of $3,400 and credited for a total of$3,600. What was the balance in the Cash account on August 1?

A)$3,400 debit.
B)$3,400 credit.
C)$4,100 credit.
D)$-0.
E)$4,100 debit.

Question 74

A column in journals and accounts used to cross reference journal and ledger entries iscalled the:

A)Debit.
B)Description.
C)Credit.
D)Account balance.
E)Posting reference.

Question 75

A credit entry

A)Increases asset and expense accounts, or decreases liability, equity, and revenue accounts.
B)Decreases asset and expense accounts, or increases liability, equity, and revenue accounts.
C)Increases the withdrawals account.
D)Is recorded on the left side of a T-account.
E)Decreases asset, expense and revenue accounts.

Question 76

Of the following accounts, the one that normally has a debit balance is

A)Accounts Receivable.
B)Accounts Payable.
C)Unearned Revenue.
D)Ted Neal, Capital.
E)Sales Revenue.

Question 77

Which of the following statements is incorrect? 67)

A)The normal balance of an expense account is a credit.
B)The abnormal balance of a revenue account is a debit.
C)The normal balance of the owner's withdrawals account is a debit.
D)The normal balance of an unearned revenues account is a credit.
E)The normal balance of the accounts receivable account is a debit.

Question 78

A debit is used to record

A)An increase in an asset account.
B)A decrease in an asset account.
C)An increase in a revenue account.
D)An increase in a liability account.
E)A decrease in the withdrawals account.

Question 79

During the month of November, Cornish Company had cash receipts of $3,500 and paid out $1,000 for expenses. The November 30th cash balance was $4,300. What was thecash balance on November 1?

A)$2,800.
B)$5,800.
C)$4,300.
D)$1,800.
E)$7,300.

Question 80

A record of all accounts used by a business is called a

A)Journal.
B)Trial balance.
C)Book of original entry.
D)General Journal.
E)Ledger.