Deck 2: Recording Business Transactions

Question 1

A payable involves a future receipt of cash.

Answer 1

False

Question 2

A liability created when a business collects cash from customers in advance of providing services or delivering goods is called a(n) ________.

A) notes receivable
B) unearned revenue
C) accrued liability
D) service revenue

Answer 2

B

Question 3

Provide an explanation for each of the follow liability accounts.

Answer 3

Question 4

Which of the following is a liability account?

A) Service Revenue
B) Building
C) Accounts Receivable
D) Unearned Revenue

Question 5

The account title used for recording the payment of rent in advance for an office building is ________.

A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense

Question 6

An accounts receivable requires the business to pay cash in the future.

Question 7

Provide an explanation for each of the following asset accounts.

Question 8

A customer's promise to pay in the future for services or goods sold is called a(n) ________.

A) Accounts Receivable
B) Accounts Payable
C) Unearned Revenue
D) Notes Payable

Question 9

Which of the following is an asset account?

A) Cash
B) Notes Payable
C) Dividends
D) Unearned Revenue

Question 10

________ represents a debt owed for renting a building currently.

A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense

Question 11

The owner's claim to the assets of a business is called equity or owner's equity.

Question 12

Which of the following is an asset account?

A) Salaries Expense
B) Accounts Payable
C) Service Revenue
D) Prepaid Expense

Question 13

A payment of an expense in advance is called a prepaid expense.

Question 14

Unearned revenue is a liability account.

Question 15

Which of the following is an asset account?

A) Wages Payable
B) Notes Payable
C) Unearned Revenue
D) Accounts Receivable

Question 16

Owner's withdrawals and expenses increase equity.

Question 17

Which is a true statement regarding the accounting equation?

A) The equation can be stated as assets minus liabilities equals equity.
B) The equation consists of three parts: assets, liabilities, and net income.
C) The equation is an optional tool for accountants to use.
D) The equation does not need to balance during a specific period.

Question 18

Which of the following is a liability account?

A) Accounts Receivable
B) Cash
C) Building
D) Notes Payable

Question 19

Liabilities are economic resources that are expected to benefit the business in the future.

Question 20

Which of the following is a liability account?

A) Accounts Payable
B) Prepaid Expense
C) Salaries Expense
D) Service Revenue

Question 21

Debit refers to the right side of the T-account, and credit refers to the left side.

Question 22

The Owner's Capital account is a separate account in the ________ category of the accounting equation.

A) equity
B) asset
C) liability
D) revenue

Question 23

A chart of accounts is a list of all of a company's accounts with their account numbers.

Question 24

Which of the following accounts decreases with a debit?

A) Accounts Receivable
B) Notes Payable
C) Cash
D) Rent Expense

Question 25

A chart of accounts provides more detail than a ledger.

Question 26

A shortened form of the ledger is called a ________.

A) trial balance
B) balance sheet
C) chart of accounts
D) T-account

Question 27

Revenues and contributions of the owner in the business increase equity.

Question 28

A listing of all accounts in numerical order is called a(n) ________.

A) Ledger
B) Journal
C) Income statement
D) Chart of accounts

Question 29

A liability account is increased by a debit.

Question 30

Which of the following is provided in a typical chart of accounts?

A) Account balance
B) Account number
C) Dates of transactions
D) Transaction amounts

Question 31

A debit always means a decrease, and a credit always means an increase.

Question 32

The system of accounting in which every transaction affects at least two accounts is called the double-entry system.

Question 33

Which of the following is the record holding all the accounts, the changes in those accounts, and their balances?

A) Source document
B) Journal
C) Ledger
D) Trial balance

Question 34

Amounts earned from delivering goods or services to customers are called ________.

A) notes receivable
B) unearned revenues
C) equity
D) revenues

Question 35

A chart of accounts is a detailed record of the changes in a particular asset, liability, or equity account during a specified period.

Question 36

Companies use a ledger to show all of the increases and decreases in each account along with their balances.

Question 37

A T-account is a summary device with credits posted on the left side of the vertical line.

Question 38

An asset account is increased by a debit.

Question 39

Nuptial Services Company paid the rent for the current month in cash. Which of the following accounts will be used to record the transaction?

A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense

Question 40

"All debits are increases and all credits are decreases." Is this a correct statement? Explain your answer.

Question 41

Accounts Receivable is a(n) ________ account and has a normal ________ balance.

A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit

Question 42

Cash is a(n) ________ account and has a normal ________ balance.

A) asset; debit
B) liability; credit
C) liability; debit
D) asset; credit

Question 43

The balances in the liability and revenue accounts are increased with a credit.

Question 44

The normal balance of an account is the increase side of the account.

Question 45

Accounts Payable is a(n) ________ account and has a normal ________ balance.

A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit

Question 46

For Office Supplies, the category of account and its normal balance is ________.

A) liabilities and a debit balance
B) assets and a debit balance
C) liabilities and a credit balance
D) assets and a credit balance

Question 47

Which one of the following account groups normally has a credit balance?

A) assets and liabilities
B) equity and assets
C) liabilities and revenues
D) assets and expenses

Question 48

The Owner's Capital account is increased by a debit.

Question 49

For Expenses, the category of account and its normal balance is ________.

A) equity and a credit balance
B) assets and a debit balance
C) assets and a credit balance
D) equity and a debit balance

Question 50

Which one of the following account groups will decrease with a debit?

A) assets and expenses
B) revenues and expenses
C) liabilities and revenues
D) assets and liabilities

Question 51

Which of the following statements is true of expenses?

A) Expenses increase equity, so an expense account's normal balance is a credit balance.
B) Expenses decrease equity, so an expense account's normal balance is a credit balance.
C) Expenses increase equity, so an expense account's normal balance is a debit balance.
D) Expenses decrease equity, so an expense account's normal balance is a debit balance.

Question 52

All asset accounts and equity accounts increase with a debit.

Question 53

The Owner's Withdrawals account is increased by a debit.

Question 54

Which of the following accounts increases with a debit?

A) Cash
B) Interest Payable
C) Accounts Payable
D) Owner, Capital

Question 55

An account that normally has a debit balance may occasionally have a credit balance.

Question 56

Which of the following accounts increases with a credit?

A) Cash
B) Owner, Capital
C) Accounts Receivable
D) Prepaid Expense

Question 57

The Salaries Payable account is a(n) ________.

A) liability account with a normal debit balance
B) asset account with a normal debit balance
C) liability account with a normal credit balance
D) asset account with a normal credit balance

Question 58

Which of the following statements is true of the Owner's Capital account?

A) It is an equity account that has a normal credit balance.
B) It is a liability account that has a normal credit balance.
C) It is a liability account that has a normal debit balance.
D) It is an equity account that has a normal debit balance.

Question 59

Which one of the following account groups normally has a debit balance?

A) assets and expenses
B) revenues and expenses
C) liabilities and revenues
D) assets and liabilities

Question 60

Which of the following accounts decreases with a credit?

A) Cash
B) Owner, Capital
C) Accounts Payable
D) Notes Payable

Question 61

Transactions are first record in a ________.

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

Question 62

In reviewing the T-account for Accounts Receivable, you find that the beginning balance is zero, the total increases are $4,900 and the total decreases are $2,400. This means that the ending balance of the account is a credit balance of $2,500.

Question 63

For Revenues, the category of account and its normal balance is ________.

A) equity and a credit balance
B) assets and a debit balance
C) assets and a credit balance
D) equity and a debit balance

Question 64

When a business records an accrued utility liability, the Utilities Expense account is credited.

Question 65

When a business makes a cash payment, the Cash account is debited.

Question 66

The Accounts Payable account of Golden Company has the following postings: Calculate the ending balance of the account.

A) $12,000 credit
B) $16,000 debit
C) $16,000 credit
D) $6,000 debit

Question 67

Source documents provide the evidence and data for accounting transactions.

Question 68

Which of the following statements is true of revenues?

A) Revenues decrease equity, so a revenue account's normal balance is a credit balance.
B) Revenues decrease equity, so a revenue account's normal balance is a debit balance.
C) Revenues increase equity, so a revenue account's normal balance is a debit balance.
D) Revenues increase equity, so a revenue account's normal balance is a credit balance.

Question 69

Debits in the journal are always posted as debits in the ledger.

Question 70

The Accounts Receivable account of Rosewood Company has the following postings: Calculate the ending balance of the account.

A) $33,000 debit
B) $27,000 debit
C) $6,000 credit
D) $21,000 debit

Question 71

In reviewing the T-account for Accounts Payable, you find that the beginning balance is zero, the total increases are $7,400 and the total decreases are $4,900. This means that the ending balance of the account is a credit balance of $2,500.

Question 72

When a business collects cash, the Cash account is debited.

Question 73

Owner's Withdrawals is a(n) ________ account that has a normal ________ balance.

A) liability; credit
B) equity; debit
C) liability; debit
D) equity; credit

Question 74

For Owner's Capital, the category of account and its normal balance is ________.

A) equity and a credit balance
B) assets and a debit balance
C) equity and a debit balance
D) assets and a credit balance

Question 75

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

Question 76

Which of the following is a source document that provides the evidence and data for accounting transactions?

A) Journal
B) Sales invoice
C) Ledger
D) Trial balance

Question 77

The T-account is a summary device that is shaped like a capital T with debits posted on the right side of the vertical line and credits posted on the left side of the vertical line.

Question 78

The T-account is a summary device that is shaped like a capital T with debits posted on the left side of the vertical line and credits posted on the right side of the vertical line.

Question 79

A compound journal entry has more than two accounts, but the total dollar value of the debits still must equal total dollar value of the credits.

Question 80

When a business records the earning of service revenue, the Service Revenue account is credited.