Deck 2: Recording Business Transactions

Question 1

An account is the detailed record of the changes in a particular asset, liability, or owners' equity.

Answer 1

True

Question 2

Which of the following is NOT part of owners' equity?

A)Bills payable
B)Capital
C)Accounts receivable
D)Both A and C

Answer 2

D

Question 3

The owner's equity account is increased by a debit.

Answer 3

False

Question 4

Prepaid expenses are recorded as:

A)liabilities.
B)debits and credits.
C)assets.
D)owners' equity.

Question 5

Which of the following accounts decreases with a credit?

A)Cash
B)Accounts payable
C)Bills payable
D)Capital

Question 6

In the standard accounting system, we use double entry accounting, which means we record the dual effects of each transaction.

Question 7

Which of the following accounts is a liability?

A)Service revenue
B)Accounts payable
C)Prepaid expenses
D)Salary expense

Question 8

Which of the following accounts is an asset?

A)Expenses
B)Drawings
C)Cash
D)Bills payable

Question 9

Which of the following accounts increases with a credit?

A)Accounts receivable
B)Prepaid expenses
C)Cash
D)Capital

Question 10

Which of the following accounts is an owners' equity account?

A)Accrued liability
B)Prepaid expense
C)Capital
D)Accounts payable

Question 11

Which of the following are accrued liabilities?

A)Salary payable
B)Interest payable
C)Taxes payable
D)All of the above

Question 12

A book holding all of the accounts is called the:

A)ledger.
B)journal.
C)balance sheet.
D)income statement.

Question 13

In a typical chart of accounts, what information is provided along with the account name?

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

Question 14

Which of the following accounts is an example of a liability?

A)Bills payable
B)Service revenue
C)Building
D)Accounts receivable

Question 15

Which of the following is the detailed record of the changes in a particular asset, liability, or owners' equity?

A)Ledger
B)Account
C)Trial balance
D)Journal

Question 16

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

Question 17

A listing of all account titles in numerical order is a(n):

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

Question 18

An asset account is increased by a debit.

Question 19

A liability account is increased by a debit.

Question 20

The drawings account is increased by a debit.

Question 21

When a business records revenue earned, the revenue account is always credited.

Question 22

Which of the following accounts decreases with a debit?

A)Prepaid insurance
B)Cash
C)Land
D)Bills payable

Question 23

A business purchases equipment for cash in the amount of $8 000. Which account is credited?

A)Cash
B)Equipment
C)Supplies expense
D)Accounts payable

Question 24

A business makes a cash payment of $12 000 to an account payable. Which account is debited?

A)Service revenue
B)Cash
C)Accounts receivable
D)Accounts payable

Question 25

The accounting process of copying a transaction from the journal to the ledger is called:

A)posting.
B)footing.
C)proofing.
D)journalising.

Question 26

When a business records an expense incurred, the expense account is always credited.

Question 27

Which of the following statements about revenue is CORRECT?

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

Question 28

The first step of journalising an entry is to:

A)identify the transaction from source documents.
B)post the accounts to the ledger.
C)determine whether each account is increased or decreased.
D)record the transaction in the journal, including a brief explanation.

Question 29

Which of the following is the order of steps to journalise an entry?

A)Identify each account affected, determine increase or decrease in each account, record the transaction.
B)Determine increase or decrease in each account, identify each account affected, record the transaction.
C)Record the transaction, identify each account affected, determine increase or decrease in each account.
D)Identify each account affected, record the transaction, determine increase or decrease in each account.

Question 30

For Revenues, the category of account and its normal balance are:

A)Owners' equity and a credit balance.
B)Liabilities and a credit balance.
C)Assets and a debit balance.
D)Owners' equity and a debit balance.

Question 31

Which of the following is NOT an example of a source document?

A)Journal
B)Bank deposit slip
C)Sales invoice
D)Purchase invoice

Question 32

A business purchases equipment for cash in the amount of $8 000. Which account is debited?

A)Equipment
B)Supplies expense
C)Cash
D)Accounts payable

Question 33

A business renders service to a client and sends out a sales invoice. The amount will be collected from the customer at a later time. Which of the following would be TRUE at the time when the invoice is sent out?

A)Total liabilities will increase.
B)Owners' equity will decrease.
C)Profit will increase.
D)Total assets will decrease.

Question 34

An owner invests $20 000 in her new business by depositing the cash in the business bank account. Which account is credited?

A)Accounts receivable
B)Accounts payable
C)Cash
D)Capital

Question 35

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

Question 36

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

Question 37

The normal sequence of information flow in an accounting system is:

A)source document, journal, ledger.
B)source document, ledger, journal.
C)ledger, journal, source document.
D)journal, source document, ledger.

Question 38

Which of the following is the last step of journalising an entry?

A)Record the transaction in the journal, including a brief explanation.
B)Identify each account affected and its type.
C)Determine whether each account has increased or decreased.
D)Post the accounts to the ledger.

Question 39

Which of the following accounts increases with a debit?

A)Interest payable
B)Accounts payable
C)Capital
D)Cash

Question 40

An owner invests $20 000 in her new business by depositing the cash in the business bank account. Which account is debited?

A)Capital
B)Accounts payable
C)Accounts receivable
D)Cash

Question 41

A trial balance summarises a ledger by listing all the accounts with their ending balances.

Question 42

A journal entry for a $250 payment to purchase supplies was erroneously recorded as a debit to Supplies for $520 and a credit to Cash for $250. Which of the following statements about the trial balance is TRUE?

A)The sum of the debits will exceed the sum of the credits by $250.
B)The sum of the debits will exceed the sum of the credits by $270.
C)The sum of the credits will exceed the sum of the debits by $270.
D)The trial balance will be in balance; the sum of the credits will equal the sum of the debits.

Question 43

The trial balance shows total amounts for assets, liabilities, and equity.

Question 44

The trial balance is generally used only inside the business and is not published with the other financial statements.

Question 45

The trial balance is one of the three basic financial statements.

Question 46

A business makes a cash payment to a supplier "on credit" (for supplies which were purchased earlier). Which account is credited?

A)Supplies
B)Accounts payable
C)Service revenue
D)Cash

Question 47

Which of the following statements is TRUE?

A)A trial balance is created after the balance sheet is prepared.
B)A trial balance is in the same format as a balance sheet.
C)A trial balance presents data in debit and credit format, but a balance sheet does not.
D)A trial balance shows total amounts for assets, liabilities, and equity.

Question 48

A business collects cash from a customer in payment of accounts receivable. Which account is credited?

A)Accounts receivable
B)Supplies
C)Cash
D)Service revenue

Question 49

A journal entry for a $75 payment for Rent expense was posted as a debit to Salary expense and a credit to Cash. This error will cause which of the following conditions on the trial balance?

A)The sum of the credits will exceed the sum of the debits by $150.
B)The sum of the debits will exceed the sum of the credits by $75.
C)The sum of the credits will equal the sum of the debits.
D)The sum of the debits will exceed the sum of the credits by $150.

Question 50

A trial balance lists accounts in which order?

A)Assets, Liabilities, Owners' equity, Revenues, Expenses
B)Assets, Expenses, Liabilities, Revenues, Owners' equity
C)Assets, Revenues, Liabilities, Expenses, Owners' equity
D)Assets, Liabilities, Revenues, Expenses, Owners' equity

Question 51

The following entries were made by the accountant of Patel Pastries during its first month of operation. 1. James Patel, the owner, deposited $3 000 in the business new bank account.
2. Patel Pastries paid the first month's rent of $400 in cash.
3. Patel Pastries purchased equipment by borrowing $11 000.
4. Cash sales for the month were $4 500.
5. Patel Pastries purchased cooking supplies for $1 400 cash.
After the accountant posts these entries to the general ledger, how much are total assets?

A)$7 100
B)$16 700
C)$18 100
D)$6 100

Question 52

A business owner took a withdrawal. Which of the following would be TRUE?

A)Total assets would increase.
B)Profit would decrease.
C)Owners' equity would decrease.
D)There would be no effect on total assets.

Question 53

Which of the following is a method used to detect errors when the two columns of the trial balance are NOT equal?

A)Calculate the difference in the columns, divide the difference between total debits and total credits by 2 and search for a debit shown as a credit, or vice versa.
B)Calculate the difference in the columns and search the trial balance for a transposition error or a slide error if the difference is evenly divisible by 9.
C)Calculate the difference in the columns and search for a missing account with that balance.
D)All of the above are suggested methods for detecting errors.

Question 54

A business renders services to a customer for $16 000 on credit. Which account is credited?

A)Accounts receivable
B)Cash
C)Accounts payable
D)Service revenue

Question 55

Equipment is purchased for cash. Which of the following would be TRUE?

A)There is an increase in total assets and a decrease in total liabilities.
B)There is no effect on total assets.
C)There is an increase in total assets.
D)There is a decrease in both total assets and total liabilities.

Question 56

A business renders services to a customer for $16 000 on credit. Which account is debited?

A)Service revenue
B)Accounts payable
C)Cash
D)Accounts receivable

Question 57

Which of the following statements is FALSE?

A)A trial balance is created before the balance sheet is prepared.
B)A trial balance shows total amounts for assets, liabilities, and equity.
C)A trial balance presents data in debit and credit format, but a balance sheet does not.
D)A trial balance shows total debits and total credits.

Question 58

A business makes a cash payment of $12 000 to an account payable. Which account is credited?

A)Accounts receivable
B)Service revenue
C)Cash
D)Accounts payable

Question 59

In a trial balance, total debits are always equal to total credits.

Question 60

A business collects cash from a customer in payment of accounts receivable. Which account is debited?

A)Accounts receivable
B)Cash
C)Service revenue
D)Supplies

Question 61

On a trial balance, which accounts are listed last?

A)Expenses
B)Liabilities
C)Revenues
D)Assets

Question 62

Which of the following statements CORRECTLY describes a trial balance?

A)A trial balance is a list of all accounts with their balances.
B)A trial balance is the first step in the accounting cycle.
C)A trial balance is also known as a balance sheet.
D)A trial balance is also known as the chart of accounts.

Question 63

When is a trial balance usually prepared?

A)At the beginning of an accounting period
B)After balancing the ledger accounts
C)After financial statements are published
D)After each entry is journalised