Deck 3: The Accounting Cycle: The Mechanics of Accounting

Question 1

Which of the following is NOT a step in the accounting cycle?

A) Recording the effects of transactions
B) Summarizing the effects of transactions
C) Forecasting sales
D) Preparing reports

Answer 1

C

Question 2

Which of the following is NOT an advantage of a computerized accounting system over a manual accounting system?

A) A computerized system is faster.
B) A computerized system is more accurate once the data is correctly entered.
C) Data can be managed more easily in a computerized system.
D) A computerized system can analyze the information for decision making.

Answer 2

D

Question 3

If a company purchased a building with a cash down payment and the balance with a loan, the accounting equation will show a(n)

A) Decrease in assets and increase in liabilities
B) Increase in assets and increase in liabilities
C) Increase in assets and decrease in liabilities
D) Decrease in assets and decrease in liabilities

Answer 3

B

Question 4

Which of the following would usually NOT happen in a single transaction?

A) Increase assets, decrease liabilities
B) Increase assets, increase liabilities
C) Increase liabilities, decrease owners' equity
D) Decrease assets, decrease owners' equity

Question 5

Liability accounts are increased

A) By debits
B) By credits
C) On the left side
D) Below the balance line

Question 6

If a company purchased equipment by borrowing money, the accounting equation would show a(n)

A) Increase in assets and decrease in assets
B) Decrease in liabilities and increase in assets
C) Increase in assets and increase in liabilities
D) Decrease in liabilities and decrease in assets

Question 7

The purchase of supplies with cash would show a(n)

A) Increase in assets and decrease in assets
B) Decrease in liabilities and increase in assets
C) Increase in assets and increase in liabilities
D) Decrease in liabilities and decrease in assets

Question 8

Which of the following is NOT a reason that business documents are used in a business?

A) To confirm that a transaction has occurred
B) To facilitate the analysis of business transactions
C) To forecast sales
D) To establish the amounts to be recorded

Question 9

If a company issues stock for cash, the accounting equation will show a(n)

A) Increase in liabilities and decrease in owners' equity
B) Decrease in liabilities and decrease in owners' equity
C) Decrease in assets and increase in owners' equity
D) Increase in assets and increase in owners' equity

Question 10

Which of the following steps is normally first in the accounting cycle?

A) Transactions are journalized.
B) Journal accounts are posted.
C) A trial balance is prepared.
D) Business documents are analyzed.

Question 11

Business documents are used as records of transactions and as the basis for accounting entries. Which of the following is NOT a business document?

A) Sales invoice
B) Check stubs
C) Receipts
D) General ledger

Question 12

The basic accounting equation is

A) Assets = Liabilities + Owners' Equity
B) Assets + Owners' Equity = Liabilities
C) Assets + Liabilities = Owners' Equity
D) Liabilities - Owner's Equity = Assets

Question 13

Owners' equity accounts are decreased with

A) Debit entries
B) Credit entries
C) Liabilities
D) Assets

Question 14

The basic accounting equation

A) Is out of balance after each journal entry
B) Should always balance
C) Is balanced only at the end of the period with closing entries
D) Is balanced only at the end of the period with adjusting entries

Question 15

Which of the following types of entries would NOT usually be made?

A) A credit to an asset account, a debit to a liability account
B) A debit to an asset account, a credit to a liability account
C) A debit to an asset account, a credit to an owners' equity account
D) A debit to an asset account, a debit to a liability account

Question 16

An entry to the left side of an account is always called a(n)

A) Debit
B) Credit
C) Increase
D) Decrease

Question 17

The purchase of supplies on account

A) Increases assets and decreases liabilities
B) Decreases assets and increases liabilities
C) Increases assets and increases liabilities
D) Decreases assets and decreases liabilities

Question 18

If a company paid off a loan, the accounting equation would show a(n)

A) Increase in assets and decrease in liabilities
B) Decrease in assets and decrease in liabilities
C) Increase in liabilities and decrease in assets
D) Increase in assets and increase in liabilities

Question 19

If a company purchased equipment for cash, the accounting equation would show a(n)

A) Increase in assets and decrease in assets
B) Decrease in liabilities and increase in assets
C) Increase in liabilities and increase in assets
D) Decrease in liabilities and decrease in assets

Question 20

Borrowing money from a bank

A) Increases assets and decreases liabilities
B) Increases liabilities and decreases assets
C) Decreases assets and decreases liabilities
D) Increases assets and increases liabilities

Question 21

Which of the following accounts is decreased with a debit?

A) Rent Expense
B) Retained Earnings
C) Equipment
D) Accounts Receivable

Question 22

When accounts receivable are collected,

A) Total assets are increased
B) Total assets are decreased
C) Total assets remain constant
D) Owners' equity increases

Question 23

When a note payable is given to settle an existing account payable,

A) There is no net change in assets, liabilities, or owners' equity
B) Net assets are increased
C) Net liabilities are increased
D) Net owners' equity is increased

Question 24

The supplies expense account

A) Normally has a credit balance
B) Is increased with a credit entry
C) Is increased with a debit entry
D) Is decreased with a debit entry

Question 25

Revenue accounts are

A) Increased with debit entries
B) Assets
C) Increased with credit entries
D) Subtracted from capital stock

Question 26

An entry to the right side of an account is called a(n)

A) Increase
B) Credit
C) Debit
D) Decrease

Question 27

Which of the following groups of accounts have a normal debit balance?

A) Revenues and Liabilities
B) Owners' Equity and Assets
C) Liabilities and Expenses
D) Assets and Expenses

Question 28

Expense and revenue accounts can be considered to be subcategories of

A) An asset account
B) A liability account
C) An owners' equity account
D) None of these are correct

Question 29

Usually, when accounts receivable are collected, an asset is debited and

A) Another asset is debited
B) Another asset is credited
C) A liability is debited
D) A liability is credited

Question 30

When equipment is purchased with a cash down payment and a signed note for the balance, the net effect will be

A) Only an increase in assets
B) Only a decrease in liabilities
C) Only a decrease in assets
D) Both an increase in assets and an increase in liabilities

Question 31

Which of the following accounts would normally NOT have a credit balance?

A) Accounts Payable
B) Cost of Goods Sold
C) Sales Revenue
D) Retained Earnings

Question 32

Which of the following is true?

A) Assets + liabilities = owners' equity
B) Credits = assets
C) Debits = credits
D) Assets = liabilities - owners' equity

Question 33

The debit and credit analysis of a transaction normally takes place

A) When the entry is posted to a subsidiary ledger
B) When the entry is recorded in a journal
C) When the trial balance is prepared
D) When the financial statements are prepared

Question 34

The capital stock account is

A) Increased with a debit
B) Increased with a credit
C) Decreased with a credit
D) None of these are correct

Question 35

Which of the following is true of the cash account?

A) It normally has a credit balance.
B) It is increased with credit entries.
C) It is an owners' equity account.
D) It is increased with debit entries.

Question 36

The inventory account is increased by

A) Credits
B) Debits
C) Either credits or debits
D) Neither credits nor debits

Question 37

Expense accounts

A) Are increased with credit entries
B) Are increased with debit entries
C) Normally have credit balances
D) Are closed to the capital stock account

Question 38

Revenues

A) Decrease assets
B) Decrease owners' equity
C) Increase liabilities
D) Increase owners' equity

Question 39

Owners' equity accounts are increased by

A) Debits
B) Expenses
C) Credits
D) The payment of dividends

Question 40

The dividends account

A) Is increased with a credit entry
B) Is decreased with a debit entry
C) Normally has a credit balance
D) Normally has a debit balance

Question 41

A chronological listing of all economic transactions is maintained in a company's

A) Work sheets
B) Ledgers
C) Journals
D) Balance sheets

Question 42

A credit sale of merchandise for a price that exceeds the cost of the merchandise

A) Increases net assets and increases liabilities
B) Decreases net assets and increases revenues
C) Increases liabilities and increases revenues
D) Increases net assets and increases revenues

Question 43

As of June 1, Mega Corporation had total assets of $79,500. During June, the company had the following transactions: After these transactions have been recorded, Mega would have total assets of

A) $100,800
B) $100,050
C) $91,200
D) $104,250

Question 44

The entry to record the payment of a note with interest usually includes a

A) Debit to Cash
B) Credit to Note Payable
C) Debit to Interest Expense
D) Credit to Note Receivable

Question 45

The following are all essential parts of the journal entry except

A) A brief explanation
B) The date
C) A debit entry
D) The journal entry number

Question 46

Miles Motor Supplies had the following transactions during December: As a result of these transactions, at year-end, liabilities and owners' equity would show a total

A) Decrease by $4,575
B) Decrease by $4,200
C) Decrease by $4,800
D) Increase by $13,425

Question 47

On May 1, James Corporation had total assets of $877,000. During May, the company completed the following transactions: After these transactions were recorded, total assets would have a balance of

A) $963,200
B) $961,700
C) $963,000
D) $945,700

Question 48

On June 30, the balances in the General Ledger accounts of Pancho Company resulted in the following totals:

Question 49

Assuming no other changes except a decrease in assets of $20,000, increase in liabilities of $10,000, and expenses of $60,000, by how much did owners' equity increase or decrease and what were revenues for the period?

A) Owners' equity increased $30,000; revenues were $90,000
B) Owners' equity decreased $30,000; revenues were $30,000
C) Owners' equity increased $10,000; revenues were $70,000
D) Owners' equity decreased $10,000; revenues were $70,000

Question 50

Which of the following types of accounts have a normal debit balance?

A) Assets and Expenses
B) Liabilities and Dividends
C) Revenues and Liabilities
D) Owners' Equity and Dividends

Question 51

Assuming that capital stock increased $5,000, net income was $100,000, and dividends were $120,000, if total assets increased by $25,000, what was the change in liabilities?

A) Liabilities increased $40,000
B) There was no change in liabilities
C) Liabilities decreased $10,000
D) The answer cannot be determined from the data given

Question 52

A book of original entry is called a

A) Journal
B) Ledger
C) Trial balance
D) Check register

Question 53

When cash dividends are paid,

A) Assets are decreased and liabilities are decreased
B) Assets are increased and owners' equity is increased
C) Assets are decreased and owners' equity is increased
D) Assets are decreased and owners' equity is decreased

Question 54

Which of the following is the correct format for journalizing transactions?

A)
$\begin{array} { l r } \text { Debit } & \mathrm { xxx } \\\text { Credit } & \mathrm { xxx }\end{array}$
B)
Debit $\quad \mathrm { xxx }$
Credit $\quad \mathrm { xxx }$
C)
Credit $\quad \mathrm { xxx }$
Debit $\quad \mathrm { xxx }$
D)
$\begin{array} { l } \text { Debit } \quad \mathrm { xxx } \\\text { Credit } \quad \mathrm { xxx } \\\end{array}$

Question 55

During March, Randolph Corporation completed the following transactions: As a result of these transactions, Randolph's total assets would

A) Increase by $56,000
B) Increase by $40,100
C) Increase by $35,900
D) Increase by $20,100

Question 56

A company's retained earnings balance would decrease by

A) The declaration and payment of dividends
B) Sales
C) Investments by owners
D) Net income

Question 57

Transactions are typically entered into the General Journal in which order?

A) Alphabetically by account
B) By account number, lowest to highest
C) By dollar amount, lowest to highest
D) By transaction date

Question 58

Which of the following is NOT usually part of an entry in the General Journal?

A) Account numbers for the debit and credit entry
B) Account titles for the debit and credit entry
C) The transaction date
D) An explanation of the transaction

Question 59

During the period, Williams Company completed the following transactions: As a result of these transactions, Williams Company's total assets would

A) Increase by $19,800
B) Increase by $45,600
C) Increase by $16,800
D) Increase by $14,400

Question 60

Which of the following types of accounts are affected when a company pays cash dividends to its shareholders?

A) Owners' equity only
B) Both assets and liabilities
C) Both liabilities and owners' equity
D) Both assets and owners' equity

Question 61

Cost of Goods Sold is what type of account?

A) Expense
B) Asset
C) Liability
D) Revenue

Question 62

On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the purchase of inventory on July 24 is

A)
$\begin{array} { c c } \text { Inventory } & 4,000 \\\text { Cash } & 4,000\end{array}$
B)
$\begin{array} { c c } \text { Accounts Payable } & 4,000 \\\text { Inventory } & 4,000\end{array}$
C)
$\begin{array} { l l l } \text { Inventory } & 4,000 & \\\text { Accounts Payable } & & 4,000\end{array}$
D)
Cash $\quad 4,000$
Inventory $\quad 4,000$

Question 63

Northwest Company received and immediately paid a $4,000 utility bill from Green River Gas and Electric Company. The entry by Green River Gas and Electric Company to record receipt of the payment would include

A) A credit to Accounts Payable
B) A debit to Cash
C) A credit to Utilities Expense
D) A credit to Accounts Payable and a debit to Cash

Question 64

Which of the following is the correct order for preparing a journal entry?

A) Identify which accounts are involved; For each account, determine if it is increased or decreased; For each account, determine by how much it has changed
B) For each account, determine if it is increased or decreased; For each account, determine by how much it has changed; Identify which accounts are involved
C) For each account, determine if it is increased or decreased; Identify which accounts are involved; For each account, determine by how much it has changed
D) Identify which accounts are involved; For each account, determine by how much it has changed; For each account, determine if it is increased or decreased

Question 65

Each account is assigned a number. This systematic listing of all accounts is called a

A) Trial Balance
B) General Journal
C) General Ledger
D) Chart of Accounts

Question 66

Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by Jeri Co. to record the transaction would include

A) A credit to Cash
B) A credit to Inventory
C) A debit to Sales Revenue
D) A credit to Notes Receivable

Question 67

On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the payment to the supplier on February 20is

A)
$\begin{array}{cc}\text { Accounts Payable } & 3,600 \\\text { Inventory } & 3,600\end{array}$
B)
Cash $\quad 3,600$
Accounts Payable $\quad 3,600$
C)
$\begin{array} { c r } \text { Accounts Payable } & 3,600 \\\text { Cash } & 3,600\end{array}$
D)
$\begin{array}{rr}\text { Cost of Goods Sold } & 3,600 \\\text { Accounts Payable } & 3,600\end{array}$

Question 68

Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off the loan plus $100 interest. The correct entry to record the August 31 payment of the loan plus interest is

A)
$\begin{array}{lr}\text { Cash } & 4,000 \\\text { Interest Expense } & 100\\\text { Notes Payable }&4,100\end{array}$
B)
$\begin{array} { l c } \text { Notes Payable } & 4,000 \\\text { Interest Expense } & 100 \\\text { Cash } & 3,900\end{array}$
C)
$\begin{array} { l r l } \text { Cash } & 4,000 & \\\text { Notes Payable } & 100 & \\\text { Interest Expense } & & 4,100\end{array}$
D)
$\begin{array} { c c } \text { Notes Payable } & 4,000 \\\text { Interest Expense } & 100 \\\text { Cash } & 4,100\end{array}$

Question 69

On July 24, Barkdull Inc. purchased $4,000 of inventory on account. On August 3, Barkdull, sold $2,000 of inventory for $1,000 cash and $2,000 on credit. The correct entry by Barkdull Inc. to record the sale of inventory or August 3 is

A) Cash 3,000 Sales Revenue 3,000
Cost of Goods Sold 2,000
Inventory 2,000
B) Cash 1,000 Accounts Receivable 2,000
Sales Revenue 3,000
Cost of Goods Sold 2,000
Inventory 2,000
C) Cost of Goods Sold 3,000 Sales Revenue 3,000
Accounts Receivable 2,000
Inventory 2,000
D) Cash 1,000 Accounts Receivable 2,000
Inventory 3,000
Cost of Goods Sold 2,000
Sales Revenue 2,000

Question 70

The accounting record where all accounts are posted and summarized is the

A) General Ledger
B) General Journal
C) Balance sheet
D) Posting reference

Question 71

On December 31, Scott Corporation paid shareholders a $13,000 cash dividend. The entry by Scott Corporation to record the transaction would include

A) A debit to Cash
B) A credit to Dividends
C) A debit to Dividends
D) A debit to Capital Stock

Question 72

A journal entry that includes more than two accounts is called a(n)

A) simple journal entry
B) compound journal entry
C) complex journal entry
D) essential journal entry

Question 73

Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the purchase of equipment is

A)
$\begin{array} { l r l } \text { Cash } & 20,000 \\\text { Equipment } & 20,000\end{array}$
B)
Equipment $\quad 20,000$
Accounts Payable $\quad 20,000$
C)
$\begin{array} { c r } \text { Equipment } & 20,000 \\\text { Cash } & 20,000\end{array}$
D)
$\begin{array}{cc}\text { Accounts Payable } & 20,000 \\\text { Equipment } & 20,000\end{array}$

Question 74

On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000 on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The entry by Bennion Company to record the transaction on May 16 would include

A) A credit to Cash
B) A debit to Inventory
C) A credit to Sales Revenue
D) A credit to Cost of Goods Sold

Question 75

Solo Company borrowed $4,000 from National City Bank on June 1. On August 31, Solo Company paid off the loan plus $100 interest. The correct entry to record the borrowing transaction on June 1 is

A)
$\begin{array} { c c c } \text { Payable } & 4,000 & \\\text { Cash } & 4,000\end{array}$
B)
$\begin{array}{cc}\text { Notes Payable } & 4,100 \\\text { Cash } & 4,100\end{array}$
C)
$\begin{array}{ll}\text { Cash } & 4,000 \\\quad \text { Notes Payable } &4,000\end{array}$
D)
Cash $\quad 4,100$
Notes Payable $\quad 4,100$

Question 76

Deano Inc. purchased $27,000 of merchandise from Jeri Co. by making a 25 percent cash down payment and signing a 90-day note for the balance. The cost of the merchandise to Jeri Co. was $22,000. The entry by Deano Inc. to record the transaction would

A) Increase total assets
B) Decrease total liabilities
C) Decrease total assets
D) Decrease total owners' equity

Question 77

On January 25, Blayne Corporation bought merchandise from a supplier for $3,600 on account. On February 20, Blayne paid the $3,600 owed to the supplier. The correct entry to record the purchase on January 25 is

A)
$\begin{array}{lc}\text { Cost of Goods Sold } & 3,600 \\\text { Inventory } & 3,600\end{array}$
B)
$\begin{array} { c c } \text { Accounts Payable } & 3,600 \\\text { Inventory } & 3,600\end{array}$
C)
Inventory $\quad 3,600$
Cost of Goods Sold $\quad 3,600$
D)
Inventory $\quad 3,600$
Accounts Payable $\quad 3,600$

Question 78

On May 16, Bennion Company, sold $50,000 of inventory to Bonaccorsi, Inc. for $10,000 cash and $60,000 on credit. On June 10, Bonaccorsi, Inc. paid Bennion Company cash for the $60,000 credit sale. The correct entry by Bennion Company to record the payment on June 10 is

A)
Cash $\quad 60,000$
Accounts Receivable $\quad 60,000$
B)
Cash $\quad 60,000$
Sales Revenue $\quad 60,000$
C)
Cost of Goods Sold $\quad 60,000$
Sales Revenue $\quad 60,000$
D)
$\begin{array} { c r } \text { Accounts Receivable } & 60,000 \\\text { Cash } & 60,000\end{array}$

Question 79

On November 15, Roach Company issued 300 new shares of stock. Shareholders paid $25 for each share of stock. The correct entry to record the issue of stock on November 15 is

A)
Cash $\quad 7,500$
Capital Stock $\quad 7,500$
B)
$\begin{array} { c r } \text { Capital Stock } & 7,500 \\\text { Cash } & 7,500\end{array}$
C)
Cash $\quad 300$
Capital Stock $\quad 300$
D)
$\begin{array} { c c } \text { Capital Stock } & 300 \\\text { Cash } & 300\end{array}$

Question 80

A trial balance shows that

A) No transactions have been omitted
B) All transactions have been properly recorded
C) Journal entries have not been posted to the wrong accounts
D) Total debits equals total credits