Deck 2: Transaction Analysis

Question 1

The Dividends account indicates an increase in common stock.

Answer 1

False

Question 2

Which of the following is NOT a business transaction?
A)The company buys land for cash.

A)The company sells goods for cash.
C)The company hires a new president.
D)The company pays a dividend to its stockholders.

Answer 2

C

Question 3

Accrued Salaries Payable is a liability account.

Answer 3

True

Question 4

A company purchased Office Supplies for cash. This transaction increased assets and:

A)increased equity.
B)increased liabilities.
C)increased revenues.
D)decreased assets.

Question 5

A record of all the changes in a particular asset, liability, or stockholders' equity during a period is called a (n):

A)transaction.
B)trial balance.
C)journal
D)account.

Question 6

The debt created by a business when it makes a purchase on account is a(n):

A) account receivable.
B) revenue.
C) prepaid expense.
D) account payable.

Question 7

A company received cash in exchange for issuing stock. This transaction increased assets and:

A)increased expenses.
B)increased revenues.
C)increased liabilities.
D)increased equity.

Question 8

Income statement data appears as revenues and expenses under Retained Earnings.

Question 9

Revenues are recorded when:

A)the company signs a contract.
B)work is begun on the job.
C)cash is received from the customer.
D)the work is completed on the job, whether or not the cash is received.

Question 10

Transactions affecting Stockholders' Equity include:

A)sale of common stock and payment of expenses.
B)revenues and purchase of supplies on account.
C)purchase of land and a sale on account.
D)payment of a liability and payment of expenses.

Question 11

Any event that has a financial impact on the business and can be measured reliably is a(n):

A)income statement.
B)transaction.
C)asset.
D)journal.

Question 12

A company performed services for a customer on account. This transaction increased assets and:

A)decreased equity.
B)increased liabilities.
C)increased expenses.
D)increased revenues

Question 13

The rules for recording accounting transactions do NOT include which of the following?

A)Every transaction's net amount on the left side of the equation must equal the net amount on the right side.
B)Both sides of the accounting equation must be affected.
C)Every transaction affects the financial statements of the business.
D)Total assets must always equal total liabilities plus total equity.

Question 14

Which of the following is NOT an asset account?

A)Accounts Receivable
B)Prepaid Rent
C)Common Stock
D)All of these are asset accounts.

Question 15

A business transaction has occurred when:

A)an event affects the entity's financial position.
B)the event can be reliably measured.
C)the accountant determines that the event is important enough to be a business transaction.
D)both A and B occur.

Question 16

A company paid cash for employee wages. This transaction:

A)increased cash and increased expenses.
B)increased cash and decreased expenses.
C)decreased cash and increased expenses.
D)decreased cash and decreased revenues.

Question 17

The purchase of office equipment for cash would increase both an asset and a liability account.

Question 18

When a business makes a sale on account, the asset created is a(n):

A)revenue.
B)expense.
C)account receivable.
D)account payable.

Question 19

Goods purchased on account for future use in the business, such as Office Supplies, are called:

A)Accrued liabilities.
B)Prepaid expenses.
C)Revenues.
D)Expenses.

Question 20

Prepaid expense accounts appear on:

A)the Income Statement.
B)the Balance Sheet.
C)the Statement of Retained Earnings and on the Income Statement.
D)both the Income Statement and Balance Sheet.

Question 21

The payment of salaries to employees would:

A)increase assets and increase liabilities.
B)decrease net income and decrease assets.
C)increase liabilities and increase net income.
D)decrease assets and increase liabilities.

Question 22

Which type of account is increased when a company records an increase in debt?

A)Expense
B)Retained earnings
C)Liability
D)None of the above

Question 23

Which type of account is decreased when a company pays its employees with cash?

A)A liability
B)A prepaid asset
C)An asset
D)Owners' equity

Question 24

A company paid cash for an amount owed to a creditor. This transaction decreased cash and:

A)decreased revenues.
B)decreased liabilities.
C)decreased expenses.
D)increased expenses.

Question 25

Notes payable, accounts payable, taxes payable and salaries payable are all examples of:

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

Question 26

The payment of an amount owed to a creditor would:

A)decrease assets.
B)increase net income.
C)decrease liabilities.
D)both decrease assets and decrease liabilities.

Question 27

Borrowing money from the bank by signing a note payable would:

A)increase stockholders' equity.
B)have no effect on stockholders' equity.
C)decrease liabilities.
D)increase net income.

Question 28

Which of the following business events would NOT be recorded in a company's accounting records?

A)The company paid a monthly utility bill of $1,000.
B)The company issued 100 shares of common stock for $75,000.
C)The company purchased two acres of land for future plant expansion for $600,000.
D)The company signed a contract to provide services in the next accounting period for $125,000.

Question 29

Receiving a payment from a customer on account would:

A)increase stockholders' equity.
B)have no effect on total assets.
C)increase stockholders' equity.
D)decrease liabilities.

Question 30

If a person starting a business had an investment of a building, valued at $300,000 with an $180,000 outstanding mortgage and issued stock for the balance, the effect would be to:

A)increase assets by $120,000.
B)increase assets by $180,000.
C)increase stockholders' equity by $120,000.
D)increase stockholders' equity by $300,000.

Question 31

What type of account is prepaid insurance?

A)A liability
B)An expense
C)Stockholders' equity
D)An asset

Question 32

Which of the following accounts are a standard component of stockholders' equity?

A)Prepaid Expenses
B)Dividends
C)Additional Paid In Stock
D)Unearned Income

Question 33

Paying a utility bill as soon as it was received would:

A)increase expenses.
B)increase liabilities.
C)increase owners' equity.
D)decrease revenues.

Question 34

Consider the following transactions: I. Borrowed cash on a note payable, $80,000
II) Provided services on account, $10,000
III) Received cash from a customer as payment on account, $8,000
IV) Received a utility bill, $1,200
Total assets would be:

A)$96,800.
B)$88,000.
C)$90,000.
D)$98,000.

Question 35

All of the following accounts would be considered assets EXCEPT for:

A)Cash.
B)Retained earnings.
C)Prepaid expenses.
D)Notes receivable.

Question 36

Which of the following transactions would increase total assets? I. Borrowed cash on a note payable, $80,000
II) Provided services on account, $10,000
III) Received cash from a customer as payment on account, $8,000
IV) Received a utility bill, $1,200

A)I and II
B)I and III
C)I, II, and III
D)All of these answers are correct.

Question 37

The purchase of land for cash would:

A)increase total assets.
B)decrease stockholders' equity.
C)increase the total debits on the trial balance.
D)have no effect on total assets.

Question 38

The owner of a business paid cash from his personal checking account to purchase an automobile for his personal use. This transaction:

A)increased a liability account and increased liabilities.
B)decreased cash and increased expenses.
C)increased assets and increased owners' equity.
D)is not a transaction recognized by the business.

Question 39

When a company performs a service and immediately collects the cash from the customer, which of the following would occur?

A)Stockholders' equity would decrease.
B)Assets would decrease.
C)Expenses would decrease.
D)Net income would increase.

Question 40

Purchasing supplies on account would:

A)increase total assets and decrease total liabilities.
B)increase total liabilities and decrease total assets.
C)increase total assets and increase total liabilities.
D)increase total liabilities and increase stockholders' equity.

Question 41

Consider the following transactions: I. Owners invested $8,000 cash to begin the business
II) Provided services for cash, $6,000
III) Provided services on account, $4,000
IV) Paid cash for expenses, $7,500
How much net income did the business have?

A)$ 2,500
B)$ 4,500
C)$ 6,500
D)$10,500

Question 42

Performing services on account would:

A)decrease both assets and liabilities.
B)increase assets and decrease stockholders' equity.
C)decrease revenues and decrease stockholders' equity.
D)increase net income and stockholders' equity.

Question 43

The amount remaining in an account is called its balance.

Question 44

If Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash, what is the company's net income for the month?

A)$8,000
B)$5,000
C)$3,000
D)None of the above

Question 45

The left hand side of a T account is the debit side and the right hand side is the credit side.

Question 46

To compute ending retained earnings on the Statement of Retained Earnings:

A)net income is added to the beginning retained earnings and dividends are subtracted from the beginning retained earnings.
B)net income and dividends are both added to beginning retained earnings
C)net loss and dividends are both added to beginning retained earnings
D)net income or net loss does not affect retained earnings.

Question 47

All of the statements are true about the income statement EXCEPT the income statement:

A)data appears as revenues and expenses under Retained Earnings.
B)reports revenues and expenses.
C)reports a net income or a net loss.
D)is as of a specific date and not a period of time.

Question 48

Consider the following transactions: I. Owners invested $8,000 cash to begin the business
II) Provided services for cash, $6,000
III) Provided services on account, $4,000
IV) Paid cash for expenses, $7,500
How much cash does the business have?

A)$ 2,500
B)$ 4,500
C)$ 6,500
D)$10,500

Question 49

Double-entry accounting records only those transactions affecting the income statement.

Question 50

The Balance Sheet lists:

A)assets, liabilities, and revenues.
B)revenues and expenses.
C)assets, liabilities, and stockholders' equity.
D)dividends and assets.

Question 51

Accounts are records of increases and decreases in individual financial statement items.

Question 52

The left side of a T-account is always the:

A)increase side.
B)decrease side.
C)debit side.
D)credit side.

Question 53

Every business transaction involves both debits and credits.

Question 54

An account with a normal debit balance indicates that the account is a liability account.

Question 55

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. The amount of stockholders' equity at the end of the period is:

A)$60,000.
B)$80,000.
C)$140,000.
D)none of the above.

Question 56

Consider the following transactions: I. Borrowed cash on a note payable, $80,000
II) Provided services on account, $10,000
III) Received cash from a customer as payment on account, $8,000
IV) Received a utility bill, $1,200
Total liabilities would be:

A)$1,200.
B)$81,200.
C)$98,000.
D)$80,000.

Question 57

The collection of cash from a cash sale would:

A)increase assets and stockholders' equity.
B)increase assets and decrease liabilities.
C)decrease assets and increase net income.
D)have no effect on net income or stockholders' equity.

Question 58

Which of the following statements regarding T accounts is FALSE?

A)The account title appears at the top of the T account.
B)The right side is the debit side.
C)The right side is the credit side.
D)T accounts are a useful tool in accounting.

Question 59

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. What is the amount of total assets?

A)$80,000
B)$78,000
C)$88,000 D None of the above

Question 60

Cash dividends paid to the stockholders will:

A)increase assets and decrease liabilities.
B)increase assets and increase liabilities.
C)have no effect on stockholders' equity or revenues.
D)decrease assets and decrease stockholders' equity.

Question 61

Accounting transactions are initially recorded in the:

A)T-account.
B)ledger.
C)journal.
D)financial statements.

Question 62

A chronological record (or history)of an entity's transactions is called a:

A)T-account.
B)ledger.
C)journal.
D)financial statements.

Question 63

Increases in stockholders' equity that result from delivering goods or services to customers are:

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

Question 64

What is the first step in the journalizing process?

A)Record the transaction in the journal.
B)Post the transaction to the ledger.
C)Determine whether each account is increased or decreased by the transaction.
D)Specify each account affected by the transaction and classify each account by type.

Question 65

Which statement is NOT true?

A)A credit increases a liability account.
B)A debit increases an asset account
C)Revenues are increased by a debit.
D)Expenses are increased by a debit.

Question 66

Which accounts are increased by debits?

A)Assets and owners' equity
B)Expenses and owners' equity
C)Assets, expenses and dividends
D)Assets, expenses and owners' equity

Question 67

A business purchases a truck by signing a note payable to the seller. This transaction would include a:

A)credit to Truck.
B)debit to Note Payable.
C)credit to Note Payable.
D)debit to Prepaid Maintenance.

Question 68

An account will have a debit balance if:

A)the amount of the credits exceeds the amount of the debits.
B)the amount of the debits exceeds the amount of the credits.
C)the account has more debit entries than credit entries.
D)it is a liability account.

Question 69

Decreases in stockholders' equity that are due to the cost of operating the business are:

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

Question 70

Transactions affecting stockholders' equity include:

A)common stock, revenues, expenses and collection of an account receivable.
B)retained earnings, revenues, expenses, and liabilities.
C)common stock, revenues, expenses, dividends and retained earnings.
D)common stock, retained earnings, revenues and assets.

Question 71

An account is increased by a debit and has a normal balance of a debit. This account is:

A)an expense account.
B)a liability account.
C)an asset account.
D)both an expense account and an asset account.

Question 72

The process of recording a transaction in the journal is called:

A)posting.
B)summarizing.
C)journalizing.
D)preparing the financial statements.

Question 73

The process of copying the information from the journal to the ledger is called:

A)posting.
B)summarizing.
C)journalizing.
D)preparing the financial statements.

Question 74

The proper order for the accounting process is:

A)posting, transaction occurs, journalizing.
B)transaction occurs, posting, journalizing.
C)transaction occurs, transaction analyzed, journalizing, and posting.
D)transaction occurs, posting, transaction analyzed, journalizing.

Question 75

Which of the following items would NOT be included in the journal entry for a transaction?

A)The source documents initiating the transaction
B)The date the accounting transaction was entered
C)The titles of the accounts debited
D)The dollar amount credited

Question 76

Which statement about the journal is NOT true?

A)The journal lists transactions in chronological order.
B)The journal entry lists debits before credits.
C)The journal entry shows a complete transaction in one place.
D)The journal entry shows the balance in each account.

Question 77

Which of the following statements regarding accounts is TRUE?

A)An asset is increased by a debit and decreased by a credit.
B)Dividends are decreased by debits and increased by credits.
C)A liability is increased by a debit and decreased by a credit.
D)Revenue is increased by a debit; an expense is increased by a credit.

Question 78

The credit side of an account:

A)is the left side of the account.
B)depends on whether the account is an asset or liability.
C)is the right side of the account.
D)can change as needed.

Question 79

Accounts are listed in the ledger:

A)alphabetically.
B)chronologically.
C)in random order.
D)in the same order as they appear on the financial statements.

Question 80

A listing of all of the accounts that make up the ledger is called the:

A)T-account.
B)ledger.
C)journal.
D)chart of accounts.