Deck 2: The Accounting Information System

Question 1

A debit entry increases assets and revenue accounts.

Answer 1

False

Question 2

Under the double-entry system of accounting,a debit is always a negative entry.

Answer 2

False

Question 3

The time period assumption assumes that a company prepares its financial statements every month.

Answer 3

False

Question 4

The term used to refer to an asset's original cost is book value.

Question 5

Income statement accounts have normal credit balances.

Question 6

The issuance of common shares increases both a company's assets and shareholders' equity.

Question 7

The initial step in the recording process is sometimes referred to as journalizing.

Question 8

GAAP established a universal chart of accounts that is applicable to all businesses in Canada.

Question 9

A company in the process of liquidation is considered to be under the going-concern assumption.

Question 10

According to the historical cost principle,assets are always carried at their current market value.

Question 11

Under the double-entry system of accounting,every transaction is entered in at least two accounts on opposite sides of a T-account.

Question 12

A T-account for cash cannot contain any credits.

Question 13

The International Accounting Standards Board (IASB)was created in order to develop worldwide accounting standards that are required for all financial statements,regardless of what country the financial statements are prepared in.

Question 14

The payment of a dividend increases both cash and shareholders' equity of the distributing entity.

Question 15

The dividends account has a normal debit balance.

Question 16

Because it tends to provide the most reliable measure of activity,all assets are reported on the balance sheet at their fair market values.

Question 17

A chart of accounts is prepared to determine whether the books have gotten out of balance.

Question 18

The going-concern assumption infers that a company will continue to operate into the near future.

Question 19

An accounting transaction may impact only a single financial statement or multiple statements.

Question 20

The accounting equation must balance before and after every accounting transaction.

Question 21

Information is _____________ if it adds either predictive or confirmatory value.

Question 22

The general ledger is an example of a book of original entry.

Question 23

____________________ is the quality of accounting information that makes it dependable in representing the events that it purports to represent.

Question 24

If a company performed services for credit,then the debit side of the journal entry would be to accounts payable and the credit would be to service revenue.

Question 25

A full disclosure policy stipulates that all information that would make a difference to financial statement users should be revealed.

Question 26

____________________ is the quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences.

Question 27

The concept that assumes that an entity is NOT in the process of bankruptcy is called the ___________ concept.

Question 28

The __________________ includes the procedures used to transform the results of a company's activities into financial statements.

Question 29

If a company made a payment on account,then assets and liabilities would both decrease.

Question 30

A trial balance is the listing of each active account and its corresponding debit or credit balance at a particular point in time.

Question 31

____________________ is the capacity of information to make a difference in a decision by helping make timely predictions or provide timely feedback.

Question 32

____________________ is the magnitude of an omission or misstatement in accounting information that will influence the decision of someone relying on the information.

Question 33

The purchase of office supplies from a supplier is an example of an external event.

Question 34

Even though a trial balance reveals that the debits equal the credits,there may still be errors in the company's books.

Question 35

When preparing the financial statements,the accountant must estimate the balances of certain accounts.When two possible estimates are available and when these estimates are about equally likely,the accountant's prudent reaction is to select the least optimistic estimate in terms of the recorded amounts of assets or income statement accounts.This is referred to as the principle of ____________________.

Question 36

The conservatism principle is concerned with the possibility of understating assets or income.

Question 37

The concept that assumes that assets are recorded at the amount to acquire them is called the ____________________ principle.

Question 38

The general ledger is often used for the initial recording of repetitive transactions.

Question 39

The various rules and conventions that have evolved over time to guide the preparation of financial statements in Canada are called ____________________.

Question 40

Only events that can be measured with sufficient reliability will be recognized in the accounting system.

Question 41

A revenue account has a normal ___________ balance.

Question 42

Borrowing from the bank in order to acquire computer equipment for $1,500 has the effect of increasing both assets and ____________________.

Question 43

The ___________________ is a chronological record of all transactions entered into by a business.

Question 44

The ____________________ principle says that assets of a company are initially recorded at their original cost.

Question 45

The ____________________ is the file or book that contains all of the company's accounts.

Question 46

Credits are always on the ____________________ side of a T-account.

Question 47

For liabilities,shareholders' equity,and revenue accounts,debits will _____________ the account balance.

Question 48

If a law firm provides services on account for its clients,both ____________________ and retained earnings will increase.

Question 49

The issuance of common shares increases both ____________________ and shareholders' equity.

Question 50

The ____________________ side,or left side,of a liability account is used to record decreases in the account balance.

Question 51

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-purchasing equipment for cash

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 52

The payment of salaries to employees will result in a debit to an expense account and a credit to the ___________ account.

Question 53

The ___________________ is a list of each active account and its debit or credit balance at a specific point in time.

Question 54

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-borrowing cash

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 55

For assets,expenses,and dividend accounts,a credit will _______ the balance in the account.

Question 56

____________________ documents provide the evidence needed in an accounting system to record a transaction.

Question 57

The ____________________ is a list of all the accounts used by an entity.

Question 58

____________________ is the quality of accounting information that allows a user to compare two or more accounting periods for a single company.

Question 59

In order for an internal or external event to be recognized in an accounting system,the items making up the event must impact the financial statements and they must be sufficiently reliable and ____________________.

Question 60

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-issuing common shares

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 61

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-purchasing a building for cash

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 62

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-providing services to customers for cash

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 63

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-paying salaries to employees

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 64

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-receiving cash from customers in advance for services to be provided next month

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 65

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-purchasing a six-month insurance policy

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 66

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-paying for a previous purchase on credit

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 67

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-borrowing cash from a bank

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 68

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-collecting from customers for services sold previously on credit

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 69

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-purchasing supplies on credit

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 70

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-paying utilities

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 71

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-providing services for customers for credit

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 72

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-issuing common shares to investors

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 73

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-purchasing insurance

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 74

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-paying dividends

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 75

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-receiving cash from a customer in advance of providing any services

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 76

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-purchasing supplies on credit

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 77

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-paying for items previously purchased on credit

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 78

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-paying salaries to employees

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends

Question 79

Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.)

-providing services for customers for cash

A)assets and liabilities increase
B)assets and contributed capital increase
C)assets and retained earnings increase
D)two asset accounts are impacted, but there is no net effect on total assets
E)assets and liabilities decrease
F)assets and retained earnings decrease
G)liabilities increase and retained earnings decrease
H)liabilities decrease and retained earnings increase

Question 80

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.)

-providing services to customers for credit

A)Cash
B)Accounts Receivable
C)Supplies
D)Prepaid Insurance
E)Land
F)Equipment
G)Accounts Payable
H)Unearned Revenues
I)Notes Payable
J)Common Shares
K)Retained Earnings
L)Service Revenue
M)Salary Expense
N)Insurance Expense
O)Utilities Expense
P)Dividends