Deck 2: Recording Business Transactions

Question 1

Performing services on account would:

A) increase assets and liabilities
B) increase assets and decrease shareholders' equity
C) increase revenue and decrease shareholders' equity
D) increase net income and shareholders' equity

Answer 1

D

Question 2

The purchase of land for cash would:

A) increase total assets
B) decrease shareholders' equity
C) increase the total debits on the trial balance
D) not affect the total of debits or credits on the trial balance

Answer 2

D

Question 3

Prepaid rent is an expense because the payment provides a future benefit of the company.

Answer 3

False

Question 4

Purchasing supplies and paying cash for them would:

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

Question 5

An accounts receivable represents the promise of the business to pay a debt.

Question 6

Paying a utility bill when received would:

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

Question 7

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

A) Cash
B) Common Shares
C) Prepaid Expenses
D) Notes Receivable

Question 8

A record of all the changes in a particular asset during a period of time is found in a(n):

A) transaction
B) trial balance
C) prior period's balance sheet
D) account

Question 9

List the types of accounts that appear on the income statement.List the types of accounts that appear on the balance sheet.

Question 10

An owner investment of a building,valued at $100,000 with an $80,000 outstanding mortgage,transferring this asset into the business would:

A) increase assets by $20,000
B) increase assets by $80,000
C) increase shareholders' equity by $20,000
D) increase shareholders' equity by $100,000

Question 11

Receiving a payment from a customer on account would:

A) have no effect on shareholders' equity
B) increase net income
C) increase shareholders' equity
D) increase liabilities

Question 12

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

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

Question 13

Assets include cash,land,and accounts payable.

Question 14

Define and provide an example of each of the following.

Question 15

Dividends paid to the shareholders when declared will:

A) increase assets and decrease liabilities
B) decrease assets and increase liabilities
C) have no effect on shareholders' equity
D) decrease assets and decrease shareholders' equity

Question 16

The collection of cash from a customer on account would:

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

Question 17

Interest payable,income tax payable and salary payable are all examples of:

A) accrued liabilities
B) prepaid expenses
C) expenses of future periods
D) retained earnings

Question 18

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

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

Question 19

The payment of an amount owed to a creditor would:

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

Question 20

Explain the following terms in your own words and give an example of each for Humpty's Equipment Inc.
a.asset
b.liability
c.shareholders' equity
d.dividend
e.revenue
f.expense

Question 21

The payment of salaries to employees when earned would:

A) increase assets
B) increase net income
C) increase liabilities
D) decrease shareholders' equity

Question 22

What type of account is Prepaid Rent?

A) a liability
B) an expense
C) shareholders' equity
D) an asset

Question 23

The purchase of office equipment on account would increase an asset and decrease a liability account.

Question 24

The entry to record the purchase of supplies on account would include a:

A) credit to the Accounts Payable account
B) debit to the Retained Earnings account
C) credit to the Cash account
D) credit to the Supplies account

Question 25

Which of the following business events may not be recorded in a company's general ledger?

A) The company paid each of its employees a Christmas bonus.
B) The company issued 100 shares of common stock.
C) The company purchased two acres of land for future plant expansion.
D) A lawsuit has been filed by one of the company's customers (against the company).

Question 26

A balance sheet is a required financial statement that reports the financial position of the company as of a given day in time.

Question 27

Prepare a Statement of Retained Earnings for the year ended June 30,2017.
Chedacorn was incorporated on July 1,2015 by 10 shareholders who each invested $100,000 in cash in exchange for common shares.Chedacorn's year end is June 30th.In its first year of business Chedacorn had a net income of $243,750.For its years ended June 30,2016 and 2017,its second and third years of operation,Chedacorn reported net income of $472,500 and $560,000 respectively.In its first year Chedacorn did not pay any dividends,but in fiscal 2016 it paid $62,500 in dividends and in 2017 it paid $100,000 in dividends.

Question 28

Note payable,accounts payable,and salary payable are all examples of:

A) assets
B) revenue
C) expenses
D) liabilities

Question 29

The costs of operating a business are usually called:

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

Question 30

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

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

Question 31

The account called Accrued Liabilities is really an expense account and not a liability account.

Question 32

The following is a summary of the balance sheet accounts for Betty's Bacon Inc.Organize the accounts into Betty's Bacon's Balance Sheet.

Question 33

For each of the following independent scenarios,fill in the blanks with the appropriate dollar amount.

Question 34

Notes Payable is a typical example of a liability account.

Question 35

Slick Corporation has summarized financial statements as shown below.Fill in the blank areas to complete the financial statements.Begin in 2015 and move forward from there.

Question 36

What criteria are used to determine if a transaction has occurred?

Question 37

Analyze the following transactions.Indicate which accounts are affected and whether they will increase or decrease.Transaction (a)is completed as an example.
a.Owner investment of cash into the business.
b.Payment of a utility bill.
c.Purchase of inventory for cash.
d.Payment of an accounts payable.
e.Performing a service on account.
f.Collecting cash from a customer as payment on his account.

Question 38

The retained earnings account represents the money invested by shareholders into the business since its inception.

Question 39

A transaction involving the cash purchase of equipment will decrease one asset account and increase another asset account.

Question 40

A balance sheet is organized in order of the accounting equation,with liabilities first,followed by assets and shareholders' equity.

Question 41

The payment for rent of the office building for one month would include a:

A) debit to Cash
B) credit to Accounts Payable
C) debit to Rent Expense
D) credit to Revenue

Question 42

Receiving cash from a customer on account would include a:

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

Question 43

Performing a service on account would include a:

A) debit to Cash
B) debit to Revenue
C) credit to Accounts Receivable
D) debit to Accounts Receivable

Question 44

The accounting transaction to record the payment of salaries to employees would include a:

A) credit to Salary Expense
B) debit to Accounts Payable
C) debit to Salary Expense
D) debit to Cash

Question 45

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

A) credit to Truck
B) debit to Note Payable
C) credit to Note Payable
D) debit to an expense account

Question 46

The accounting transaction to record payment of the advertising bill would include a:

A) debit to Cash
B) credit to Accounts Payable
C) debit to Advertising Expense
D) debit to Accounts Receivable

Question 47

Paying a dividend to the company's shareholders would include a:

A) debit to Cash and a credit to Dividends
B) debit to Dividends and a credit to Cash
C) debit to Retained Earnings and a credit to Dividends
D) debit to Accounts Payable and a credit to Retained Earnings

Question 48

The purchase of office furniture on account (that is,on credit)would include a:

A) credit to Accounts Payable
B) credit to Office Furniture
C) debit to Accounts Receivable
D) credit to Cash

Question 49

The purchase of office equipment for cash would include a:

A) debit to Cash
B) debit to Office Equipment
C) credit to Accounts Payable
D) credit to Office Equipment

Question 50

An owner makes an investment of cash into the business.Such a transaction would include a:

A) debit to Common shares
B) credit to Cash
C) debit to Cash
D) debit to Accounts Receivable

Question 51

The accounting transaction to record payment of the telephone bill would include a:

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

Question 52

Receiving a cheque from a customer on account would include a:

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

Question 53

Making a cash payment to settle a debt would include a:

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

Question 54

An owners' investment of land and a building into the business would include a:

A) debit to Land and a credit to Common shares
B) debit to Land and a credit to Building
C) debit to Common shares and a credit to Building
D) debit to Building and a debit to Common shares

Question 55

The purchase of an automobile with a cash down payment and a written promise to pay the balance in the future would include a:

A) credit to Cash and a credit to Note Payable
B) debit to Cash and a credit to Automobile
C) debit to Note Payable and a credit to Cash
D) debit to Cash and a debit to Note Payable

Question 56

The accounting transaction to record payment of the heating bill would include a:

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

Question 57

Credits to revenue accounts ultimately result in:

A) a decrease in owners' equity
B) an increase in owners' equity
C) a decrease in assets
D) an increase in liabilities

Question 58

Purchasing a three-year insurance policy for cash would include a:

A) debit to Cash and a credit to Accounts Receivable
B) debit to Insurance Expense and a credit to Dividends
C) debit to Prepaid Insurance and a credit to Accounts Payable
D) debit to Prepaid Insurance and a credit to Cash

Question 59

Paying by cheque to settle a debt would include a:

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

Question 60

The purchase of a building with a cash down payment and a written promise to pay the balance in the future would include a:

A) credit to Cash and a credit to Note Payable
B) debit to Cash and a credit to Buildings
C) debit to Note Payable and a credit to Cash
D) debit to Cash and a debit to Note Payable

Question 61

A credit increases the balance of which types of accounts?

A) revenue and assets
B) liabilities and assets
C) liabilities and expenses
D) shareholders' equity and liabilities

Question 62

Assets,owners' equity,and expenses are all increased by debits.

Question 63

Which type of account is credited when a company pays its employees?

A) an expense account
B) an asset account
C) a liability account
D) the owners' equity account

Question 64

Which of the following statements regarding accounts is correct?

A) Assets are decreased by debits.
B) Expenses are decreased by debits.
C) Revenues are increased by debits.
D) Liabilities are decreased by debits.

Question 65

When a company purchases inventory on account (that is,on credit),which type of account is credited to record the transaction?

A) asset
B) expense
C) liability
D) owners' equity

Question 66

Which type of account is credited when a company records a debt?

A) expense
B) retained earnings
C) liability
D) asset

Question 67

When the owner of a business invests cash into the business,which of the following accounts is debited?

A) Dividends
B) Cash
C) Common Shares
D) Accounts Receivable

Question 68

A credit decreases the balance of which types of accounts?

A) expenses and assets
B) liabilities and expenses
C) assets and liabilities
D) assets and shareholders' equity

Question 69

Which of the following accounts normally has a debit balance?

A) Dividends
B) Retained Earnings
C) Share capital
D) Revenue

Question 70

Expenses increase shareholders equity.That is why they are credits.

Question 71

When a business sells inventory in exchange for cash,which of the following accounts is credited?

A) Revenue
B) Cash
C) Owners' Equity
D) Accounts Payable

Question 72

The payment of expenses should be recorded with a credit to:

A) Cash
B) Dividends
C) Common shares
D) Accounts Receivable

Question 73

The right side of a T-account is always the debit side.

Question 74

Which of the following statements regarding accounts is incorrect?

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

Question 75

The left side of a T-account is always the side that increases the balance of the account.

Question 76

A debit increases the balance of which types of accounts?

A) assets and liabilities
B) assets and expenses
C) liabilities and expenses
D) assets and shareholders' equity

Question 77

A credit always decreases an asset account.

Question 78

A dividend account is known as a contra equity account.

Question 79

The account credited when cash is received from a customer on account is:

A) Cash
B) Accounts Payable
C) Revenue
D) Accounts Receivable

Question 80

The account credited when supplies are purchased on account is:

A) Cash
B) Supplies
C) Supplies Expense
D) Accounts Payable