Deck 2: Recording Business Transactions

Question 1

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

Answer 1

D

Question 2

The payment of an amount owed to a creditor would:

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

Answer 2

D

Question 3

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).

Answer 3

D

Question 4

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

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

Question 5

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 6

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

Question 7

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

Question 8

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 9

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 10

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

Question 11

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

Question 12

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 13

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 14

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

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

Question 15

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

Question 16

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 17

The costs of operating a business are usually called:

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

Question 18

The payment of salaries to employees when earned would:

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

Question 19

What type of account is Prepaid Rent?

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

Question 20

Paying a utility bill when received would:

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

Question 21

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

Question 22

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 23

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 24

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 25

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 26

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

Question 27

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 28

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

Question 29

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 30

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 31

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

Question 32

Notes Payable is a typical example of a liability account.

Question 33

Prepare a Statement of Retained Earnings for the year ended June 30, 2014.
Chedacorn was incorporated on July 1, 2012 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, 2013 and 2014, 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 2013 it paid $62,500 in dividends and in 2014 it paid $100,000 in dividends.

Question 34

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 35

Slick Corporation has summarized financial statements as shown below. Fill in the blank areas to complete the financial statements. Begin in 2012 and move forward from there.

Question 36

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

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

Question 37

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

Question 38

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

Question 39

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 40

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 41

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 42

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 43

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 44

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 45

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 46

Which of the following statements regarding accounts is false?

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 47

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 48

The account credited when supplies are purchased on account is:

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

Question 49

Which of the following statements regarding accounts is true?

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 50

Sending out a 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 51

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 52

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 53

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 54

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 55

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 56

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 57

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 58

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 59

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 60

Which of the following accounts normally has a debit balance?

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

Question 61

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 62

The purchase of a building with a down payment of cash and the signing of a note payable for the remainder would include a debit to both the asset Building, and a credit to the asset Cash and the liability Note Payable.

Question 63

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 64

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 65

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

Question 66

An expense account is known as a contra equity account.

Question 67

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 68

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

Question 69

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

Question 70

Every accounting transaction involves an increase in at least one account and a decrease in at least one other account.

Question 71

A credit always decreases an asset account.

Question 72

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 73

A dividend account is known as a contra equity account.

Question 74

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

Question 75

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

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

Question 76

The payment of the owner's personal expenses from the business's chequebook should be recorded with a debit to:

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

Question 77

The purchase of office supplies for cash would include a debit to the asset Office Supplies and a credit to the asset Cash.

Question 78

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

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

Question 79

Every transaction affects at least two accounts.

Question 80

The Dividends account normally has a debit balance.