Deck 2: The Accounting Cycle: During the Period

Question 1

Providing services to customers for cash causes stockholders' equity to increase.

Answer 1

True

Question 2

Purchasing office supplies on account causes assets to increase and liabilities to increase.

Answer 2

True

Question 3

Amounts owed from customers are recorded in the Accounts Receivable account.

Answer 3

True

Question 4

External transactions are transactions the firm conducts with a separate economic entity,such as selling products to a customer,purchasing supplies from a vendor,paying salaries to an employee,and borrowing money from a bank.

Question 5

The two components of stockholders' equity are Debits and Credits.

Question 6

If a transaction causes total assets of the company to increase by $5,000 and total liabilities to increase by $3,000,then stockholders' equity increases by $8,000.

Question 7

Paying dividends to its stockholders causes a company's stockholders' equity to decrease.

Question 8

Selling common stock for cash causes assets to increase and stockholders' equity to decrease.

Question 9

A list of all account names used to record transactions of a company is referred to as a T-account.

Question 10

Paying for one year of rent in advance does not affect the accounting equation.

Question 11

Incurring employees' salaries but not paying them causes no change to stockholders' equity.

Question 12

Revenues have the effect of increasing retained earnings.

Question 13

If a transaction causes total assets of the company to increase by $2,000,then liabilities plus stockholders' equity also increases by $2,000.

Question 14

Borrowing cash from the bank causes assets to increase and liabilities to increase.

Question 15

Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity.Examples are using supplies on hand and earning revenues after having received cash in advance from a customer.

Question 16

After recording each transaction,total assets must equal total liabilities plus stockholders' equity.

Question 17

Providing services to customers on account causes assets to increase and stockholders' equity to increase.

Question 18

Purchasing supplies on account increases the balance of the Accounts Receivable account.

Question 19

Receiving cash in advance from a customer for services to be provided in the future causes assets to increase and stockholders' equity to increase.

Question 20

Purchasing equipment using cash causes assets to increase.

Question 21

Paying employees' salaries for the current period is recorded with a debit to Salaries Expense.

Question 22

Liability accounts increase with a credit and decrease with a debit.

Question 23

A journal provides a chronological record of all transactions affecting a firm.

Question 24

For each transaction,there must be at least one debit amount and one credit amount.

Question 25

The general ledger includes all accounts used to record the company's transactions.

Question 26

Providing services to customers is recorded with a debit to Service Revenue.

Question 27

Expenses have the effect of decreasing retained earnings.

Question 28

Borrowing cash from the bank is recorded with a debit to cash.

Question 29

Common Stock increases with a credit and decreases with a debit.

Question 30

Liability accounts increase with a debit and decrease with a credit.

Question 31

Revenue accounts increase with a debit and decrease with a credit.

Question 32

Purchasing office supplies is recorded with a credit to office supplies.

Question 33

Unearned Revenue is a liability account.

Question 34

Receiving cash in advance from customers increases the Service Revenue account.

Question 35

Selling common stock for cash is recorded with a debit to common stock.

Question 36

For each transaction,the total debit amounts must equal the total credit amounts.

Question 37

A debit to an account balance always results in the balance increasing.

Question 38

Expense accounts increase with a debit and decrease with a credit.

Question 39

The Dividends account increases with a credit and decreases with a debit.

Question 40

A credit to an account balance always results in the balance decreasing.

Question 41

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits?

A)Use source documents to determine accounts affected by the transaction.
B)Prepare a trial balance.
C)Analyze the impact of the transaction on the accounting equation.
D)Post the transaction to the T-account in the general ledger.

Question 42

An account receivable can best be defined as:

A)A payment to the owners.
B)A sale of goods and services.
C)A resource owned by the company.
D)An amount owed by the company.

Question 43

External events include all of the following except:

A)Paying employees' salaries.
B)Purchasing equipment.
C)Using office supplies.
D)Collecting an account receivable.

Question 44

When a company incurs employee salaries but does not pay them,how will the basic accounting equation be affected?

A)Stockholders' equity decreases.
B)Revenues decrease.
C)Expenses decrease.
D)Liabilities decrease.

Question 45

The following amounts are reported in the ledger of Mariah Company:
What is the balance in the Common Stock account?

A)$44,000.
B)$32,000.
C)$48,000.
D)$42,000.

Question 46

A trial balance is a list of all accounts and their balances at a particular date,showing that assets equal liabilities.

Question 47

A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20.Which of the following statements is true?

A)The company records service revenue on October 15.
B)The company records cash collection November 20.
C)The company records unearned revenue on October 15.
D)The company records nothing on October 15.

Question 48

After posting transactions to the general ledger accounts,the sum of the accounts with debit balances should equal the sum of the accounts with credit balances.

Question 49

The full set of procedures used to accomplish the FN Measurement/communication process of financial accounting is referred to as the:

A)Trial balance
B)Accounting cycle
C)Chart of accounts
D)General ledger

Question 50

When the company pays stockholders a dividend,what is the effect on the accounting equation for that company?

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

Question 51

Which of the following is not part of measuring external transactions?

A)Using source documents to analyze accounts affected.
B)Recording transactions.
C)Making payments on all amounts owed.
D)Analyzing transactions for their effect on the accounting equation.

Question 52

Which of the following would increase assets and increase liabilities?

A)Provide services to customers on account.
B)Purchase office supplies on account.
C)Pay dividends to stockholders.
D)Receive a utility bill but do not pay it immediately.

Question 53

If total debits equal total credits in the trial balance,then all balances are correct.

Question 54

Pumpkin Inc.sold $500 in pumpkins to a customer on account on January 1.On January 11 Pumpkin collected the cash from that customer.What is the impact on Pumpkin's accounting equation from the collection of cash?

A)No net effect to the accounting equation.
B)Decrease assets and increase liabilities.
C)Increase assets and increase liabilities.
D)Decrease assets and decrease liabilities.

Question 55

For each transaction recorded in an accounting system,the basic equation that must be maintained at all times is:

A)Assets = Liabilities + Stockholders' Equity.
B)Cash Increases = Cash Decreases.
C)Revenues = Expenses + Dividends.
D)Assets = Liabilities.

Question 56

Which of the following is not an asset account?

A)Supplies.
B)Accounts Payable.
C)Equipment.
D)Accounts Receivable.

Question 57

Receiving assets from customers before services are performed results in:

A)Prepaid Assets.
B)Service Revenue.
C)Unearned Revenues.
D)Accounts Receivable.

Question 58

The process of transferring the debit and credit information from the journal to individual accounts in the general ledger is called journalizing.

Question 59

Receiving cash from an account receivable:

A)Increases revenue and decreases an asset.
B)Decreases a liability and increases an asset.
C)Increases an asset and increases revenue.
D)Increases one asset and decreases another asset.

Question 60

When cash payments are made to stockholders,what is the effect on the company's accounts?

A)Cash decreases and dividends increase.
B)Cash increases and dividends decrease.
C)Cash decreases and common stock decreases.
D)Cash increases and common stock increases.

Question 61

Purchasing office supplies on account will:

A)Not change assets.
B)Increase assets and decrease liabilities.
C)Increase assets and increase liabilities.
D)Increase assets and increase stockholders' equity.

Question 62

Revenues have what effect on the accounting equation?

A)Increase liabilities.
B)Decrease assets.
C)Increase stockholders' equity.
D)No effect.

Question 63

When a company provides services on account,the accounting equation would be affected as follows:

A)Assets increase.
B)Revenues increase.
C)Assets increase and liabilities decrease.
D)Assets increase and stockholders' equity increases.

Question 64

How many of the following events would require an expense to be recorded? Ordering office supplies
Hiring a receptionist
Paying employee salaries for the current month
Receiving but not paying a current utility bill
Paying for insurance in advance

A)One.
B)Two.
C)Three.
D)Four.

Question 65

An expense has what effect on the accounting equation?

A)Decrease liabilities.
B)Decrease stockholders' equity.
C)Increase assets.
D)No effect.

Question 66

When a payment is made on an account payable:

A)Assets and stockholders' equity decrease.
B)Assets and liabilities decrease.
C)Liabilities and revenues decrease.
D)Assets and expenses decrease.

Question 67

Purchasing office equipment on account has what impact on the accounting equation?

A)Stockholders' equity decreases and assets increase.
B)Liabilities increase and assets increase.
C)Assets decrease and liabilities decrease.
D)Assets increase and stockholders' equity increases.

Question 68

When a company issues common stock for cash,what is the effect on the accounting equation for the company?

A)Assets increase and liabilities increase.
B)Assets increase and stockholders' equity increases.
C)Assets decrease and liabilities decrease.
D)Liabilities decrease and stockholders' equity increases.

Question 69

Which of the following is NOT possible for a business transaction?

A)Increase assets and decrease revenue.
B)Decrease assets and increase expense.
C)Increase liabilities and increase expense.
D)Decrease liabilities and increase revenue.

Question 70

Investments by stockholders have what effect on the accounting equation?

A)Assets increase and liabilities increase.
B)Expenses increase and liabilities increase.
C)Assets increase and revenues increase.
D)Assets increase and stockholders' equity increases.

Question 71

The Unearned Revenue account is shown in which statement?

A)Income statement.
B)Statement of cash flows.
C)Balance sheet.
D)Statement of stockholders' equity.

Question 72

Which of the following is not possible when recording a transaction?

A)Liabilities increase and assets decrease.
B)Stockholders' equity increases and assets increase.
C)One asset increases and another asset decreases.
D)Stockholders' equity decreases and assets decrease.

Question 73

On January 1,Brad Inc.sold $30,000 in products to a customer on account.Then on January 10,Brad collected the cash on that account.What is the impact on Brad's accounting equation from the collection of cash on January 10?

A)No net effect to the accounting equation.
B)Assets increase and liabilities decrease.
C)Assets decrease and liabilities decrease.
D)Assets increase and stockholders' equity increases.

Question 74

Purchasing supplies for cash has what effect on the accounting equation?

A)Increase assets.
B)Decrease stockholders' equity.
C)Decrease liabilities.
D)No effect.

Question 75

If a company provides services on account,which of the following is true?

A)Expenses increase.
B)Liabilities increase.
C)Stockholders' equity increases.
D)Assets decrease.

Question 76

Which of the following transactions causes a decrease in stockholders' equity?

A)Pay dividends to stockholders.
B)Obtain cash by borrowing from a local bank.
C)Provide services to customers on account.
D)Purchase office equipment for cash.

Question 77

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month,did assets increase or decrease and by how much?

A)$34,000 increase.
B)$55,000 increase.
C)$34,000 decrease.
D)$76,000 increase.

Question 78

Which of the following transactions would cause a decrease in both assets and stockholders' equity?

A)Paying insurance premium for the next two years.
B)Purchasing office equipment on account.
C)Paying advertising for the current month.
D)Providing installation services to customers.

Question 79

Providing services and receiving cash will:

A)Increase assets and increase stockholders' equity.
B)Increase assets and increase liabilities.
C)Decrease assets and increase liabilities.
D)Decrease liabilities and increase stockholders' equity.

Question 80

Amounts owed to suppliers for supplies purchased on account are defined as:

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