Question 1

The accounting equation is expressed as assets = liabilities - equity

Accepted Answer

The accounting equation is expressed as assets = liabilities + equity, with assets on one side and liabilities and equity on the other side.

Question 2

When a company sells services for which cash will not be received until some future date, the company should credit an unearned revenues account for the amount charged to the customer.

Accepted Answer

When a company sells services on credit, it should debit accounts receivable and credit a revenue account, not an unearned revenue account. Unearned revenue is used when cash is received before services are performed.

Question 3

Debits increase asset and expense accounts

Accepted Answer

Debit entries increase the balance of asset and expense accounts.

Question 4

An account is a detailed record of increases and decreases in a specific asset, liability or 2)equity item.

Accepted Answer

An account is indeed a detailed record of increases and decreases in a specific asset, liability or equity item.

Question 5

Credits to accounts are always increases

Accepted Answer

Credits increase liability, revenue, and equity accounts but decrease asset and expense accounts.

Question 6

As prepaid assets are used up, the costs of the assets become expenses

Accepted Answer

This is true. Prepaid assets are recorded as assets on the balance sheet until they are consumed or used up, at which point their costs are recognized as expenses on the income statement.

Question 7

The first step in the accounting cycle is transaction analysis

Accepted Answer

Transaction analysis is the first step in the accounting cycle where every transaction is identified, analyzed, and recorded in the accounting system.

Question 8

Cash withdrawn by the owner of an unincorporated business in the form of a monthlysalary should be treated as an expense of the business.

Accepted Answer

In an unincorporated business, cash withdrawn by the owner (often referred to as drawings) is not treated as an expense but rather as a reduction in the owner's equity in the business.

Question 9

A T-Account is a formal account frequently used in business

Accepted Answer

The answer of A T-Account is a formal account frequently...

Question 10

A building is an example of an asset that does not provide any benefit to its owner

Accepted Answer

A building can provide various benefits to its owner, such as rental income or appreciation in value.

Question 11

An account balance is the difference between the increases and decreases recorded in an account.

Accepted Answer

An account balance is calculated by subtracting the total of all decreases from the total of all increases in an account. Therefore, it is the difference between the increases and decreases recorded in an account.

Question 12

Unearned revenues are assets, because a service or product is owed to the customer

Accepted Answer

Unearned revenues are considered liabilities because they represent an obligation to deliver a product or service in the future.

Question 13

Double-entry accounting means that every transaction affects and is recorded in at leasttwo accounts.

Accepted Answer

Double-entry accounting is the system in which every financial transaction is recorded in at least two accounts, with one account debited and one account credited. This ensures accuracy and helps to prevent errors in accounting.

Question 14

To make it easier for the bookkeeper, the cost of land is separated from the cost of 8)buildings located on the land.

Accepted Answer

The answer of To make it easier for the bookkeeper,...

Question 15

The accounting equation can be expressed as liabilities = assets - equity

Accepted Answer

The answer of The accounting equation can be expressed as...

Question 16

Goods sold on credit to customers are called accounts payable

Accepted Answer

Goods sold on credit to customers are actually called accounts receivable, as they represent money owed to the seller by the buyer. Accounts payable, on the other hand, are amounts owed by the buyer to the seller for goods or services that have been received but not yet paid for.

Question 17

The left side of a T-account is always the credit side, while the right side is always the debit side.

Accepted Answer

The left side of a T-account is always the debit side, while the right side is always the credit side.

Question 18

Withdrawals are a type of transaction that affects equity

Accepted Answer

Withdrawals are a type of transaction in which an owner or owners of a business withdraw funds or assets from the business for personal use. This transaction reduces the equity of the business since the owner is taking out money or assets that belong to the business.

Question 19

A ledger is a type of account

Accepted Answer

A ledger is a book or other collection of financial accounts, not a type of account itself. It is where all the accounts are consolidated and recorded.

Question 20

In a double-entry accounting system, total debits must always equal total credits

Accepted Answer

This is a fundamental principle of the double-entry accounting system. Each transaction must have at least one debit and one credit, and the total amount debited must always equal the total amount credited. This ensures that the accounting equation (Assets = Liabilities + Equity) remains in balance.

Quiz 2: Analyzing and Recording Transactions