Question 1

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements.
A)Income Statement
B)Trial Balance
C)Statement of Owner's Equity
D)Balance Sheet

Accepted Answer

While a trial balance may be prepared by a business, it is not a formal financial statement that is generally made available to all users of the financial statements. The three main formal financial statements are the income statement, statement of owner's equity, and balance sheet.

Question 2

An account whose balance is transferred to the capital account at the end of an accounting period is a temporary account.

Accepted Answer

Temporary accounts are used to track income, expenses, gains, and losses for a specific accounting period, and their balances are transferred to the capital account at the end of that period. Examples of temporary accounts include revenue, cost of goods sold, and operating expenses. In contrast, permanent accounts (such as assets, liabilities, and equity) retain their balances from one accounting period to the next.

Question 3

A business receives a bill for utilities but decides to pay it next month. The business would record the receipt of the bill by:
A)Debiting Utilities Expense; Crediting Cash
B)Debiting Utilities Expense; Crediting Accounts Receivable
C)Debiting Utilities Expense; Crediting Accounts Payable
D)Debiting Accounts Payable; Crediting Utilities Expense

Accepted Answer

The bill for utilities represents a liability because the business owes money to the utility company. Since the business intends to pay the bill at a later date, the credit should be to Accounts Payable. Meanwhile, the expense should be recognized when the utilities are being used, then recording should be done by debiting Utility Expense.

Question 4

A business earns $4,000 from various charge account clients. To record this transaction, the business would:
A)Debit Accounts Receivable; Credit Fees Income
B)Debit Cash; Credit Accounts Receivable
C)Debit Accounts Payable; Credit Fees Income
D)Debit Accounts Receivable; Credit Cash

Accepted Answer

Debiting Accounts Receivable and crediting Fees Income correctly reflects the increase in assets (Accounts Receivable) due to the earnings from charge account clients and the increase in income (Fees Income) from the services provided.

Question 5

The classification and normal balance of the salaries expense account is:
A)a liability with a debit balance.
B)an expense with a credit balance.
C)an asset with a debit balance.
D)an expense with a debit balance.

Accepted Answer

Salaries expense is an expense account and, as such, has a normal debit balance.

Question 6

On a statement of owner's equity, beginning capital is $30,000, Net Income for the year is $11,000 and Drawing for the year is $6,000, the ending capital amount would be:
A)$25,000.
B)$47,000.
C)$35,000.
D)$30,000.

Accepted Answer

Beginning capital + Net Income - Drawing = Ending Capital
$30,000 + $11,000 - $6,000 = $35,000

Question 7

A business purchases equipment costing $5,500. They pay $1,500 right away and charge the remaining amount. To record this transaction, the business would:
A)Debit Equipment $5,500; Credit Cash $1,500 and Credit Accounts Payable $4,000
B)Debit Equipment $5,500; Credit Accounts Payable $5,500
C)Debit Equipment $4,000; Credit Accounts Payable $4,000
D)Debit Equipment $1,500; Credit Cash $1,500

Accepted Answer

The business purchased equipment worth $5,500 and paid $1,500 in cash upfront. Therefore, the remaining amount charged is $4,000.

The equipment account needs to be debited because it is an asset that the business has acquired.

Cash account needs to be credited because the business has paid $1,500 at the time of the purchase.

Accounts payable account needs to be credited because the business has charged the remaining $4,000 for the equipment purchase which will be paid at a later date.

Therefore, the correct journal entry would be:

Debit Equipment $5,500
Credit Cash $1,500
Credit Accounts Payable $4,000 The business is purchasing equipment costing $5,500 but paying only $1,500 right away. Therefore, the remaining amount will be charged, which means the business will have an accounts payable for $4,000. This transaction involves both cash and credit, so we need to debit equipment for $5,500 (to increase the value of the asset) and credit cash for $1,500 (to decrease the amount of cash). Additionally, we need to credit accounts payable for $4,000 (to increase the liability). Thus, the journal entry will be: Debit Equipment $5,500; Credit Cash $1,500 and Credit Accounts Payable $4,000.

Question 8

Credits are used to record:
A)decreases in liabilities and increases in assets and owner's equity.
B)decreases in assets and owner's equity and increases in liabilities.
C)increases in liabilities and revenues.
D)increases in assets, liabilities, and owner's equity.

Accepted Answer

Credits are used to record increases in liabilities and revenues, as well as decreases in assets and owner's equity.

Question 9

On a statement of owner's equity, beginning capital is $152,000, Drawing for the year is $65,000, and the ending capital is $191,000. What is the amount of Net Income for the year?
A)$126,000
B)$ 87,000
C)$104,000
D)$ 26,000

Accepted Answer

Net Income = Ending Capital - Beginning Capital - Drawings
Net Income = $191,000 - $152,000 - $65,000
Net Income = $104,000. Therefore, the correct answer is option C.

Question 10

Which of the following represents the proper sequence for preparing the financial statements?
A)balance sheet, statement of owner's equity, income statement
B)income statement, balance sheet, statement of owner's equity
C)statement of owner's equity, income statement, balance sheet
D)income statement, statement of owner's equity, balance sheet

Accepted Answer

The proper sequence for preparing the financial statements is income statement, statement of owner's equity, and then balance sheet. This is because the income statement shows the company's revenue and expenses, which are used in calculating the net income or loss. The statement of owner's equity shows changes in the owner's equity account, such as investments and withdrawals, as well as the net income or loss from the income statement. Finally, the balance sheet shows the assets, liabilities, and owner's equity of the company at a specific point in time, using information from the other two statements.

Question 11

A business performed $8,000 of services. Their customer paid $3,000 of the amount right away but Charged the remaining amount. To record this transaction, the business would: A)Debit Cash $3,000 and Debit Accounts Receivable $5,000 and Credit Fees Income $8,000 B)Debit Accounts Receivable $8,000 and; Credit Fees Income $8,000 C)Debit Cash $3,000; Credit Fees Income $3,000 D)Debit Cash $3,000 and Debit Accounts Payable $5,000; Credit Fees Income $8,000

Accepted Answer

The business performed services worth $8,000 but received only $3,000 in cash. The remaining $5,000 is charged and will be received later. To account for this transaction, we will debit Cash $3,000 because that's the amount received in cash, and we will also debit Accounts Receivable $5,000 because that's the amount that's still due from the customer. We will credit Fees Income $8,000 because that's the amount earned by the business for performing services. Therefore, the correct option is A.

Question 12

The classification and normal balance of the accounts receivable account is:
A)an asset with a debit balance.
B)a revenue with a debit balance.
C)a liability with a debit balance.
D)an asset with a credit balance.

Accepted Answer

Accounts receivable is classified as an asset because it represents money owed to the company by its customers. It has a normal debit balance, reflecting an increase when sales are made on credit.

Question 13

Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business?
A)debit Cash and credit Salary Expense
B)debit Salary Expense and credit Cash
C)debit Ty Knott, Drawing, and credit Cash.
D)debit Cash and credit Ty Knott, Capital

Accepted Answer

The answer of Which of the following entries records the...

Question 14

When recording transactions in the T-accounts, the debits should equal the credits:
A)Always.
B)Sometimes.
C)Never.
D)Only for asset accounts.

Accepted Answer

The fundamental accounting equation states that assets = liabilities + equity. This equation must always balance, and as a result, the total debits must always equal the total credits in a transaction. Therefore, choice A is correct.

Question 15

Select the entry below to record the payment to employees for work performed during the pay period?
A)debit Cash, and credit Accounts Receivable
B)debit Salary Expense and credit Cash
C)debit Salary Expense and credit Accounts Receivable
D)debit Cash and credit Salary Expense

Accepted Answer

The correct entry to record the payment to employees for work performed during the pay period is to debit Salary Expense and credit Cash. This reflects the increase in expense due to salaries and the decrease in cash due to payment.

Question 16

An account with a balance that carries over from one accounting period to another is a nominal account.

Accepted Answer

An account with a balance that carries over from one accounting period to another is a real account, not a nominal account. Nominal accounts are accounts that are closed at the end of each accounting period and have their balances reset to zero. Examples of nominal accounts include revenue and expense accounts.

Question 17

A business pays a creditor on account. The entry to record this transaction is:
A)Debit Cash; Credit Accounts Payable
B)Debit Accounts Receivable; Credit to Cash
C)Debit Accounts Receivable; Credit Accounts Payable
D)Debit Accounts Payable; Credit Cash

Accepted Answer

When a business pays a creditor on account, it means that the business is making a payment towards the amount they owe to the creditor. This would result in a decrease in the liability account, Accounts Payable, and a decrease in the asset account, Cash. Therefore, the entry to record this transaction would be to debit Accounts Payable and credit Cash. Option D, Debit Accounts Payable; Credit Cash, is the best choice as it correctly reflects the decrease in both the liability and asset accounts.

Question 18

A business purchases supplies on account. The entry to record this transaction is:
A)Debit to Supplies; Credit Accounts Receivable
B)Debit Supplies; Credit Accounts Payable
C)Debit Supplies; Credit to Cash
D)Debit to Cash; Credit Supplies

Accepted Answer

When a business purchases supplies on account, it means that they are getting supplies and agreeing to pay for them at a later date. This is a liability for the business and is recorded as a credit to Accounts Payable. The corresponding debit is for the asset received, which in this case is Supplies. Therefore, the correct entry to record this transaction is to debit Supplies and credit Accounts Payable.

Question 19

Debits are used to record:
A)increases in assets.
B)increases in liabilities.
C)increases in revenue.
D)decreases in expenses.

Accepted Answer

Debits are used to record increases in assets, as well as decreases in liabilities, equity (including revenues), and can increase expenses. Therefore, the correct answer is A, as it directly relates to the increase in assets.

Question 20

The ending capital balance appears on which of the following statement(s)?
A)Income Statement
B)Statement of owner's equity and balance sheet
C)Only on the Statement of owner's equity
D)Statement of owner's equity and income statement

Accepted Answer

The ending capital balance is shown on the Statement of Owner's Equity, which feeds into the Balance Sheet. Therefore, the correct choices are B) Statement of owner's equity and balance sheet. The Income Statement shows revenues and expenses, but not ending capital balance.

Quiz 3: Analyzing Business Transactions Using T Accounts

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements.

An account whose balance is transferred to the capital account at the end of an accounting period is a temporary account.

A business receives a bill for utilities but decides to pay it next month. The business would record the receipt of the bill by:

A business earns $4,000 from various charge account clients. To record this transaction, the business would:

The classification and normal balance of the salaries expense account is:

On a statement of owner's equity, beginning capital is $30,000, Net Income for the year is $11,000 and Drawing for the year is $6,000, the ending capital amount would be:

A business purchases equipment costing $5,500. They pay $1,500 right away and charge the remaining amount. To record this transaction, the business would:

Credits are used to record:

On a statement of owner's equity, beginning capital is $152,000, Drawing for the year is $65,000, and the ending capital is $191,000. What is the amount of Net Income for the year?

Which of the following represents the proper sequence for preparing the financial statements?

A business performed $8,000 of services. Their customer paid $3,000 of the amount right away but Charged the remaining amount. To record this transaction, the business would:

The classification and normal balance of the accounts receivable account is:

Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business?

When recording transactions in the T-accounts, the debits should equal the credits:

Select the entry below to record the payment to employees for work performed during the pay period?

An account with a balance that carries over from one accounting period to another is a nominal account.

A business pays a creditor on account. The entry to record this transaction is:

A business purchases supplies on account. The entry to record this transaction is:

Debits are used to record:

The ending capital balance appears on which of the following statement(s) ?