Question 1

A bookkeeper has debited an asset account for $3,500 and credited a liability account for $2,000. Which of the following would be an incorrect way to complete the recording of this transaction:

Accepted Answer

The total debits and credits must balance in a transaction. Options A, B, C, and D involve crediting accounts to balance the initial debit, which is correct. Option E incorrectly suggests debiting another account, which would unbalance the transaction.

Question 2

Web Consulting received $3,000 from a customer for services provided. The general journal entry to record this transaction will be:

Accepted Answer

When a company receives cash from a customer for services provided, it increases its Cash account (an asset) and increases its Services Revenue account (an income statement account). Therefore, the company should debit Cash to increase it and credit Services Revenue to record the income.

Question 3

Identify which error will cause the trial balance to be out of balance.

Accepted Answer

The answer of Identify which error will cause the trial...

Question 4

A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error?

Accepted Answer

The answer of A $130 credit to Supplies was credited...

Question 5

The credit purchase of a new oven for $4,700 was posted to Kitchen Equipment as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance?

Accepted Answer

The answer of The credit purchase of a new oven...

Question 6

Identify the accounts that would normally have balances in the debit column of a business's trial balance.

Accepted Answer

Debit balances represent an increase in assets or a decrease in liabilities and equity. Expenses also have a debit balance because they decrease equity. Therefore, the accounts that normally have balances in the debit column are assets and expenses.

Question 7

Which financial statement reports an organization's financial position at a single point in time?

Accepted Answer

The balance sheet provides a snapshot of an organization's financial position at a specific point in time by reporting its assets, liabilities, and equity. The other financial statements report financial information over a period of time.

Question 8

Compare the list of accounts below and choose the list that contains only accounts that would be classified as asset accounts on the Chart of Accounts.

Accepted Answer

Cash, Prepaid Insurance, and Equipment are all examples of asset accounts as they represent resources that the company owns and can use to generate future economic benefits.

Question 9

While in the process of posting from the journal to the ledger, a company failed to post a $500 debit to the Equipment account. The effect of this error will be that:

Accepted Answer

The answer of While in the process of posting from...

Question 10

A list of all ledger accounts and their balances at a point in time is called a(n):

Accepted Answer

A list of all ledger accounts and their balances at a point in time is called a trial balance. Option A, account balance, is incorrect because it only refers to the balance of one specific account. Option C, ledger, is incorrect because it refers to the entire bookkeeping system where accounts are recorded. Option D, chart of accounts, is incorrect because it only describes a list of accounts used by a business. Option E, general journal, is incorrect because it is a book of original entry where all transactions are recorded before being posted to the ledger.

Question 11

Wiley Hill opened Hill's Repairs on March 1 of the current year. During March, the following transactions occurred: 1. Wiley invested $25,000 cash in the business in exchange for common stock.
2) Wiley contributed $100,000 of equipment to the business in exchange for common stock.
3) The company paid $2,000 cash to rent office space for the month of March.
4) The company received $16,000 cash for repair services provided during March.
5) The company paid $6,200 for salaries for the month of March.
6) The company provided $3,000 of services to customers on account.
7) The company paid cash of $500 for utilities for the month of March.
8) The company received $3,100 cash in advance from a customer for repair services to be provided in April.
9) The company paid $5,000 in cash dividends.
Based on this information, the total amount of stockholders' equity reported on the balance sheet at the end of March would be:

Accepted Answer

Ending Equity = $25,000 (#1) + $100,000 (#2) + $16,000 (#4) + $3,000 (#6) − $2,000 (#3) − $6,200 (#5) − $500 (#7) − $5,000 (#9) = $130,300

Question 12

Identify the accounts that would normally have balances in the credit column of a business's trial balance

Accepted Answer

Revenues and liabilities normally have credit balances. Revenues increase with credits and decrease with debits, reflecting the inflow of assets from the sale of goods or services. Liabilities increase with credits because they represent amounts the business owes, which decrease with payments (debits).

Question 13

Identify the statement below that is true.

Accepted Answer

The trial balance is a list of all accounts from the ledger with their balances at a point in time. It is used to ensure that debits equal credits in the accounting system and to prepare financial statements. None of the other statements are true.

Question 14

Which of the following is not a step in the accounting process?

Accepted Answer

Ensuring all cash is distributed to stockholders at the end of each period is not a step in the accounting process. The accounting process involves identifying, analyzing, recording, and summarizing financial transactions and events to prepare financial statements for decision-making.

Question 15

On a trial balance, if the Debit and Credit column totals are equal, then:

Accepted Answer

The answer of On a trial balance, if the Debit...

Question 16

Jeff Jackson opened Jackson's Repairs on March 1 of the current year. During March, the following transactions occurred: 1. Jackson invested $25,000 cash in the business in exchange for common stock.
2) Jackson contributed $100,000 of equipment to the business.
3) The company paid $2,000 cash to rent office space for the month of March.
4) The company received $16,000 cash for repair services provided during March.
5) The company paid $6,200 for salaries for the month of March.
6) The company provided $3,000 of services to customers on account.
7) The company paid cash of $500 for utilities for the month of March.
8) The company received $3,100 cash in advance from a customer for repair services to be provided in April.
9) The company paid $5,000 in cash dividends.
Based on this information, net income for March would be:

Accepted Answer

Net Income = Revenues − Expenses
Net Income = $16,000 (#4) − $2,000 (#3) − $6,200 (#5) + $3,000 (#6) − $500 (#7) = $10,300

Question 17

At year-end, a trial balance showed total credits exceeding total debits by $4,950. This difference could have been caused by:

Accepted Answer

The answer of At year-end, a trial balance showed total...

Question 18

All of the following are asset accounts except:

Accepted Answer

Accounts Receivable, Buildings, Equipment, and Prepaid Insurance are all examples of asset accounts. Supplies expense is not an asset account, but rather an expense account that is used to track the cost of supplies used in the business.

Question 19

A $15 credit to Sales was posted as a $150 credit. By what amount is the Sales account in error?

Accepted Answer

$150 − 15 = $135

Question 20

Identify the item below that would cause the trial balance to not balance?

Accepted Answer

The answer of Identify the item below that would cause...

Quiz 16: Accounting for Business Transactions