Question 1

If total debits equal total credits in the trial balance,then all balances are correct.A trial balance could contain offsetting errors where the balance of one account is misstated in one direction but the balance of another account (with the same type of debit or credit balance)is misstated in the other direction.

Accepted Answer

A trial balance only checks if the total debits equal total credits, but it does not guarantee that all transactions have been recorded correctly or in the right accounts, allowing for the possibility of offsetting errors.

Question 2

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.

Accepted Answer

When cash payments are made to stockholders as dividends, the company's cash balance decreases as cash is being paid out. At the same time, the company's retained earnings decrease and the dividend account increases, which ultimately leads to an increase in the total amount of dividends paid out. Therefore, choice A is the correct option.

Question 3

The following amounts are reported in the ledger of Mariah Company: What is the balance in the Common Stock account?
$$\begin{array} { | l | r | } 
\hline \text { Assets } & \$ 80,000 \
\hline \text { Liabilities } & 36,000 \
\text { Retained Earnings } & 12,000 \
\hline
\end{array}$$
A)$44,000.
B)$32,000.
C)$48,000.

Accepted Answer

The answer of The following amounts are reported in the...

Question 4

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.

Accepted Answer

The sale of $500 on account would have increased the assets (accounts receivable) and increased the equity (revenue earned). When the cash is collected, there is no net effect on the accounting equation as the accounts receivable (asset) decreases by $500 and cash (asset) increases by $500. Therefore, there is no change in the total assets or equity, and no change in the liabilities.

Question 5

Revenues have what effect on the accounting equation?
A)Increase liabilities.
B)Decrease assets.
C)Increase stockholders' equity.

Accepted Answer

Revenues increase the stockholders' equity, as it reflects an increase in the company's assets (cash, accounts receivable, etc.) based on the products or services delivered to customers.

Question 6

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 on November 20.
C)The company records deferred revenue on October 15.

Accepted Answer

The company has not yet provided services, so it cannot record revenue as earned. Instead, it should record the cash received as a liability called deferred revenue since the services have not yet been provided. Once the services are provided on November 20, the company can then recognize the revenue and reduce the deferred revenue liability. Therefore, the correct choice is C.

Question 7

External events include all of the following except:
A)Paying rent.
B)Purchasing equipment.
C)Using office supplies.

Accepted Answer

Using office supplies is considered an internal event because it involves the internal consumption of resources rather than transactions or interactions with external parties.

Question 8

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.

Accepted Answer

Making payments on all amounts owed is not part of measuring external transactions. External transactions involve analyzing source documents and recording transactions, but making payments on amounts owed is part of the payment process, not the measuring process.

Question 9

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

Accepted Answer

The step that involves assessing the equality of total debits and total credits for the period is to prepare a trial balance. A trial balance is a report that lists all accounts and their balances to ensure that the total debits equal the total credits. If they do not balance, it may indicate an error in recording the transactions. Therefore, option B is the correct answer. Option A describes the first step of the process, and Option C describes the step that involves analyzing the impact of the transaction on the accounting equation.

Question 10

When a company pays employees' salaries for the current period,how will the basic accounting equation be affected?
A)Stockholders' equity decreases.
B)Revenues decrease.
C)Expenses decrease.

Accepted Answer

Paying employees' salaries for the current period decreases stockholders' equity because it increases expenses, which reduces net income and, consequently, stockholders' equity.

Question 11

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.

Accepted Answer

This is the fundamental principle of double-entry accounting system where every transaction has equal debits and credits. Therefore, the sum of all debit balances should equal the sum of all credit balances.

Question 12

Receiving cash from customers before services are performed results in:
A)Prepaid Assets.
B)Service Revenue.
C)Deferred Revenues.

Accepted Answer

Receiving cash from customers before services are performed creates a liability for the company since they have not yet earned the revenue. This liability is referred to as deferred revenues. It is not considered a prepaid asset, as the service has not yet been performed, and it is not considered service revenue until the service is actually provided.

Question 13

An expense has what effect on the accounting equation?
A)Decrease liabilities.
B)Decrease stockholders' equity.
C)Increase assets.

Accepted Answer

Expenses decrease stockholders' equity because they represent costs associated with operating the business, which reduces the net income and, consequently, the retained earnings component of stockholders' equity.

Question 14

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

Accepted Answer

The statement in the question is actually referring to posting, not journalizing. Journalizing is the process of recording transactions in the journal.

Question 15

A list of all account names used to record transactions of a company is referred to as the:
A)Chart of Accounts
B)Income statement
C)General journal

Accepted Answer

The chart of accounts is a document that lists all account names used by a company to record its transactions. This includes all asset, liability, equity, revenue, and expense accounts. The income statement is a financial report that shows a company's revenue, expenses, and net income for a specific period of time. The general journal is a chronological record of a company's transactions, including the accounts affected and the amounts involved. While all of these documents are important for accounting purposes, only the chart of accounts specifically lists all account names used by a company.

Question 16

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

Accepted Answer

A trial balance is a list of all accounts and their balances at a particular date, but it shows that total debits equal total credits, not that assets equal liabilities.

Question 17

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.

Accepted Answer

The basic accounting equation, also known as the balance sheet equation, states that Assets must always equal Liabilities plus Stockholders' Equity for each transaction recorded in an accounting system. This equation must remain in balance at all times. Option B is incorrect as it only refers to cash transactions while option C is incorrect as it does not reflect the complete balance sheet equation.

Question 18

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:
A)Trial balance
B)Accounting cycle
C)Chart of accounts

Accepted Answer

The accounting cycle refers to the full set of procedures used to record, classify, and report financial information, including the steps of analyzing transactions, journalizing them, posting to the ledger, preparing trial balances, adjusting entries, creating financial statements, and closing the books. The trial balance and chart of accounts are specific components of the accounting cycle.

Question 19

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.

Accepted Answer

Purchasing office supplies on account will increase assets (office supplies) and increase liabilities (accounts payable). Providing services on account would increase assets (accounts receivable) and increase equity (revenue earned). Paying dividends would decrease assets (cash) and decrease equity (retained earnings).

Question 20

A(n)_______________ summarizes all transactions related to a particular item over a period of time.
A)Debit
B)Account
C)Chart of accounts

Accepted Answer

A summary of all transactions related to a particular item over a period of time is called an Account. A debit is a transaction that increases the balance of an account, and a chart of accounts is a list of all accounts used by a business.

Quiz 2: The Accounting Cycle: During the Period

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

The following amounts are reported in the ledger of Mariah Company: What is the balance in the Common Stock account? $\begin{array} { | l | r | } \hline \text { Assets } & \$ 80,000 \\\hline \text { Liabilities } & 36,000 \\\text { Retained Earnings } & 12,000 \\\hline\end{array}$

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?

Revenues have what effect on the accounting equation?

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?

External events include all of the following except:

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

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

When a company pays employees' salaries for the current period,how will the basic accounting equation be affected?

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.

Receiving cash from customers before services are performed results in:

An expense has what effect on the accounting equation?

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

A list of all account names used to record transactions of a company is referred to as the:

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

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

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

Which of the following would increase assets and increase liabilities?

A(n) _______________ summarizes all transactions related to a particular item over a period of time.