Question 1

Which of the following statements is true of revenues?

Accepted Answer

A)  Revenues decrease equity, so a revenue account's normal balance is a credit balance. 
B)  Revenues decrease equity, so a revenue account's normal balance is a debit balance. 
C)  Revenues increase equity, so a revenue account's normal balance is a debit balance. 
D)  Revenues increase equity, so a revenue account's normal balance is a credit balance. 
A)  Revenues decrease equity, so a revenue account's normal balance is a credit balance. 
B)  Revenues decrease equity, so a revenue account's normal balance is a debit balance. 
C)  Revenues increase equity, so a revenue account's normal balance is a debit balance. 
D)  Revenues increase equity, so a revenue account's normal balance is a credit balance.

Question 2

All asset accounts and equity accounts increase with a debit.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following journal entries would be recorded if a business purchased office supplies on account in a previous accounting period and now makes a cash payment of $750 to the supplier to settle the account?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 750 & \
\hline \text { Accounts Payable } & & 750 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 750 & \
\hline \text { Cash } & & 750 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Office Supplies } & 750 & \
\hline \text { Cash } & & 750 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 750 & \
\hline \text { Office Supplies } & & 750 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 750 & \
\hline \text { Accounts Payable } & & 750 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 750 & \
\hline \text { Cash } & & 750 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Office Supplies } & 750 & \
\hline \text { Cash } & & 750 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 750 & \
\hline \text { Office Supplies } & & 750 \
\hline
\end{array}$$

Question 4

Saturn, Inc. paid the rent for the current month in cash. Which of the following accounts will be used to record the transaction?

Accepted Answer

A)  Prepaid Rent 
B)  Rent Payable 
C)  Rent Revenue 
D)  Rent Expense 
A)  Prepaid Rent 
B)  Rent Payable 
C)  Rent Revenue 
D)  Rent Expense

Question 5

A customer's promise to pay in the future for services or goods sold is called a(n) ________.

Accepted Answer

A)  Accounts Receivable 
B)  Accounts Payable 
C)  Unearned Revenue 
D)  Notes Payable 
A)  Accounts Receivable 
B)  Accounts Payable 
C)  Unearned Revenue 
D)  Notes Payable

Question 6

If the total debits equal the total credits on the trial balance, the individual account balances will be error free.

Accepted Answer

A) True 
 B)False

Question 7

When using a four-column account, the posting reference column allows the user of the financial data to trace the amounts in the journal back to the ledger.

Accepted Answer

A) True 
 B)False

Question 8

A debit always means a decrease, and a credit always means an increase.

Accepted Answer

A) True 
 B)False

Question 9

Briefly describe each of the following source documents:
 $$\begin{array} { | l | l | } 
\hline \text { Source Document } & \text { Description } \
\hline \text { Bank checks } & \
\hline \text { Sales invoices } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 10

Mason's Restaurant and Catering had the following transactions during the month of May.
 May 1 Mason contributed $\$ 45,000$ cash in exchange for common stock.
 $\quad $ $\quad $5 Paid monthly rent on the restaurant equipment, $\$ 1,650$.
 $\quad $ $\quad $12 Purchased office supplies on account, $\$ 1,500$.
 $\quad $ $\quad $15 Borrowed $\$ 25,000$ from the bank for business use.
 $\quad $ $\quad $26 Paid $\$ 30,000$ cash for a delivery van.
 $\quad $ $\quad $28 Paid $\$ 1,500$ on account.
 $\quad $ $\quad $29 The business received $\$ 1,600$ for catering services for a wedding on  $\quad $ $\quad $June 11 .
 $\quad $ $\quad $31 Revenues earned during the month included $\$ 20,500$ cash and  $\quad $ $\quad $ $\quad $$\$ 14,500$ on account.
 $\quad $ $\quad $31 Received the May utility bill for $\$ 1,000$. The amount is due on June $\quad $ $\quad $ 10 and will be paid on that date.
 $\quad $ $\quad $31 Paid employees' salaries $\$ 5,500$; restaurant rent $\$ 3,000$ and $\quad $ $\quad $ $\quad $ advertising for May $\$ 800$. Record a compound entry.
 $\quad $ $\quad $31 Received the bill for catering food and supplies used in  May, $\$ 8,500$.
 $\quad $ $\quad $The bill is due on June 15 and will be paid on that date.
 $\quad $ $\quad $31 Paid cash dividends of $\$ 6,000$. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Delivery Van; Accounts Payable; Utilities Payable; Unearned Revenue; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Equipment Rent Expense; Restaurant Rent Expense; Utilities Expense; Catering Expense; and Advertising Expense.
Required: Journalize each transaction. Explanations are not needed.

Accepted Answer

The answer of Mason's Restaurant and Catering had the following...

Question 11

When a business makes a cash payment, the Cash account is debited.

Accepted Answer

A) True 
 B)False

Question 12

A business collects cash from a customer for services that were performed one month earlier. Which of the following accounts is credited?

Accepted Answer

A)  Cash 
B)  Accounts Receivable 
C)  Service Revenue 
D)  Accounts Payable 
A)  Cash 
B)  Accounts Receivable 
C)  Service Revenue 
D)  Accounts Payable

Question 13

A business has the following transactions: The business receives $16,000 cash and issues common stock to stockholders.
The business purchases $500 of office supplies on account.
The business purchases $1,000 of furniture on account.
The business performs services for various clients totaling $14,000 on account.
The business pays $3,000 for salaries expense and $5,000 for rent expense.
The business pays $500 to a supplier for the office supplies purchased earlier.
The business collects $3,000 from one of its clients for services rendered earlier in the month.
At the end of the month, all journal entries are posted to the ledger. Accounts Receivable will appear as which of the following?

Accepted Answer

A)  Accounts Receivable $$\begin{array} { r | l l } 
3,000 & 14,000 & \
\hline & 11,000 \quad \text { Bal. }
\end{array}$$ 
B)  Accounts Receivable $$\begin{array} { l l | l } 
& 14,000 & \
\hline \text { Bal. } & 14,000 &
\end{array}$$ 
C)  Accounts Receivable $$\begin{array} { l l | l } 
& 14,000 & 3,000 \
\hline \text { Bal. } & 11,000 &
\end{array}$$ 
D)  Accounts Receivable $$\begin{array} { r | r r } 
14,000 & 3,000 & \
\hline & 11,000 \quad \text { Bal. }
\end{array}$$ 
A)  Accounts Receivable $$\begin{array} { r | l l } 
3,000 & 14,000 & \
\hline & 11,000 \quad \text { Bal. }
\end{array}$$ 
B)  Accounts Receivable $$\begin{array} { l l | l } 
& 14,000 & \
\hline \text { Bal. } & 14,000 &
\end{array}$$ 
C)  Accounts Receivable $$\begin{array} { l l | l } 
& 14,000 & 3,000 \
\hline \text { Bal. } & 11,000 &
\end{array}$$ 
D)  Accounts Receivable $$\begin{array} { r | r r } 
14,000 & 3,000 & \
\hline & 11,000 \quad \text { Bal. }
\end{array}$$

Question 14

An account is a detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period.

Accepted Answer

A) True 
 B)False

Question 15

An accounting entry that is characterized by having multiple debits and/or multiple credits is called a ________ entry.

Accepted Answer

A)  balanced 
B)  posted 
C)  chart of accounts 
D)  compound journal 
A)  balanced 
B)  posted 
C)  chart of accounts 
D)  compound journal

Question 16

A payable involves a future receipt of cash.

Accepted Answer

A) True 
 B)False

Question 17

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E).
 $$\begin{array} { | l | l | } 
\hline \text { Common Stock } &\quad\quad\quad\quad \
\hline \text { Accounts Receivable } & \
\hline \text { Dividends } & \
\hline \text { Service Revenue } & \
\hline \text { Prepaid Rent } & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 18

Regarding the double-entry system, which of the following statements is incorrect?

Accepted Answer

A)  A transaction would be incomplete if only one side were recorded. 
B)  Because of technology, the use of the double-entry system of accounting is optional. 
C)  The double-entry system is a system of accounting in which every transaction affects at least two accounts. 
D)  If office supplies are purchased on account, the account Office Supplies increases and the account Accounts Payable increases. 
A)  A transaction would be incomplete if only one side were recorded. 
B)  Because of technology, the use of the double-entry system of accounting is optional. 
C)  The double-entry system is a system of accounting in which every transaction affects at least two accounts. 
D)  If office supplies are purchased on account, the account Office Supplies increases and the account Accounts Payable increases.

Question 19

Accounts Receivable is a(n) ________ account and has a normal ________ balance.

Accepted Answer

A)  liability; debit 
B)  asset; debit 
C)  liability; credit 
D)  asset; credit 
A)  liability; debit 
B)  asset; debit 
C)  liability; credit 
D)  asset; credit

Question 20

A business performs services for a customer for $26,000 on account. Which of the following accounts is credited?

Accepted Answer

A)  Cash 
B)  Accounts Receivable 
C)  Service Revenue 
D)  Accounts Payable 
A)  Cash 
B)  Accounts Receivable 
C)  Service Revenue 
D)  Accounts Payable

Exam 2: Recording Business Transactions

Which of the following statements is true of revenues?

All asset accounts and equity accounts increase with a debit.

Which of the following journal entries would be recorded if a business purchased office supplies on account in a previous accounting period and now makes a cash payment of $750 to the supplier to settle the account?

Saturn, Inc. paid the rent for the current month in cash. Which of the following accounts will be used to record the transaction?

A customer's promise to pay in the future for services or goods sold is called a(n) ________.

If the total debits equal the total credits on the trial balance, the individual account balances will be error free.

When using a four-column account, the posting reference column allows the user of the financial data to trace the amounts in the journal back to the ledger.

A debit always means a decrease, and a credit always means an increase.

Briefly describe each of the following source documents: Source Document Description Bank checks Sales invoices

When a business makes a cash payment, the Cash account is debited.

A business collects cash from a customer for services that were performed one month earlier. Which of the following accounts is credited?

An account is a detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period.

An accounting entry that is characterized by having multiple debits and/or multiple credits is called a ________ entry.

A payable involves a future receipt of cash.

Consider the following accounts and identify each as an asset (A), liability (L), or equity (E). Common Stock Accounts Receivable Dividends Service Revenue Prepaid Rent

Regarding the double-entry system, which of the following statements is incorrect?

Accounts Receivable is a(n) ________ account and has a normal ________ balance.

A business performs services for a customer for $26,000 on account. Which of the following accounts is credited?

Accounting and the Business Environment

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

Filters

Accounts Receivable is a(n) account and has a normal balance.