Deck 2: Analyzing and Recording Transactions

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

Credits to accounts are always increases.

Question 5

The accounting equation is expressed as assets = liabilities - equity.

Question 6

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

Question 7

Withdrawals are a type of transaction that affects equity.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Goods sold on credit to customers are called accounts payable.

Question 14

Debits increase asset and expense accounts.

Question 15

When a company sells services in 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.

Question 16

The first step in the accounting cycle is to analyze transactions.

Question 17

Cash withdrawn by the owner of an unincorporated business in the form of a monthly salary should be treated as an expense of the business.

Question 18

A prepaid expense occurs when a company pays in advance for a service or goods for which the benefit extends beyond the current accounting period.

Question 19

A ledger is a type of account.

Question 20

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

Question 21

A transaction that increases an asset account and decreases a liability account must also affect another account.

Question 22

The chart of accounts is a list of all the accounts used by a company.

Question 23

Purchasing supplies on credit increases assets while decreasing liabilities.

Question 24

When a business sends a bill for $200 to a customer for services rendered, the journal entry to record this transaction will include a $200 credit to Accounts Receivable.

Question 25

If a company sells products and receives from the customer a formal written promise to pay a definite sum of money on demand or on a defined future date (or dates), the seller should debit the promised amount to Accounts Receivable.

Question 26

Asset accounts normally have credit balances and expense accounts normally have debit balances.

Question 27

Debits to accounts are normally decreases.

Question 28

The normal balance of an account refers to the debit or credit side where increases are recorded.

Question 29

If a company purchases land, paying part with cash and issuing a note payable for the balance, the journal entry to record this transaction will include a debit to Cash.

Question 30

Because they decrease equity, withdrawals made by a business owner are credited to his/her Withdrawals account.

Question 31

A compound journal entry usually affects three or more accounts.

Question 32

A transaction that decreases an asset account and increases a liability account must also affect another account.

Question 33

A chart of accounts lists the accounts and balances at a specific time.

Question 34

Increases in liabilities are recorded as debits.

Question 35

A revenue account normally has a debit balance.

Question 36

Step Two of the accounting cycle requires that we record transactions in a record called a journal.

Question 37

A credit purchase of a business expense item should be recorded with a debit to an expense account and a credit to Accounts Payable.

Question 38

Prepaid Insurance is an expense account which is used for recording expenses that have been paid in advance.

Question 39

All increases and decreases in cash are not necessarily recorded in the Cash account.

Question 40

To credit an asset account means to decrease it.

Question 41

An abnormal balance in an account refers to a balance on the side where decreases are recorded.

Question 42

If an error is discovered in either the journal or the ledger, it must be corrected by erasing the incorrect amount and entering the corrected amount.

Question 43

Which of the following statements is correct?

A) When an insurance premium is paid in advance, the payment is normally recorded in a liability account called Prepaid Insurance.
B) Goods and services are commonly sold to customers on the basis of oral or implied promises of future payment, called promissory notes.
C) Increases and decreases in cash are always recorded in the equity account.
D) An account called Land is commonly used to record increases and decreases in the land and buildings owned by a business.
E) None of these statements are correct.

Question 44

Unearned revenues are

A) revenues that have been earned and received
B) revenues that have been earned but not yet collected
C) liabilities created by advance cash payments from customers for products or services
D) recorded as an asset in the accounting records
E) increases to owners' equity

Question 45

Posting is the process of copying the debit and credit amounts from a journal to the general ledger accounts.

Question 46

The account sometimes referred to as the owner's personal account or drawing account is called a(n)

A) revenue account
B) withdrawals account
C) capital account
D) expense account
E) liability account

Question 47

A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger, and preparing the trial balance.

Question 48

The trial balance is a list of the accounts that have balances in the ledger.

Question 49

Which of the following statements is correct?

A) The left side of a T-account is the credit side.
B) Entries that decrease asset and expense accounts, or increase liability, equity, and revenue accounts are posted as debits.
C) The left side of a T-account is the debit side.
D) The right side of a T-account is the debit side.
E) Entries that increase asset, expense, and revenue accounts are posted as debits.

Question 50

What is a simple account form widely used in accounting education to illustrate how debits and credits work is called?

A) Withdrawals account
B) Capital account
C) Ledger
D) T-account
E) Balance column account

Question 51

An unconditional written promise to pay a definite sum of money on demand or on a defined future date (or dates) is a(n)

A) unearned revenue
B) prepaid expense
C) account payable
D) notes receivable
E) account receivable

Question 52

The total dollar value of all debits and credits recorded in a journal entry must be equal.

Question 53

An account used to record the owner's investments in the business plus any more or less permanent changes in the equity is called a(n)

A) withdrawals account
B) capital account
C) asset account
D) expense account
E) revenue account

Question 54

The accounting cycle begins with

A) preparing financial statements and other reports
B) analysis of economic events and recording their effects
C) posting to the ledger
D) presentation of financial information to decision makers
E) None of these

Question 55

Since all figures are eventually posted to the ledger, the posting reference column in a journal is not necessary.

Question 56

A place or location within an accounting system in which the increases and decreases in a specific asset, liability, or equity item is recorded and stored is called a(n)

A) journal
B) ledge
C) trial balance
D) account
E) chart of accounts

Question 57

If an account was incorrectly debited for $300 instead of correctly credited for $300, the account is out of balance by $300.

Question 58

An account balance is

A) the total of the credit side of the account
B) the total of the debit side of the account
C) the difference between the increases (including the beginning balance) and decreases recorded in the account
D) the same as the balance sheet equation
E) not used in the real world

Question 59

A general journal entry usually includes information about the date of a transaction, titles of affected accounts, dollar amount of each debit and credit and an explanation of the transaction.

Question 60

What are prepaid expenses?

A) Payments made for economic benefits that never expire
B) Classified as liabilities on the balance sheet
C) Generally, all combined into one account called "Miscellaneous Expenses"
D) Assets created by payments for economic benefits that are not used up until later
E) Always debited to an expense account

Question 61

A credit entry

A) increases asset and expense accounts, or decreases liability, equity, and revenue accounts
B) Is recorded on the left side of a T-account
C) Decreases asset and expense accounts, or increases liability, equity, and revenue account
D) Decreases asset, expense and revenue accounts.
E) Increases the withdrawals account

Question 62

On June 30, the Cash account of Majeau Company had a normal balance of $4,300. During July the account was debited for a total of $3,400 and credited for a total of $3,600. What was the balance in the Cash account on August 1?

A) $-0
B) $4,100 debit
C) $3,400 credit
D) $3,400 debit
E) $4,100 credit

Question 63

A column in journals and accounts used to cross reference journal and ledger entries is called the

A) account balance
B) debit
C) posting reference
D) credit
E) description

Question 64

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is

A) recorded as a debit to an unearned revenue account
B) recorded as a debit to a prepaid expense account
C) recorded as a credit to an unearned revenue account
D) recorded as a credit to a prepaid expense account
E) not recorded in the accounting records

Question 65

The following transactions occurred during July for Hurley Services: How much revenue was earned in July?

A) $1,200
B) $2,300
C) $2,900
D) $5,500
E) $7,000

Question 66

During the month of November, Duffee Company had cash receipts of $3,500 and paid out $1,000 for expenses. The November 30^th cash balance was $5,300. What was the cash balance on November 1?

A) $1,800
B) $2,800
C) $4,300
D) $5,800
E) $7,300

Question 67

The right side of a T-account is a(n)

A) debit
B) increase
C) credit
D) decrease
E) account balance

Question 68

Which of the following statements is incorrect?

A) The normal balance of the accounts receivable account is a debit.
B) The normal balance of the owner's withdrawals account is a debit.
C) The normal balance of an unearned revenues account is a credit.
D) The normal balance of an expense account is a credit.
E) The abnormal balance of a revenue account is a debit.

Question 69

A debit entry

A) increases asset and expense account
B) decreases liability and equity accounts
C) increases the owner's withdrawals account
D) decreases revenue accounts
E) All of these

Question 70

Of the following accounts, the one that normally has a debit balance is

A) accounts payable
B) accounts receivable
C) Ted Neal, capital
D) sales revenue
E) unearned revenue

Question 71

Of the following accounts, the one that normally has a credit balance is

A) cash
B) office equipment
C) sales salaries payable
D) Ted Neal, withdrawals
E) sales salaries expense

Question 72

An asset created by a payment for economic benefits that does not expire until some later time is

A) recorded as a debit to an unearned revenue account
B) recorded as a debit to a prepaid expense account
C) recorded as a credit to an unearned revenue account
D) recorded as a credit to a prepaid expense account
E) not recorded in the accounting records

Question 73

The process of copying journal information to the ledger is called

A) double-entering
B) posting
C) an internal business transaction
D) journalizing
E) an external business transaction

Question 74

If Girard Don, the owner of Girard's Software proprietorship, uses cash of the business to purchase a personal computer, the business should record this use of cash with an entry to

A) debit Salary Expense and credit cash.
B) debit Girard Don, Salary and credit cash.
C) debit cash and credit Girard Don, withdrawals
D) debit Girard Don, capital and credit cash
E) debit Girard Don, withdrawals and credit cash

Question 75

What is double-entry accounting?

A) An accounting system that disregards the accounting equation, A = L + E
B) An accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits
C) An accounting system in which each transaction affects and is recorded in two or more accounts with unequal debits and equal credits
D) An accounting system in which the sum of the debit account balances never equals the sum of the credit account balances
E) An accounting system in which errors never occur

Question 76

A debit is used to record

A) an increase in a liability account
B) a decrease in an asset account
C) a decrease in the withdrawals account
D) an increase in an asset account
E) an increase in a revenue account

Question 77

A list of all accounts used by a company, including the identification number assigned to each account, is called a

A) ledger
B) journal
C) trial balance
D) chart of accounts
E) general journal

Question 78

A credit is used to record

A) a decrease in an expense account
B) a decrease in an asset account
C) an increase in an unearned revenue account
D) an increase in a revenue account
E) All of these

Question 79

A record of all accounts used by a business is called a

A) journal
B) book of original entry
C) general journal
D) trial balance
E) ledger

Question 80

On May 31, Charlotte Company had an Accounts Payable balance of $57,000. During the month of June, total credits to Accounts Payable were $34,000, which resulted from purchases on credit. The June 30 Accounts Payable balance was $7,000. What was the amount of payments made during June?

A) $32,000
B) $34,000
C) $57,000
D) $59,000
E) $84,000