Deck 2: The Recording Process

Question 1

A credit balance in a liability account indicates that an error in recording has occurred.

Answer 1

False

Question 2

Transactions are entered in the ledger accounts and then transferred to journals.

Answer 2

False

Question 3

An account is often referred to as a T-account because of the way it is constructed.

Answer 3

True

Question 4

Debit and credit can be interpreted to mean increase and decrease, respectively.

Question 5

The recording process becomes more efficient and informative if all transactions are recorded in one account.

Question 6

A simple journal entry requires only one debit to an account and one credit to an account.

Question 7

If a revenue account is credited, the revenue account is increased.

Question 8

A debit to an account indicates an increase in that account.

Question 9

All business transactions must be entered first in the general ledger.

Question 10

When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.

Question 11

A compound journal entry requires several debits to one account and several credits to one account.

Question 12

A new account is opened for each transaction entered into by a business firm.

Question 13

The normal balance of all accounts is a debit.

Question 14

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

Question 15

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

Question 16

Under the double-entry system, revenues must always equal expenses.

Question 17

The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

Question 18

Business documents can provide evidence that a transaction has occurred.

Question 19

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

Question 20

Revenues are a subdivision of retained earnings.

Question 21

A journal is also known as a book of original entry.

Question 22

The chart of accounts is a listing of the accounts and the account numbers which identify their location in the ledger.

Question 23

Transactions are recorded in alphabetic order in a journal.

Question 24

After a transaction has been posted, the reference column in the journal should not be blank.

Question 25

The complete effect of a transaction on the accounts is disclosed in the journal.

Question 26

An account consists of

A) one part.
B) two parts.
C) three parts.
D) four parts.

Question 27

The chart of accounts is a special ledger used in accounting systems.

Question 28

The normal balance of an expense is a credit.

Question 29

A general ledger should be arranged in the order in which accounts are presented in the financial statements, beginning with the balance sheet accounts.

Question 30

The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction.

Question 31

A trial balance does not prove that all transactions have been recorded or that the ledger is correct.

Question 32

The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises.

Question 33

Posting is the process of proving the equality of debits and credits in the trial balance.

Question 34

The journal provides a chronological record of transactions.

Question 35

The account titles used in journalizing transactions need not be identical to the account titles in the ledger.

Question 36

The left side of an account is

A) blank.
B) a description of the account.
C) the debit side.
D) the balance of the account.

Question 37

The primary purpose of a trial balance is to prove the mathematical equality of the debits and credits after posting.

Question 38

Which one of the following is not a part of an account?

A) Credit side
B) Trial balance
C) Debit side
D)

Question 39

The ledger is merely a bookkeeping device and therefore does not provide much useful data for management.

Question 40

The trial balance will not balance when incorrect account titles are used in journalizing or posting.

Question 41

An account is a part of the financial information system and is described by all except which one of the following?

A) An account has a debit and credit side.
B) An account is a source document.
C) An account may be part of a manual or a computerized accounting system.
D) An account has a title.

Question 42

The normal balance of any account is the

A) left side.
B) right side.
C) side which increases that account.
D) side which decreases that account.

Question 43

In recording an accounting transaction in a double-entry system

A) the number of debit accounts must equal the number of credit accounts.
B) there must always be entries made on both sides of the accounting equation.
C) the amount of the debits must equal the amount of the credits.
D) there must only be two accounts affected by any transaction.

Question 44

Which one of the following represents the expanded basic accounting equation?

A) Assets = Liabilities + Common stock + Retained Earnings + Dividends - Revenues - Expenses.
B) Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues.
C) Assets - Liabilities - Dividends = Common stock + Retained Earnings + Revenues - Expenses.
D) Assets = Revenues + Expenses - Liabilities.

Question 45

For the basic accounting equation to stay in balance, each transaction recorded must

A) affect two or less accounts.
B) affect two or more accounts.
C) always affect exactly two accounts.
D) affect the same number of asset and liability accounts.

Question 46

An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction?

A) Nothing further must be done.
B) Debit a Stockholders' equity account for $700.
C) Debit another asset account for $700.
D) Credit a different asset account for $700.

Question 47

A debit is not the normal balance for which account listed below?

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

Question 48

Which of the following correctly identifies normal balances of accounts?

Question 49

The double-entry system requires that each transaction must be recorded

A) in at least two different accounts.
B) in two sets of books.
C) in a journal and in a ledger.
D) first as a revenue and then as an expense.

Question 50

A debit to an asset account indicates

A) an error.
B) a credit was made to a liability account.
C) a decrease in the asset.
D) an increase in the asset.

Question 51

An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?

A) Credit an asset account for $800.
B) Credit another liability account for $800.
C) Credit a Stockholders' account for $800.
D) Debit a Stockholders' account for $800.

Question 52

The best interpretation of the word credit is the

A) offset side of an account.
B) increase side of an account.
C) right side of an account.
D) decrease side of an account.

Question 53

Which of the following is not true of the terms debit and credit?

A) They can be abbreviated as Dr. and Cr.
B) They can be interpreted to mean increase and decrease.
C) They can be used to describe the balance of an account.
D) They can be interpreted to mean left and right.

Question 54

Which of the following statements is true?

A) Debits increase assets and increase liabilities.
B) Credits decrease assets and decrease liabilities.
C) Credits decrease assets and increase liabilities.
D) Debits decrease liabilities and decrease assets.

Question 55

A T-account is

A) a way of depicting the basic form of an account.
B) what the computer uses to organize bytes of information.
C) a special account used instead of a trial balance.
D) used for accounts that have both a debit and credit balance.

Question 56

Credits

A) decrease both assets and liabilities.
B) decrease assets and increase liabilities.
C) increase both assets and liabilities.
D) increase assets and decrease liabilities.

Question 57

The right side of an account

A) is the correct side.
B) reflects all transactions for the accounting period.
C) shows all the balances of the accounts in the system.
D) is the credit side.

Question 58

A credit is not the normal balance for which account listed below?

A) Common stock account
B) Revenue account
C) Liability account
D) Dividends account

Question 59

An account consists of

A) a title, a debit balance, and a credit balance.
B) a title, a left side, and a debit balance.
C) a title, a debit side, and a credit side.
D) a title, a right side, and a debit balance.

Question 60

An account will have a credit balance if the

A) credits exceed the debits.
B) first transaction entered was a credit.
C) debits exceed the credits.
D) last transaction entered was a credit.

Question 61

Electrelane Company showed the following balances at the end of its first year: $$\begin{array} { l r } \text { Cash } & \$ 4,000 \\\text { Prepaid insurance } & 7,000 \\\text { Accounts receivable } & 5,000 \\\text { Accounts payable } & 4,000 \\\text { Notes payable } & 6,000 \\\text { Common stock } & 2,000 \\\text { Dividends } & 1,000 \\\text { Revenues } & 32,000 \\\text { Expenses } & 25,000\end{array}$$ What did Electrelene Company show as total credits on its trial balance?

A) $9,000
B) $44,000
C) $45,000
D) $49,000

Question 62

At December 1, 2018, Cursive Company's accounts receivable balance was $1,800. During December, Cursive had revenues on account of $7,200 and collected accounts receivable of $6,000. At December 31, 2018, the accounts receivable balance is

A) $600 debit.
B) $3,000 debit.
C) $600 credit.
D) $3,000 credit.

Question 63

On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include

A) a debit to Supplies and a credit to Accounts Payable.
B) a debit to Supplies Expense and a credit to Accounts Receivable.
C) a debit to Supplies and a credit to Cash.
D) a debit to Accounts Receivable and a credit to Supplies.

Question 64

If a company has overdrawn its bank balance, then

A) its cash account will show a debit balance.
B) its cash account will show a credit balance.
C) the cash account debits will exceed the cash account credits.
D) it cannot be detected by observing the balance of the cash account.

Question 65

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and

A) nothing further must be done.
B) debited the retained earnings account for $2,100.
C) credited another asset account for $400.
D) credited a liability account for $2,100.

Question 66

At January 31, 2018, the balance in Aislers Inc.'s supplies account was $750. During February, Aislers purchased supplies of $900 and used supplies of $1,125. At the end of February, the balance in the supplies account should be

A) $525 debit.
B) $975 debit.
C) $525 credit.
D) $775 debit.

Question 67

The Dividends account

A) appears on the income statement along with the expenses of the business.
B) must show transactions every accounting period.
C) is increased with debits and decreased with credits.
D) is not a proper subdivision of retained earnings.

Question 68

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)

A) $800 credit balance.
B) $1,200 debit balance.
C) $400 debit balance.
D) $400 credit balance.

Question 69

On June 1, 2018, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?

A) $3,000 debit balance
B) $17,000 debit balance
C) $3,000 credit balance
D) $2,000 credit balance

Question 70

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

A) A debit balance in the dividends account
B) A credit balance in an expense account
C) A credit balance in a liabilities account
D) A credit balance in a revenue account

Question 71

Which account below is not a subdivision of retained earnings?

A) Dividends
B) Revenues
C) Expenses
D) Common stock

Question 72

Mt. Zion Inc. pays its employees twice a month, on the 7^th and the 21^st. On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would

A) increase stockholders' equity by $5,000.
B) decrease the balance in Salaries and Wages Expense by $5,000.
C) decrease net income for the month by $5,000.
D) be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to Salaries and Wages Expense.

Question 73

When a company distributes dividends

A) it doesn't have to be cash, it could be another asset.
B) the dividends account will be increased with a credit.
C) the retained earnings account will be directly increased with a debit.
D) the dividends account will be decreased with a debit.

Question 74

At January 1, 2018, Alligator Industries reported retained earnings of $150,000. During 2018, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2018, the amount of retained earnings is

A) $105,000.
B) $120,000.
C) $135,000.
D) $165,000.

Question 75

In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $36,000 ($16,000 investment by stockholders and revenues of $20,000). The total of the credit entries to the cash account amounted to $22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end of the month, the cash account has a(n)

A) $6,000 credit balance.
B) $6,000 debit balance.
C) $14,000 debit balance.
D) $14,000 credit balance.

Question 76

Assets normally show

A) credit balances.
B) debit balances.
C) debit and credit balances.
D) debit or credit balances.

Question 77

A credit to a liability account

A) indicates an increase in the amount owed to creditors.
B) indicates a decrease in the amount owed to creditors.
C) is an error.
D) must be accompanied by a debit to an asset account.

Question 78

Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?

A) Credit an asset account for $400.
B) Credit another liability account for $400.
C) Credit the retained earnings account for $400.
D) Debit the retained earnings account for $400.

Question 79

Which of the following statements is incorrect?

A) Expenses increase stockholders' equity.
B) Expenses have normal debit balances.
C) Expenses decrease stockholders' equity.
D) Expenses are a negative factor in the computation of net income.

Question 80

During February 2018 its first month of operations, the stockholders of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?

A) $4,000 credit
B) $4,000 debit
C) $46,000 debit
D) $54,000 debit