Deck 2: Recording Business Transactions

Question 1

Which of the following items of information would not normally be included in a journal entry?

A) the dollar amount of the debit
B) the date the transaction took place
C) the location where the transaction took place
D) the title of the account debited

Answer 1

C

Question 2

Receiving cash from a customer on account would include a:

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

Answer 2

B

Question 3

The payment of salaries to employees when earned would:

A) increase assets
B) decrease shareholders' equity
C) increase liabilities
D) increase net income

Answer 3

B

Question 4

The normal balance of the Accounts Payable account is aaccount.

A) credit; liability
B) credit; shareholders' equity
C) credit; revenue
D) debit; asset

Question 5

An owner investment of a building, valued at $100,000 with an $80,000 outstanding mortgage, transferring this asset into the business would:

A) increase shareholders' equity by $20,000
B) increase shareholders' equity by $100,000
C) increase assets by $20,000
D) increase assets by $80,000

Question 6

A record of all the changes in a particular asset during a period of time is found in a(n):

A) transaction
B) prior period's balance sheet
C) account
D) trial balance

Question 7

The accounting transaction to record payment of the telephone bill would include a:

A) debit to Accounts Receivable
B) credit to Utilities Expense
C) credit to Accounts Payable
D) credit to Cash

Question 8

Receiving a payment from a customer on account would:

A) increase liabilities
B) have no effect on shareholders' equity
C) increase shareholders' equity
D) increase net income

Question 9

Purchasing a three-year insurance policy for cash would include a:

A) debit to Insurance Expense and a credit to Dividends
B) debit to Prepaid Insurance and a credit to Cash
C) debit to Cash and a credit to Accounts Receivable
D) debit to Prepaid Insurance and a credit to Accounts Payable

Question 10

The payment of an amount owed to a creditor would:

A) increase assets
B) decrease net income
C) decrease liabilities
D) increase liabilities

Question 11

The normal balance of an expense account is a because expenses decrease .

A) credit; assets
B) debit; revenues
C) credit; liabilities
D) debit; shareholders' equity

Question 12

An organization's list of all its accounts and the related account numbers is called a:

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

Question 13

Which of the following statements regarding accounts is incorrect?

A) Revenue is increased by a credit and an expense is increased by a debit.
B) A liability is decreased by a debit and increased by a credit.
C) Revenue is increased by a debit and an expense is increased by a credit.
D) An asset is increased by a debit and decreased by a credit.

Question 14

If the credit amount of an entry to record the payment of salaries was not posted:

A) shareholders' equity would be understated
B) expenses would be understated
C) expenses would be overstated
D) assets would be overstated

Question 15

The accounting transaction to record payment of the heating bill would include a:

A) debit to Cash
B) debit to Accounts Receivable
C) credit to Accounts Payable
D) debit to Utilities Expense

Question 16

The purchase of a building with a cash down payment and a written promise to pay the balance in the future would include a:

A) credit to Cash and a credit to Note Payable
B) debit to Note Payable and a credit to Cash
C) debit to Cash and a credit to Buildings
D) debit to Cash and a debit to Note Payable

Question 17

The right side of a T-account is always the:

A) debit side
B) decrease side
C) credit side
D) increase side

Question 18

Which element of an accounting system provides information about the balance in each account?

A) cash flow statement
B) journals
C) ledgers
D) source documents

Question 19

The journal entry to record the payment of cash dividends to shareholders would include a:

A) Debit to Retained Earnings
B) Debit to Dividends
C) Debit to Cash
D) Credit to Dividends

Question 20

A debit increases the balance of which types of accounts?

A) assets and expenses
B) assets and shareholders' equity
C) liabilities and expenses
D) assets and liabilities

Question 21

Which of the following statements regarding accounts is correct?

A) Revenues are increased by debits.
B) Expenses are decreased by debits.
C) Assets are decreased by debits.
D) Liabilities are decreased by debits.

Question 22

Interest payable, income tax payable and salary payable are all examples of:

A) expenses of future periods
B) retained earnings
C) accrued liabilities
D) prepaid expenses

Question 23

What is the first step in the journalizing process?

A) Enter the transaction in the journal.
B) Identify the transaction from source documents and other information.
C) Post the transaction to the ledger.
D) Determine what accounts will be affected and whether to debit or credit them.

Question 24

The account credited when supplies are purchased on account is:

A) Accounts Payable
B) Supplies Expense
C) Supplies
D) Cash

Question 25

A trial balance is:

A) a list of all accounts with their balances
B) prepared before the posting process is completed
C) a list of balance sheet accounts with their balances
D) a list of income statement accounts with their balances

Question 26

The normal balance of the Supplies account is a account.

A) debit; shareholders' equity
B) debit; asset
C) credit; liability
D) credit; expense

Question 27

Which type of account is credited when a company pays its employees?

A) an asset account
B) an expense account
C) a liability account
D) the owners' equity account

Question 28

A credit decreases the balance of which types of accounts?

A) assets and shareholders' equity
B) liabilities and expenses
C) assets and liabilities
D) expenses and assets

Question 29

Accounting transactions are first recorded in a book or record called a:

A) file
B) journal
C) source document
D) ledger

Question 30

When a business sells inventory in exchange for cash, which of the following accounts is credited?

A) Owners' Equity
B) Accounts Payable
C) Revenue
D) Cash

Question 31

Which type of account is credited when a company records a debt?

A) liability
B) asset
C) expense
D) retained earnings

Question 32

The payment for rent of the office building for one month would include a:

A) debit to Cash
B) credit to Revenue
C) debit to Rent Expense
D) credit to Accounts Payable

Question 33

Credits to revenue accounts ultimately result in:

A) an increase in owners' equity
B) an increase in liabilities
C) a decrease in owners' equity
D) a decrease in assets

Question 34

What type of account is Prepaid Rent?

A) an expense
B) shareholders' equity
C) an asset
D) a liability

Question 35

An owners' investment of land and a building into the business would include a:

A) debit to Common shares and a credit to Building
B) debit to Land and a credit to Building
C) debit to Building and a debit to Common shares
D) debit to Land and a credit to Common shares

Question 36

The normal balance of the Common Shares account is a because it increases .

A) credit; liabilities
B) credit; shareholders' equity
C) debit; expenses
D) debit; assets

Question 37

The purchase of an automobile with a cash down payment and a written promise to pay the balance in the future would include a:

A) debit to Cash and a debit to Note Payable
B) debit to Cash and a credit to Automobile
C) credit to Cash and a credit to Note Payable
D) debit to Note Payable and a credit to Cash

Question 38

The accounting process of copying of amounts from the journal to the appropriate ledger accounts is referred to as:

A) posting
B) balancing
C) journalizing
D) footing

Question 39

The payment of expenses should be recorded with a credit to:

A) Common shares
B) Cash
C) Dividends
D) Accounts Receivable

Question 40

This summarizes all the account balances for the financial statements and shows whether total debits equals total credits:

A) journal
B) ledger
C) trial balance
D) accounting equation

Question 41

A chart of accounts is:

A) a list of all income statement accounts
B) a list of all accounts
C) a list of all balance sheet accounts
D) a list of all accounts with their ending balances

Question 42

All of the following accounts would be considered assets except for:

A) Common Shares
B) Notes Receivable
C) Cash
D) Prepaid Expenses

Question 43

Dividends paid to the shareholders when declared will:

A) increase assets and decrease liabilities
B) decrease assets and increase liabilities
C) decrease assets and decrease shareholders' equity
D) have no effect on shareholders' equity

Question 44

Paying a utility bill when received would:

A) increase expenses
B) increase liabilities
C) decrease revenues
D) increase owners' equity

Question 45

The accounting transaction to record the payment of salaries to employees would include a:

A) debit to Cash
B) debit to Salary Expense
C) debit to Accounts Payable
D) credit to Salary Expense

Question 46

Borrowing money from the bank by signing a note payable would:

A) decrease liabilities
B) increase shareholders' equity
C) increase net income
D) have no effect on shareholders' equity

Question 47

A trial balance that is "in balance" proves:

A) all transactions were properly recorded during the accounting period
B) all journal entries were properly posted to the ledger
C) the equality of the debits and credits
D) that the financial statement cannot be prepared using the account balances

Question 48

The normal balance of the Dividends account is a _ because it decreases _ .

A) credit; revenues
B) debit; liabilities
C) debit; assets
D) debit; shareholders' equity

Question 49

The accounting transaction to record payment of the advertising bill would include a:

A) credit to Accounts Payable
B) debit to Advertising Expense
C) debit to Accounts Receivable
D) debit to Cash

Question 50

When a company performs a service and immediately collects the cash from the customer, which of the following would occur?

A) Net income would increase.
B) Assets would decrease.
C) Expenses would decrease.
D) Shareholders' equity would decrease.

Question 51

Receiving a cheque from a customer on account would include a:

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

Question 52

Paying a dividend to the company's shareholders would include a:

A) debit to Dividends and a credit to Cash
B) debit to Retained Earnings and a credit to Dividends
C) debit to Accounts Payable and a credit to Retained Earnings
D) debit to Cash and a credit to Dividends

Question 53

Which of the following accounts does not have a normal credit balance?

A) Inventory
B) Accounts Payable
C) Common Shares
D) Retained Earnings

Question 54

Purchasing supplies and paying cash for them would:

A) have no effect on total assets
B) decrease total assets
C) increase total liabilities and shareholders' equity
D) increase total assets

Question 55

Note payable, accounts payable, and salary payable are all examples of:

A) expenses
B) assets
C) revenue
D) liabilities

Question 56

Performing a service on account would include a:

A) credit to Accounts Receivable
B) debit to Cash
C) debit to Revenue
D) debit to Accounts Receivable

Question 57

The purchase of office equipment for cash would include a:

A) credit to Office Equipment
B) debit to Cash
C) credit to Accounts Payable
D) debit to Office Equipment

Question 58

The normal balance of Accounts Receivable is a account.

A) credit; shareholders' equity
B) credit; liability
C) debit; expense
D) debit; asset

Question 59

The entry to record the purchase of supplies on account would include a:

A) credit to the Accounts Payable account
B) debit to the Retained Earnings account
C) credit to the Supplies account
D) credit to the Cash account

Question 60

When the owner of a business invests cash into the business, which of the following accounts is debited?

A) Cash
B) Common Shares
C) Accounts Receivable
D) Dividends

Question 61

The normal balance of a liability account is a and the normal balance of the common shares account is a .

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

Question 62

The account credited when cash is received from a customer on account is:

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

Question 63

A chronological record (or history) of an entity's transactions is called a(n):

A) ledger
B) account
C) source document
D) journal

Question 64

A trial balance has all of the following features listed below except:

A) subtotals for assets, liabilities, and shareholders' equity
B) a heading
C) totals for both debits and credits
D) accounts listed in order, assets first, followed by liabilities and then shareholders' equity

Question 65

Which of the following items would not be included in the journal entry for a transaction?

A) the names of the source documents used to record the accounting transaction
B) the date the accounting transaction was entered into the accounting system
C) the titles of the accounts that will be used as debits and credits in the transaction
D) the dollar amounts used to record the debits and credits in the transaction

Question 66

Which of the following accounts normally has a debit balance?

A) Retained Earnings
B) Dividends
C) Revenue
D) Share capital

Question 67

The collection of cash from a customer on account would:

A) have no effect on net income or shareholders' equity
B) increase assets and decrease liabilities
C) increase assets and increase net income
D) increase net income and shareholders' equity

Question 68

The normal balance of an expense account is a while the normal balance of a revenue account is a .

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

Question 69

A chart of accounts is:

A) a source document
B) the same as a trial balance
C) a list of all of the accounts of the organization and their related account numbers
D) prepared as the last step in analyzing transactions

Question 70

The purchase of land for cash would:

A) increase total assets
B) increase the total debits on the trial balance
C) decrease shareholders' equity
D) not affect the total of debits or credits on the trial balance

Question 71

If the debit amount of an entry to record the purchase of supplies on account was not posted:

A) assets would be understated
B) liabilities would be understated
C) assets would be overstated
D) liabilities would be overstated

Question 72

The normal balance of a revenue account is a because revenues increase .

A) credit; liabilities
B) debit; assets
C) credit; shareholders' equity
D) debit; dividends

Question 73

Making a cash payment to settle a debt would include a:

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

Question 74

A credit increases the balance of which types of accounts?

A) revenue and assets
B) liabilities and expenses
C) shareholders' equity and liabilities
D) liabilities and assets

Question 75

An owner makes an investment of cash into the business. Such a transaction would include a:

A) debit to Cash
B) debit to Accounts Receivable
C) debit to Common shares
D) credit to Cash

Question 76

Which of the following statements regarding a trial balance is false?

A) A trial balance provides a check on the equality of debits and credits.
B) A trial balance is the same as a balance sheet.
C) A trial balance is a list of all accounts with their balances.
D) A trial balance may be taken at any time the postings are up to date.

Question 77

Posting, a part of the accounting process, refers to:

A) copying amounts from the general ledger to the financial statements
B) copying amounts from the financial statements to the general ledger
C) copying amounts from the journal to the appropriate accounts in the general ledger
D) copying amounts from the accounts in the general ledger to the journal

Question 78

Paying by cheque to settle a debt would include a:

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

Question 79

Performing services on account would:

A) increase net income and shareholders' equity
B) increase revenue and decrease shareholders' equity
C) increase assets and liabilities
D) increase assets and decrease shareholders' equity

Question 80

A trial balance is a useful device because it provides a check on accuracy by showing whether:

A) total revenues equal total expenses
B) total of all the income statement accounts equals the total of all the balance sheet accounts
C) total debits equal total credits
D) total assets equal total liabilities