Deck 3: Double-Entry Accounting and the Accounting Cycle

Question 1

Prepaid expenses, inventory and accounts payable are examples of permanent accounts.

Answer 1

True

Question 2

The right side of a T account is also known as the

A) debit side.
B) credit side.
C) asset side.
D) liability side.

Answer 2

B

Question 3

When transactions are recorded in at least two separate accounts that are equal and offsetting, this is referred to as

A) double-entry accounting.
B) posting to the general ledger.
C) date entry.
D) transaction analysis.
E) all of the above

Answer 3

A

Question 4

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

Question 5

An income summary account can be used when closing the books.

Question 6

Closing entries are done monthly for all companies.

Question 7

Which of the following statements is true?

A) The normal balance is always on the side of the T account that is increasing.
B) The normal balance is always on the side of the T account that is decreasing.
C) The normal balance is always on the debit side of the T account.
D) The normal balance is always on the credit side of the T account.

Question 8

Salary expense, sales revenue, and depreciation expense are examples of permanent accounts.

Question 9

Which of the following relationships best expresses the double-entry nature of an accounting system?

A) assets = liabilities
B) assets = debits
C) liabilities = credits
D) debits = credits

Question 10

All accounts are increased by credits and decreased by debits.

Question 11

Which of the following statements regarding the retained earnings account is not true?

A) It normally has a credit balance.
B) Its balance is increased by revenues.
C) Its balance is decreased by expenses.
D) Its balance is increased by the declaration of dividends.

Question 12

Cash is normally a credit balance.

Question 13

A major disadvantage of the template approach is the number of columns that can be manageably used. This disadvantage can be eliminated through

A) general ledger accounts.
B) transaction analysis.
C) double-entry accounting system.
D) chart of accounts.

Question 14

Balances in the revenue and expense accounts will affect retained earnings at the end of the period.

Question 15

An adjusting entry can be used to record transactions that have been missed.

Question 16

All Statement of Financial Position accounts increase with debits, while all Statement of Income accounts increase with credits.

Question 17

Increases to assets are recorded on the credit side of a T account.

Question 18

All Statement of Financial Position items are temporary and must be closed out annually.

Question 19

Net income is calculated as sales revenues minus the cost of goods sold.

Question 20

At the beginning of the fiscal year an entity's permanent and temporary accounts should all have a zero balance.

Question 21

Which of the following is the first step in the accounting cycle?

A) Recognize that a transaction has occurred.
B) Prepare a source document.
C) Prepare a chart of accounts.
D) Journalize a transaction.

Question 22

Which of the following is not part of the accounting cycle?

A) posting
B) financial statement analysis
C) adjusted trial balance
D) transaction analysis

Question 23

Which of the following accounts normally has a credit balance?

A) Accumulated depreciation
B) Accounts receivable
C) Dividends declared
D) Rent expense

Question 24

A list of all the accounts used by the company in its accounting records is referred to as a

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

Question 25

Which of the following accounts would have a balance that carries over from one period to the next?

A) Revenue
B) Insurance expense
C) Prepaid insurance
D) Dividends declared

Question 26

In practice, an accounting system's chart of accounts includes

A) a numerical identifier.
B) the use of account titles only.
C) statement of financial position accounts only.
D) a restriction on the number of accounts that can be used.

Question 27

Which of the following accounts normally has a debit balance?

A) Accumulated depreciation
B) Prepaid insurance
C) Accounts payable
D) Common shares

Question 28

Which of the following types of accounts appear on the Statement of Financial Position and Statement of Income respectively?

Question 29

Which of the following sequences concerning the accounting cycle is correct?

A) journalize, post, adjusting entries, financial statements
B) transaction analysis, trial balance, post, adjusted trial balance
C) post, adjusting entries, closing entries, financial statements
D) adjusting entries, closing entries, adjusted trial balance, financial statements

Question 30

The chart of accounts is ___.

A) static
B) dynamic
C) not generally useful
D) contains only permanent accounts

Question 31

Which of the following transactions would involve a debit to an asset account?

A) recording depreciation expense on capital assets
B) payment of an accounts payable
C) payment of a dividend
D) collection of an accounts receivable

Question 32

Which of the following is an example of a temporary account?

A) Accumulated depreciation
B) Retained earnings
C) Unearned revenues
D) Dividends declared

Question 33

Which of the following accounts normally has a debit balance?

A) Accounts payable
B) Retained earnings
C) Land
D) Sales revenue

Question 34

Which of the following statements about accumulated depreciation is not true?

A) It is a contra asset account.
B) It records the portion or how much of the asset has been used up.
C) It is reflected on the Statement of Financial Position.
D) It helps determine how much an asset can be sold for.

Question 35

The use of temporary accounts helps managers, at least in part, to assess

A) liquidity.
B) stability.
C) profitability.
D) efficiency.

Question 36

Which of the following accounts normally has a credit balance?

A) Cash
B) Dividends declared
C) Insurance expense
D) Retained earnings

Question 37

The process of transferring data from the general journal to the general ledger is called

A) journalizing.
B) ledgerizing.
C) posting.
D) balancing.

Question 38

Which of the following results in a debit entry to the account identified?

A) increase in shareholders' equity
B) recording interest revenue
C) payment on accounts receivable
D) decrease in shareholders' equity

Question 39

Which of the following accounting records is in chronological order?

A) the chart of accounts
B) the general journal
C) the general ledger
D) the statement of income

Question 40

The following accounts are closed directly into retained earnings; therefore, this (these) account(s) are not accounted for separately in the company's chart of accounts:

A) Revenues.
B) Expenses.
C) Dividends.
D) All of the above are correct.
E) None of the above are correct.

Question 41

Which of the following would normally be recorded with an adjusting entry?

A) sales on account
B) payment for supplies bought on account
C) utilities expense
D) depreciation expense

Question 42

The purchase of land for a combination of cash and issuance of shares would require which of the following entries?

A) Dr. Land, Cr. Common shares, Cr. Cash
B) Dr. Cash, Dr. Common shares, Cr. Land
C) Dr. Land, Cr. Cash, Dr. Common Shares
D) Dr. Cash, Cr. Land, Cr. Common shares

Question 43

The sale of merchandise to a customer partly for cash and partly on account would require which of the following entries?

A) Dr. Accounts receivable, Dr. Cash, Cr. Sales revenue
B) Dr. Cash, Dr. Accounts payable, Cr. Sales revenue
C) Dr. Cash, Cr. Sales revenue
D) Dr. Accounts payable, Dr. Accounts receivable, Cr. Sales revenue

Question 44

When the board of directors declares and pays a $500 dividend, which of the following would be included in the resulting journal entry?

A) Dr. Dividends Declared, Cr. Cash
B) Dr. Cash, Cr. Retained Earnings
C) Dr. Retained Earnings, Cr. Dividends declared
D) Dr. Cash, Cr. Dividends payable

Question 45

An example of a contra asset account is

A) Accumulated depreciation.
B) Depreciation expense.
C) Gain on sale of landd) Prepaid expenses.

Question 46

Which of the following would be the adjusting entry to record accrued interest on a loan made to the business at the end of an accounting period?

A) Dr. Interest expense, Cr. Cash
B) Dr. Interest expense, Cr. Interest payable
C) Dr. Interest payable, Cr. Interest income
D) Dr. Interest payable, Cr. Cash

Question 47

Which of the following is a listing of all the account balances at a specific point in time?

A) the statement of financial position
B) the chart of accounts
C) the general journal
D) the trial balance

Question 48

The purchase of land for a combination of cash and a 15-year note would require which of the following entries?

A) Dr. Land, Dr. Cash, Cr. Long-term note payable
B) Dr. Land, Cr. Cash, Cr. Long-term note payable
C) Dr. Cash, Cr. Long-term note payable, Cr. Land
D) Dr. Land, Dr. Long-term note payable, Cr. Cash

Question 49

The temporary account used in the closing process is called

A) Income Summary.
B) Revenues.
C) Expenses.
D) Dividends.
E) all of the above

Question 50

Which statement regarding adjusting entries is not true?

A) Adjusting entries are made at the end of the accounting period.
B) Adjusting entries can include cash transactions.
C) Adjusting entries are required for accrual accounting.
D) The recognition of depreciation expense is a deferral.

Question 51

Which of the following could cause the trial balance to be out of balance?

A) an entry recorded with only debits
B) an unrecorded entry
C) an entry recorded twice
D) an entry recorded to the wrong accounts

Question 52

Which of the following would be the adjusting journal entry to recognize earned but unpaid wages for the period?

A) Dr. Wages Expense, Cr. Cash
B) Dr. Wages Payable, Cr. Cash
C) Dr. Wages Payable, Cr. Wages Expense
D) Dr. Wages Expense, Cr. Wages Payable

Question 53

The closing process includes the following journal entries:

A) Dr. Revenues, Cr. R/E.
B) Dr. R/E, Cr. Expenses.
C) Dr. R/E, Cr. Dividends Declared.
D) all of the above
E) none of the above

Question 54

When an inventory item that cost $75 is sold on account for $100, which of the following would be included in the journal entry recording the cost of goods sold?

A) Dr. Cash $100
B) Cr. Cost of goods sold $75
C) Cr. Accounts Receivable $100
D) Cr. Inventory $75

Question 55

A debit entry made to the unearned revenue account and credit entry made to the revenue account at the end of the period is referred to as a(n)

A) accrual.
B) deferral.
C) correcting entry.
D) closing entry.

Question 56

Which of the following would be the adjusting journal entry to expense prepaid rent for the period?

A) Dr. Prepaid rent, Cr. Rent expense
B) Dr. Rent expense, Cr. Cash
C) Dr. Prepaid rent, Cr. Cash
D) Dr. Rent expense, Cr. Prepaid rent

Question 57

The process of recording transactions is called

A) transaction analysis.
B) posting.
C) recognizing.
D) journalizing.

Question 58

A net loss occurs when

A) assets exceed liabilities.
B) expenses exceed revenues for the year.
C) dividends exceed income for the year.
D) cumulative expenses and dividends have exceeded income.

Question 59

Which of the following is not an example of an adjusting entry?

A) recording unpaid interest at year end relating to an outstanding loan balance at year end
B) recording depreciation on office equipment purchased during the year
C) recording the gain on the sale of equipment made during the year
D) reducing the prepaid rent account for the portion of rent actually used

Question 60

Which of the following statements about the trail balance is not true?

A) Debit balances must equal credit balances.
B) It includes only assets, liability and equity accounts.
C) It is useful for detecting errors.
D) It is an important step in the accounting cycle.

Question 61

Why is a trial balance prepared and what is its function?

Question 62

Given the following adjusted trial balance: Instructions
a) Determine the
1. net income (loss).
2. current assets.
3. total assets.
4. shareholders' equity.
5. gross profit.
6.current liabilities.
b) Prepare any closing entries required. Assume dividends declared and paid in 2020 are $19,000.
a) Determine the

Question 63

What are temporary accounts and why are they used?

Question 64

Shown below is the trial balance for Kel-Mar Bakery Co. as at December 31, 2020, the company's year end. The company owner provides you with the following additional information:
a) No interest has been paid yet on the note payable. The note has been outstanding since April 1 and the interest rate is 6%.
b) The equipment originally cost $200,000 and has an estimated residual value of $20,000 and a useful life of 6 years.
c) On June 1 the company renewed its insurance policy and paid a $1,200 premium for the year. It was correctly recorded at that time as prepaid insurance.
d) On October 1 the company sold a 12-month service contract to a client for $18,000 and recorded it as Unearned Revenue because at that point they had not yet provided any service to the client. They have been providing the service since the contract was sold.

Instructions
Prepare any adjusting entries required.

Question 65

Shown below is an adjusted trial balance for Debrose Enterprises Ltd. at the end of its accounting period, October 31, 2020. Instructions
a) Prepare a Statement of Income.
b) Prepare a Statement of Changes in Equity.
c) Prepare a classified Statement of Financial Position.

Question 66

What are T accounts and how does this relate to the concept of a normal balance? What is the normal balance for each of the financial statement elements?

Question 67

Prepare year-end adjustments for the following transactions:
1. The company has a $21,000 note receivable with an interest rate of 7%, interest is due on 1^st of the month. Interest expense is recorded monthly.
2. Customer deposits of $7,500 have been received and not yet earned.
3. Annual rent, totalling $12,000, was paid in advance at the beginning of the year.
4. Services totalling $22,100 had been performed but not yet billed by the end of the year.
5. The company owns equipment worth $105,000. It has a 10 year estimated useful life and no residual value.
6. Supplies on hand at the beginning of the year totalled $880, during the year an additional $350 worth of supplies was purchased. By year end, only $100 in supplies remained.
7. Salaries owed to employees at the end of the year total $1,550.

Question 68

The following is a summary of ledger balances at the end of the 2019 and 2020 for Miller's Meat Store:ط Instructions
Prepare a Statement of Financial Position for 2020 based on the above information, assuming the company declared and paid a dividend of $20,000 in 2020.

Question 69

Sara Lee owns and operates Coffee and Just Desserts Inc., a small bakery and café. Instructions
Prepared any closing entries required.

Question 70

What is a chart of accounts? Identify and describe what is contained in a chart of accounts and what management would take into consideration when developing the chart of accounts?

Question 71

Arrange the following accounting cycle steps in the proper order by placing numbers 1 through 10 in the blanks provided:

Question 72

Describe the double-entry accounting system? Explain when, why and how it is used?

Question 73

Which of the following is a current asset item on the Statement of Financial Position?

A) Equipment
B) Prepaid expenses
C) Accounts payable
D) Accrued wages payable

Question 74

Fill in the blanks using the words provided below:
Analyzing, Statement of Financial Position, crediting, debiting, journal, ledger, prepaid expenses, posting, unearned revenue.
a) The act of entering an amount on the left side of an account is called ___ the account, and making an entry on the right side is called ___ the account.
b) The basic steps in the recording process are ___ each transaction, entering the transaction in a ___, and ___ the information to appropriate accounts in the ___.
c) Expenses paid and recorded in an asset account before they are used or consumed are called ___. Revenue received and recorded as a liability before it is earned is referred to as ___.
d) The ___ reports the assets, liabilities, and shareholders' equity of a business on a specific date.

Question 75

The Play House Theatre offers 8 shows per year from September until April. The company has one show each month over the 8-month season. September is always very busy as the company gears up for the new season. The following activities occurred at the Play House during the month of September:
a) On September 1, the company sold season tickets for admission to the season's shows. Ticket sales totalled $1,800,000.
b) On September 1, the theatre issued a casting call and hired the actors for the first show beginning in mid-September. Actor wages for September were $22,750 and paid October 15.
c) On September 1, the Theatre Company also prepaid the stage rental for the entire season. The cost was $500,000.
d) The company has an outstanding short term $150,000 loan with First National bank that was negotiated in August and must be repaid in full by December 15. The interest rate on the loan is 5% and the interest must be paid monthly on the 1^st.
e) On September 10, theatre playbills were printed for the first half of the entire season. The printing cost was $10,500.
Instructions
For each of the transactions above, prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry, if any, required on September 30, the end of the fiscal year.

Question 76

Which of the following would be the closing entry for dividends declared?

A) Dr. Expense summary, Cr. Dividends declared
B) Dr. Retained earnings, Cr. Dividends declared
C) Dr. Dividends declared, Cr. Income summary
D) Dr. Dividends declared, Cr. Retained earnings

Question 77

Tebby's Transportation Corporation prepares annual financial statements. Below are some selected accounts and their balances on the June 30 trial balance before any adjustments have been made. An analysis of the account balances provided the following additional information:
1. A physical count of office supplies revealed $1,200 on hand on June 30.
2. An annual insurance policy was purchased on June 1 for $6,600.
3. The office equipment was purchased on December 1 for $16,200 and has an estimated useful life of five years and no residual value.
4. Rent received in advance that remains unearned at June 30 is $500.
5. An additional $500 of wages has been earned but not yet paid.
Instructions
Using the above additional information, prepare the adjusting entries that should be made on June 30 (adjusting entries are made annually).

Question 78

Indicate with a Dr. or a Cr. whether each of the following accounts normally has a debit or a credit balance.

Question 79

Which of the following types of entries is used to reset the temporary accounts to zero and update the balance in the retained earnings?

A) journal entries
B) adjusting entries
C) closing entries
D) balancing entries

Question 80

The ledger accounts of Brick House Gym Inc. at July 31, 2020 are shown below: Instructions
Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading. Assume all accounts have a normal balance.