Deck 3: Processing Accounting Information

Question 1

The origins of single-entry accounting were documented in a book written by Pacioli over 500 years ago.It includes the concepts of bookkeeping that are still applied today.

Answer 1

False

Question 2

The credit side of an account is the right side while the debit side is the left side.

Answer 2

True

Question 3

The issuance of stock decreases a company's assets and increases its stockholders' equity.

Answer 3

False

Question 4

Dividends are a determinant of net income.

Question 5

There is a universal chart of accounts that is applicable to all businesses.

Question 6

With few exceptions, the balance of all accounts should be on the side of the T account that causes the increase.

Question 7

An external event involves interaction between an entity and its environment.

Question 8

​Payment of a dividend decreases both cash and stockholders' equity of the distributing business.

Question 9

If a company purchases equipment by issuing a note payable, its total assets will not change.

Question 10

Under the cost principle, assets are always carried at their original cost or historical cost.

Question 11

A company's chart of accounts will reflect the nature of its business.

Question 12

When making a general journal entry, there can only be one debit and one credit.

Question 13

Every accounting transaction affects both the balance sheet and the income statement.

Question 14

A T account for Cash cannot contain any credits.

Question 15

The normal balance of the Dividends account is a credit.

Question 16

The initial step in the recording process is posting.

Question 17

A debit is a negative entry.

Question 18

Under the double-entry system of accounting, every transaction is entered in at least two accounts on opposite sides of T accounts.

Question 19

A debit entry increases assets, decreases liabilities, or decreases stockholders' equity.

Question 20

The accounting equation must balance after each transaction.

Question 21

Which one of the following statements is true?

A) External events (transactions) involve interactions between an entity and a party outside the entity.
B) Every event or transaction which affects an entity is identified from a source document.
C) All economic events can be reliably measured.
D) The movement of raw material into production is an external event.

Question 22

The ledgers are an example of an accounting book of original entry.

Question 23

Every transaction affects equal numbers of ledger accounts and is recorded by equal dollar amounts of debits and credits.

Question 24

The payment of wages to employees is an internal event.

Question 25

Only events that can be measured will be reflected in the journal entries.

Question 26

A trial balance that balances provides proof that all transactions were correctly journalized and posted to the ledger.

Question 27

All transactions refer to external events.

Question 28

A trial balance can be distributed to stockholders in place of the balance sheet.

Question 29

The general journal is often used to record repetitive transactions.

Question 30

The general ledger is sometimes called the book of original entry because it is the accounting record where transactions are first recorded.

Question 31

A trial balance is a financial statement.

Question 32

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.

Question 33

A trial balance is the listing of each account and its balance at a specific point in time.

Question 34

Not all recognizable events are supported by a standard source document.

Question 35

A trial balance can be as informal as an adding machine tape with the account titles penciled in next to the debit and credit amounts.

Question 36

Which of the following is an internal event (transaction)?

A) Life guard salaries are paid by a swim club.
B) Dividends are distributed to shareholders.
C) Eggs used to make omelets in a restaurant are purchased.
D) None of these choices.

Question 37

The equality of debits and credits in a trial balance means that all entries were correctly posted to the accounts.

Question 38

A source document is a record used to accumulate amounts for each individual asset, liability, revenue, expense, and component of stockholders' equity.

Question 39

The use of equipment in a company is an external event.

Question 40

Debits are good and credits are bad in financial terms.

Question 41

Services are provided for customers who pay for the services immediately.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities decrease and assets decrease.

Question 42

Owners of Tri-States Industries, Ralph and Maureen, are sent a dividend check from the company.For this transaction, what is the effect on the accounting equation for Tri-States Industries?

A) Assets decrease and stockholders' equity decreases.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities increase and stockholders' equity decreases.

Question 43

All of the following events (transactions) would be identified from standard source documents except for

A) freight charges for merchandise purchased from suppliers.
B) the amount to be paid to settle a lawsuit for discrimination in hiring employees.
C) wages to be paid to hourly employees.
D) commissions earned by sales employees.

Question 44

XYZ Corp.made cash sales to customers.What effect does this transaction have on the accounting equation?

A) Liabilities increase and stockholders' equity increases.
B) There is no effect on the accounting equation as one asset account increases while another asset account decreases.
C) Assets increase and liabilities increase.
D) Assets increase and stockholders' equity increases.

Question 45

One effect on the accounting equation when a firm borrows money is

A) stockholders' equity decreases.
B) assets increase.
C) liabilities decrease.
D) assets decrease.

Question 46

Payment is made for an electric bill which was received and recorded earlier.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities decrease and assets decrease.

Question 47

Payment is received from customers who were billed earlier for services provided for them.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) There is no effect on the accounting equation as one asset account increases while another asset account decreases.

Question 48

Services are provided for customers who are sent bills for the amount they owe.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities decrease and assets decrease.

Question 49

Which of the following events (transactions) is an internal event for a business entity?

A) An accountant provides services for clients.
B) An accountant purchases computer equipment to maintain business records and prepare legal documents.
C) An accountant receives cash payments from clients for services performed.
D) Periodically, part of the cost of the computer equipment used by an accountant is assigned to depreciation expenses.

Question 50

A truck is purchased on credit.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and owners' equity increases.
C) Liabilities increase and owners' equity decreases.
D) Liabilities decrease and assets decrease.

Question 51

The purchase of office equipment on credit has what effect on the accounting equation?

A) Assets increase and liabilities increase
B) Liabilities increase and stockholders' equity decreases.
C) Assets decrease and stockholders' equity decreases
D) Assets decrease and liabilities decrease.

Question 52

All of the following are external events (transactions) except for

A) a department store recognizing losses from shoplifting.
B) a department store running ads in a local newspaper.
C) a department store purchasing merchandise from a clothing manufacturer.
D) a department store selling clothing to customers on credit.

Question 53

During November, ABC, Inc.purchased office supplies for cash.The supplies will be used in November.What effect does this purchase transaction have on the accounting equation?

A) Assets increase and stockholders' equity decreases.
B) Assets increase and liabilities increase.
C) Assets decrease and liabilities decrease.
D) There is no effect on the accounting equation as one asset account increases while another asset account decreases.

Question 54

Payment is made for land purchased earlier on credit.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decrease.
D) Liabilities decrease and assets decrease.

Question 55

A bill is received for electric service; the charge for the electricity is recorded, but payment will be made later.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities decrease and assets decrease.

Question 56

Blake and Ryan each invest $30,000 in a business and are given shares of stock in Jones Industries as evidence of their ownership interests.For this transaction, identify the effect on the accounting equation.

A) Assets increase and liabilities increase.
B) Assets increase and stockholders' equity increases.
C) Liabilities increase and stockholders' equity decreases.
D) Liabilities decrease and assets decrease.

Question 57

Which of the following statements is false?

A) Checks and deposit slips are the main source of documents backing up the bank statement.
B) Retailers use cash register tapes to recognize sales.
C) Stock certificates are evidence of being a creditor of the company.
D) Time cards are used as the source of information to record wages.

Question 58

The payment of employee salaries has what effect on the accounting equation?

A) Assets decrease and stockholders' equity decreases.
B) Liabilities decrease and stockholders' equity decreases.
C) Assets decrease and liabilities increase.
D) Assets increase and liabilities decrease.

Question 59

Which of the following would be a case where an event as a transaction is not supported by a source document?

A) a purchase of inventory on credit
B) a cash sale
C) a credit sale
D) None of these choices

Question 60

Which of the following statements is true?

A) Only the effects of internal transactions must be recognized and recorded in the entity's accounting system.
B) An internal event is a transaction between an entity and its environment.
C) Not all recognizable events are supported by a standard source document.
D) Only the effects of external events must be recognized, measured, and recorded in an entity's accounting system.

Question 61

Which of the following statements best describes one effect of recognizing expenses incurred by a business entity?

A) Stockholders' equity will decrease.
B) Liabilities will decrease.
C) Stockholders' equity will increase.
D) Assets will increase.

Question 62

The Casan Company purchased a delivery van for $100,000 in cash.What is the effect on current assets?

A) Increase in current assets
B) Decrease in current assets
C) No effect on current assets
D) Unable to determine

Question 63

Given a current ratio of 5 to 3, what is the effect of paying a supplier within 30 days of the purchase?

A) The current ratio would increase.
B) The current ratio would decrease.
C) The current ratio would remain the same.
D) Unable to determine.

Question 64

Use the five transactions for Hennigan Company described below to answer the question(s) that follow(s). Dec 1 Hennigan purchases two new saws on credit at $\$ 375$ each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days.
8 Hennigan accepts advance deposits for to ol Company of $\$ 75$ .
15 Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.
20 Customers are charged $\$ 750$ by Hennigan for tool Company. Payment is due from the customers in 30 days.
31 Hennigan receives $\$ 500$ in payments from the customers that were billed for Company on December 20.

-Refer to the transactions for Hennigan Rentals. ?
Based on the above transactions, how much is still owed to Hennigan on December 31 from its customers?

A) $ -0-
B) $ 250
C) $ 500
D) $ 750

Question 65

Which of the following entries causes a decrease in assets and in net income?

A) The entry to record the payment of utilities with cash.
B) The entry to record the payment of rent for three months in advance.
C) The entry to record accrued wages payable.
D) The entry to record revenue earned but not yet received.

Question 66

Use the five transactions for Hennigan Company described below to answer the question(s) that follow(s). Dec 1 Hennigan purchases two new saws on credit at $\$ 375$ each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days.
8 Hennigan accepts advance deposits for to ol Company of $\$ 75$ .
15 Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.
20 Customers are charged $\$ 750$ by Hennigan for tool Company. Payment is due from the customers in 30 days.
31 Hennigan receives $\$ 500$ in payments from the customers that were billed for Company on December 20.

-Refer to the transactions for Hennigan Rentals. Based on the October 31 transaction, Hennigan will record which of the following in its accounting records?

A) a credit in Accounts Payable for $500.
B) a credit in Accounts Receivable for $500.
C) a debit in Accounts Payable for $500.
D) a debit in Accounts Receivable for $500.

Question 67

Use the five transactions for Hennigan Company described below to answer the question(s) that follow(s). Dec 1 Hennigan purchases two new saws on credit at $\$ 375$ each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days.
8 Hennigan accepts advance deposits for to ol Company of $\$ 75$ .
15 Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.
20 Customers are charged $\$ 750$ by Hennigan for tool Company. Payment is due from the customers in 30 days.
31 Hennigan receives $\$ 500$ in payments from the customers that were billed for Company on December 20.

-Refer to the transactions for Hennigan Rentals. Based on the October 15 transaction, Hennigan will record which of the following in its accounting records?

A) a credit in Accounts Payable for $150.
B) a credit in Accounts Receivable for $150.
C) a debit in Accounts Payable for $150.
D) a debit in Accounts Receivable for $150.

Question 68

Use the five transactions for Hennigan Company described below to answer the question(s) that follow(s). Dec 1 Hennigan purchases two new saws on credit at $\$ 375$ each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days.
8 Hennigan accepts advance deposits for to ol Company of $\$ 75$ .
15 Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.
20 Customers are charged $\$ 750$ by Hennigan for tool Company. Payment is due from the customers in 30 days.
31 Hennigan receives $\$ 500$ in payments from the customers that were billed for Company on December 20.

-Refer to the transactions for Hennigan Rentals. Based on the October 15 transaction, Farmer's Electric will record which of the following in its accounting records?

A) a credit in Accounts Payable for $150.
B) a credit in Accounts Receivable for $150.
C) a debit in Accounts Payable for $150.
D) a debit in Accounts Receivable for $150.

Question 69

If the company has an _________ from a client, then the client has an ________ to the company.

A) account receivable; account receivable
B) account payable; account payable
C) account receivable; account payable
D) account payable; account receivable

Question 70

One effect on the accounting equation when a firm lends money is

A) stockholders' equity decreases.
B) liabilities decrease.
C) liabilities increase.
D) total assets remain the same.

Question 71

If the landlord has rent _________, then the tenant has rent _________.

A) revenue; revenue
B) revenue; expense
C) expense; revenue
D) expense; expense

Question 72

Which of the following statements best describes the effects of recognizing revenue earned by a business entity?

A) Assets increase only when cash sales are made.
B) Stockholders' equity increases only when credit sales are made.
C) Assets and stockholders' equity increase when either cash or credit sales are made.
D) Assets increase, but stockholders' equity decreases, when either cash or credit sales are made.

Question 73

A list of all asset, liability, stockholders' equity, revenue, and expense accounts, along with their assigned account numbers, which are used by a company is a(an)

A) Account
B) General Journal
C) General Ledger
D) Chart of Accounts

Question 74

Rise Corp.received payment from its customers for previous sales on credit.What was the impact on its working capital?

A) Increase in working capital
B) Decrease in working capital
C) No effect on working capital
D) Unable to determine

Question 75

Which of the following transactions affects the liabilities for Gravette, Inc.?

A) Supplies are purchased for cash by Gravette.
B) Gravette places an order for merchandise with a supplier; the merchandise will be shipped to Ernest White in 60 days.
C) The owners of Gravette invest $100,000 in the company.
D) Payment is made on a bank loan which Gravette had obtained 6 months ago.

Question 76

Which of the following statements regarding the activities of Casion Corp.is true?

A) Revenues decrease Forman's stockholders' equity.
B) Expenses decrease Marcus' stockholders' equity.
C) Expenses increase Marcus' stockholders' equity.
D) None of these answer choices is correct.

Question 77

Given that Carlson Corp.'s current ratio is 3 to 2, what is the effect of obtaining a patent from the inventor in exchange for shares of stock in Carlson Corp.?

A) The current ratio would increase.
B) The current ratio would decrease.
C) The current ratio would remain the same.
D) Unable to determine.

Question 78

Which of the following transactions does not affect the total assets of Vertican Sailing Corp.?

A) A bill is received for the telephone service used by Horizon Sailing during the past month.
B) Dividends are paid by Horizon Sailing.
C) Customers are billed for sales made on credit by Horizon Sailing.
D) A new computer is purchased on credit by Horizon Sailing.

Question 79

The following transactions occurred during March, the first month of operations for Canyon Products, Inc.: 1.Issued 50,000 shares of capital stock in exchange for $600,000 cash
2)Purchased land for $400,000, using a $150,000 cash down payment and signing a note payable for the balance.
3)Made a $60,000 cash payment on the note payable from the purchase of land.
4)Purchased equipment on credit from Burton, Inc.for $63,000.
What is the balance in the Cash account at the end of March?

A) $810,000
B) $210,000
C) $600,000
D) $390,000

Question 80

Your bookkeeper is off for the day and you are trying to figure out what her last entry in the journal could be for.Unfortunately, she only recorded the debit side of the transaction as $4,400 to Accounts Payable.It is possible that this debit could correspond to:

A) A purchase of equipment costing $4,400 on credit.
B) A payment of $4,400 to a supplier to settle a balance due.
C) A $4,400 sale to a customer.
D) A $4,400 issuance of the company's capital stock.