Deck 2: Recording Business Transactions

Question 1

Liabilities are economic resources that are expected to benefit the business in the future.

Answer 1

False

Question 2

The account title used for recording the prepayment of rent for a building in the future is:

A) prepaid rent.
B) rent payable.
C) rent revenue.
D) rent expense.

Answer 2

A

Question 3

Which of the following details is provided in a typical chart of accounts?

A) account balance
B) account number
C) dates of transactions
D) transaction amounts

Answer 3

B

Question 4

Unearned revenue is a liability account.

Question 5

A chart of accounts is a list of all of a company's accounts with their account numbers.

Question 6

Which of the following is a liability account?

A) Accounts Payable
B) Prepaid Expense
C) Salaries Expense
D) Service Revenue

Question 7

________ represents a debt owed for renting a building currently.

A) Prepaid rent
B) Rent payable
C) Rent revenue
D) Rent expense

Question 8

Which of the following is a collection of all the accounts, the changes in those accounts, and their balances?

A) source document
B) journal
C) ledger
D) trial balance

Question 9

The earnings that result from delivering goods or services to customers are called:

A) notes receivable.
B) unearned revenues.
C) capital.
D) revenues.

Question 10

Which of the following is an asset account?

A) Salaries Expense
B) Accounts Payable
C) Service Revenue
D) Prepaid Expense

Question 11

Which of the following is a liability account?

A) Service Revenue
B) Building
C) Accounts Receivable
D) Unearned Revenue

Question 12

An accounts receivable requires the business to pay cash in future.

Question 13

Which of the following is an asset account?

A) Wages Payable
B) Notes Payable
C) Unearned Revenue
D) Accounts Receivable

Question 14

Nuptial Inc. paid the rent for the current month in cash. Which of the following account titles will be debited?

A) Prepaid rent
B) Rent payable
C) Rent revenue
D) Rent expense

Question 15

A liability created when a business collects cash from customers in advance of providing services or delivering goods is called:

A) notes receivable.
B) unearned revenues.
C) capital.
D) revenues.

Question 16

A payable involves a future receipt of cash.

Question 17

Which of the following is a liability account?

A) Accounts Receivable
B) Cash
C) Building
D) Notes Payable

Question 18

A customer's promise to pay in the future for services or goods sold is called a(n):

A) Accounts Receivable.
B) Accounts Payable.
C) Unearned Revenue.
D) Notes Payable.

Question 19

A chart of accounts is a detailed record of the changes in a particular asset, liability, or owner's equity.

Question 20

A payment of an expense in advance is called a prepaid expense.

Question 21

The system of accounting in which every transaction affects at least two accounts is called the double-entry system.

Question 22

An asset account is increased by a debit.

Question 23

The balances in the accounts of liabilities and revenues are increased with a credit.

Question 24

When a business collects cash, the Cash account is debited.

Question 25

Which of the following accounts increases with a credit?

A) Cash
B) Smith, Capital
C) Accounts Receivable
D) Prepaid Expenses

Question 26

A liability account is increased by a debit.

Question 27

A listing of all account titles in numerical order is called a(n):

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

Question 28

The Owner's Withdrawals account is increased by a debit.

Question 29

All asset accounts and equity accounts increase with a debit.

Question 30

An account that normally has a debit balance may occasionally have a credit balance.

Question 31

A debit always means a decrease and a credit means increase.

Question 32

When a business records revenue earned, the Revenue account is credited.

Question 33

An amount owed but not paid is called a(n):

A) prepaid expense.
B) adjusted liability.
C) accrued liability.
D) note receivable.

Question 34

Debit refers to the right side of the T-account and credit refers to the left side.

Question 35

The Owner's Capital account is increased by a debit.

Question 36

Which type of account is Owner's Capital?

A) equity
B) asset
C) liability
D) revenue

Question 37

When a business makes a cash payment, the Cash account is debited.

Question 38

When a business records an expense incurred, the Expense account is credited.

Question 39

Which of the following is an asset account?

A) Cash
B) Notes Payable
C) Owner's Withdrawals
D) Expenses

Question 40

The normal balance of an account is the increase side of the account.

Question 41

Which of the following groups of accounts normally have a credit balance?

A) assets and liabilities
B) capital and assets
C) liabilities and owner's equity
D) assets and expenses

Question 42

Which of the following accounts increases with a debit?

A) Cash
B) Interest Payable
C) Accounts Payable
D) Smith, Capital

Question 43

For Office Supplies, the category of account and its normal balance is:

A) liabilities and a debit balance.
B) assets and a debit balance.
C) liabilities and a credit balance.
D) assets and a credit balance.

Question 44

The Salaries Payable account is a(n):

A) liability account with a normal debit balance.
B) asset account with a normal debit balance.
C) liability account with a normal credit balance.
D) asset account with a normal credit balance.

Question 45

The Accounts Receivable account of Nuptials Inc. is shown below. Calculate the ending balance of the account.

A) $33,500, debit
B) $31,000, debit
C) $3,500, credit
D) $27,500, debit

Question 46

Which of the following statements is true of the Owner's Capital account?

A) It is an equity account that has a normal credit balance.
B) It is a liability account that has a normal credit balance.
C) It is a liability account that has a normal debit balance.
D) It is an equity account that has a normal debit balance.

Question 47

For Owner's Capital, the category of account and its normal balance is:

A) equity and a credit balance.
B) assets and a debit balance.
C) equity and a debit balance.
D) assets and a credit balance.

Question 48

The Accounts Payable account is a(n) ________ account and carries a ________ normal balance.

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

Question 49

For the Cash account, the category of account and its normal balance is:

A) assets and a debit balance.
B) liabilities and a credit balance.
C) liabilities and a debit balance.
D) assets and a credit balance.

Question 50

Which of the following statements is true of expenses?

A) Expenses increase owner's equity, so an expense account's normal balance is a credit balance.
B) Expenses decrease owner's equity, so an expense account's normal balance is a credit balance.
C) Expenses increase owner's equity, so an expense account's normal balance is a debit balance.
D) Expenses decrease owner's equity, so an expense account's normal balance is a debit balance.

Question 51

Which of the following groups of accounts will decrease with a debit?

A) assets and expenses
B) revenues and expenses
C) liabilities and owner's equity
D) assets and liabilities

Question 52

For Revenues, the category of account and its normal balance is:

A) owner's equity and a credit balance.
B) assets and a debit balance.
C) assets and a credit balance.
D) owner's equity and a debit balance.

Question 53

A shortened form of an account in the ledger is called a:

A) trial balance.
B) balance sheet.
C) chart of accounts.
D) T-account.

Question 54

Which of the following groups of accounts normally have a debit balance?

A) assets and expenses
B) revenues and expenses
C) liabilities and owner's equity
D) assets and liabilities

Question 55

Which of the following accounts decreases with a debit?

A) Accounts Receivable
B) Notes Payable
C) Cash
D) Land

Question 56

Which of the following accounts decreases with a credit?

A) Cash
B) Smith, Capital
C) Accounts Payable
D) Notes Payable

Question 57

Withdrawals is a(n) ________ account that has a normal ________ balance.

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

Question 58

The Accounts Receivable account is a(n) ________ account and carries a ________ normal balance.

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

Question 59

Which of the following statements is true of revenue?

A) Revenues decrease owner's equity, so a revenue account's normal balance is a credit balance.
B) Revenues decrease owner's equity, so a revenue account's normal balance is a debit balance.
C) Revenues increase owner's equity, so a revenue account's normal balance is a debit balance.
D) Revenues increase owner's equity, so a revenue account's normal balance is a credit balance.

Question 60

For Expenses, the category of account and its normal balance is:

A) owner's equity and a credit balance.
B) assets and a debit balance.
C) assets and a credit balance.
D) owner's equity and a debit balance.

Question 61

After initially recording a transaction, the data is then transferred to the:

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

Question 62

Journalizing a transaction involves:

A) calculating the balance in an account using journal entries.
B) posting the account balances in the chart of accounts.
C) preparing a summary of account balances.
D) recording the data only in the journal.

Question 63

A business purchased $3,500 of office supplies for cash. Which of the following sets of ledger accounts reflect the posting of this transaction?

A)

B)

C)

D)

Question 64

A journal entry under the double-entry system includes both debit and credit amounts.

Question 65

Which of the following is a source document that provides the evidence and data for accounting transactions?

A) Journal
B) Sales invoice
C) Ledger
D) Trial balance

Question 66

Which of the following sequences is the normal sequence of flow of accounting data?

A) Ledger → Journal → Source document
B) Journal → Source document → Ledger
C) Source document → Journal → Ledger
D) Source document → Ledger → Journal

Question 67

Sandra invests $40,000 in her new business by depositing the cash in the business's bank account. Which of the following accounts will be debited?

A) Accounts Receivable
B) Cash
C) Sandra, Capital
D) Accounts Payable

Question 68

Sandra invests $40,000 in her new business by depositing the cash in the business's bank account. Which of the following accounts will be credited?

A) Accounts Receivable
B) Cash
C) Sandra, Capital
D) Accounts Payable

Question 69

A business purchases equipment for $8,000 cash. Which of the following accounts will be credited?

A) Cash
B) Accounts Payable
C) Sandra, Capital
D) Equipment

Question 70

Posting a transaction means:

A) calculating the balance in an account.
B) transferring data from the journal to the ledger
C) preparing a summary of account balances.
D) finding the account number in the chart of accounts.

Question 71

Source documents provide the evidence and data for accounting transactions.

Question 72

Debits in the journal are always posted as debits in the ledger.

Question 73

The accounting process of transferring a transaction from the journal to the ledger is called:

A) journalizing.
B) posting.
C) compounding.
D) sourcing.

Question 74

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

Question 75

Accountants first record transactions in a:

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

Question 76

Which of the following is the fifth and last step in the journalizing and posting process?

A) posting the accounts to the ledger
B) identifying each account affected and its type
C) determining whether the accounting equation is in balance
D) determining whether each account has increased or decreased

Question 77

A business renders services to a client and issues a sales invoice. The amount will be collected from the customer at a later time. Which of the following would be true at the time the invoice is issued?

A) Owner's equity will decrease.
B) Total liabilities will increase.
C) Total assets will decrease.
D) Net income will increase.

Question 78

Which of the following is the order of steps to journalize an entry?

A) Identify each account affected → Determine increase or decrease in each account → Record the transaction
B) Identify each account affected → Record the transaction → Determine increase or decrease in each account
C) Record the transaction → Identify each account affected → Determine increase or decrease in each account
D) Determine increase or decrease in each account → Identify each account affected → Record the transaction

Question 79

A business purchases equipment for $8,000 cash. Which of the following accounts will be debited?

A) Cash
B) Accounts Payable
C) Sandra, Capital
D) Equipment

Question 80

The first step in the journalizing and posting process is to:

A) post the accounts to the ledger.
B) identify each account involved and its type.
C) determine whether each account is increased or decreased.
D) record the transaction in the journal, including a brief explanation.