Deck 3: Processing Accounting Information

Question 1

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

Answer 1

True

Question 2

All transactions refer to external events.

Answer 2

False

Question 3

The accounting equation must balance after each transaction.

Answer 3

True

Question 4

A T account for Cash cannot contain any credits.

Question 5

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

Question 6

The payment of wages to employees is an internal event.

Question 7

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

Question 8

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.

Question 9

Dividends are a determinant of net income.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

The normal balance of the Dividends account is a credit.

Question 21

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

Question 22

The initial step in the recording process is posting.

Question 23

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

Question 24

A trial balance is a financial statement.

Question 25

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

Question 26

If debits equal credits in a trial balance,then all entries were correctly posted to the accounts.

Question 27

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 are correct.

Question 28

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

Question 29

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

Question 30

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 that affects an entity is identified from a source document.
C)All economic events can be reliably measured.
D)The movement of raw materials into production is an external event.

Question 31

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

Question 32

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

Question 33

The general journal is often used to record repetitive transactions.

Question 34

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

Question 35

Debits are good and credits are bad in financial terms.

Question 36

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 37

A debit is a negative entry.

Question 38

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

Question 39

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

Question 40

Which one of the following best defines an internal event in terms of accounting?

A)Every type of transaction is an internal event
B)An event recognized in a set of financial statements
C)A happening of consequence to an entity
D)An event occurring entirely within an entity

Question 41

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 42

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 43

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 44

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 45

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 46

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 47

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 48

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 decrease and stockholders' equity increases.

Question 49

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 50

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 51

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 52

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

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

Question 53

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,the historical cost of the computer equipment used by an accountant is recorded as depreciation expenses.

Question 54

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

A)Purchase of inventory on credit
B)Cash sale
C)Credit sale
D)None of these are correct

Question 55

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

A)moving goods from the stock-room to the retail floor for sale.
B)running ads in a local newspaper.
C)purchasing merchandise from a clothing manufacturer.
D)selling clothing to customers on credit.

Question 56

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 57

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 decreases.
D)Liabilities decrease and assets decrease.

Question 58

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 59

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 60

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 61

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

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

Question 62

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 63

Given a current ratio of 5 to 1,what is the effect of paying an accounts payable to a supplier?

A)The current ratio would increase.
B)The current ratio would decrease.
C)The current ratio would remain the same.
D)The effect of the current ratio cannot be determined.

Question 64

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)The effect of the current ratio cannot be determined.

Question 65

Hennigan Company
Use the five transactions below for Hennigan Rentals to answer the questions that follow.
Dec. 1 $\quad$ 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 $\quad$ Hennigan accepts advance deposits for tool rentals of $\$ 75$ .

15 $\quad$ Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.

20 $\quad$ Customers are charged $\$ 750$ by Hennigan for tool rentals. Payment is due from the customers in 30 days.

31 $\quad$ Hennigan receives $\$ 500$ in payments from the customers that were billed for rentals 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 66

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 Vertican Sailing during the past month.
B)Cash dividends are paid by Vertican Sailing.
C)Customers are billed for sales made on credit by Vertican Sailing.
D)A new computer is purchased on credit by Vertican Sailing.

Question 67

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

A)account.
B)general journal.
C)general ledger.
D)chart of accounts.

Question 68

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 69

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

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

Question 70

Hennigan Company
Use the five transactions below for Hennigan Rentals to answer the questions that follow.
Dec. 1 $\quad$ 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 $\quad$ Hennigan accepts advance deposits for tool rentals of $\$ 75$ .

15 $\quad$ Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.

20 $\quad$ Customers are charged $\$ 750$ by Hennigan for tool rentals. Payment is due from the customers in 30 days.

31 $\quad$ Hennigan receives $\$ 500$ in payments from the customers that were billed for rentals on December 20.

-Refer to the transactions for Hennigan Rentals. ?
Based on the December 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 71

Hennigan Company
Use the five transactions below for Hennigan Rentals to answer the questions that follow.
Dec. 1 $\quad$ 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 $\quad$ Hennigan accepts advance deposits for tool rentals of $\$ 75$ .

15 $\quad$ Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.

20 $\quad$ Customers are charged $\$ 750$ by Hennigan for tool rentals. Payment is due from the customers in 30 days.

31 $\quad$ Hennigan receives $\$ 500$ in payments from the customers that were billed for rentals on December 20.

-Refer to the transactions for Hennigan Rentals. ?
Based on the December 8 transaction,Hennigan will record which of the following in its accounting records?

A)A credit in Accounts Payable for $75
B)A credit in Accounts Receivable for $75
C)A debit in Accounts Payable for $75
D)A debit in Accounts Receivable for $75

Question 72

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 73

Hennigan Company
Use the five transactions below for Hennigan Rentals to answer the questions that follow.
Dec. 1 $\quad$ 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 $\quad$ Hennigan accepts advance deposits for tool rentals of $\$ 75$ .

15 $\quad$ Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.

20 $\quad$ Customers are charged $\$ 750$ by Hennigan for tool rentals. Payment is due from the customers in 30 days.

31 $\quad$ Hennigan receives $\$ 500$ in payments from the customers that were billed for rentals on December 20.

-Refer to the transactions for Hennigan Rentals. ?
Based on the December 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 74

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 Gravette 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 six months ago.

Question 75

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

A)Revenues decrease Casion 's stockholders' equity.
B)Expenses decrease Casion 's stockholders' equity.
C)Expenses increase Casion 's stockholders' equity.
D)None of these are correct.

Question 76

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 77

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 cash for the purchase of a building
C)The entry to record accrued wages payable
D)The entry to record revenue earned but not yet received

Question 78

Hennigan Company
Use the five transactions below for Hennigan Rentals to answer the questions that follow.
Dec. 1 $\quad$ 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 $\quad$ Hennigan accepts advance deposits for tool rentals of $\$ 75$ .

15 $\quad$ Hennigan receives a bill from Farmer's Electric Company for $\$ 150$ . Payment is due in 30 days.

20 $\quad$ Customers are charged $\$ 750$ by Hennigan for tool rentals. Payment is due from the customers in 30 days.

31 $\quad$ Hennigan receives $\$ 500$ in payments from the customers that were billed for rentals on December 20.

-Refer to the transactions for Hennigan Rentals. ?
Based on the December 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 79

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.

Question 80

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