Deck 2: Analyzing Business Transactions

Question 1

Fair Value is the exchange price associated with a business transaction at the time the transaction is recognized.

Answer 1

True

Question 2

Purchase requisitions are recognized in the accounting records.

Answer 2

False

Question 3

A debit has an unfavorable effect on an account.

Answer 3

False

Question 4

When a company purchases goods that it will resell,it must record the goods in an expense account.

Question 5

A decrease in a liability is recorded by a debit.

Question 6

The valuation issue deals with how the components of a transaction should be categorized.

Question 7

When a business hires a new employee,a recordable transaction has occurred.

Question 8

When a company receives a product previously ordered,a recordable transaction has occurred.

Question 9

A decrease in a stockholders' equity account is recorded with a credit.

Question 10

An increase in an asset is recorded by a debit.

Question 11

In accounting,to recognize means to record a transaction or event.

Question 12

When a company receives an order,a transaction has occurred.

Question 13

The recognition issue deals with when a user of financial statements should use accounting information.

Question 14

The most generally accepted value used in accounting is market value.

Question 15

The classification issue involves the assignment of accounts to business transactions.

Question 16

The double-entry system is possible because all business transactions have two equal and opposite aspects.

Question 17

For a T account,an account balance is the difference in total dollars between total debit footings and total credit footings.

Question 18

Column totals are called footings.

Question 19

The cost principle is a solution to the recognition issue.

Question 20

A credit to an asset account means that asset account has been increased.

Question 21

When payment is received for services not yet rendered,no entry is recorded until that service has been rendered.

Question 22

Accounts Payable has a normal credit balance.

Question 23

Dividends should appear on the statement of retained earnings.

Question 24

A transposition error will cause the trial balance to be out of balance by an amount that is evenly divisible by 9.

Question 25

Generally,before Accounts Payable is debited,it is credited.

Question 26

Retained Earnings has a normal debit balance.

Question 27

Generally,before Accounts Receivable is debited,it is credited.

Question 28

A trial balance is normally prepared at the end of the day.

Question 29

A basic storage unit for accounting data is the account.

Question 30

Revenues have a normal credit balance.

Question 31

When stockholders make an investment,the Common Stock account is debited.

Question 32

An increase in revenue is recorded with a credit.

Question 33

Recording an account with a debit balance as a credit,or vice versa,will cause the trial balance to be out of balance by an amount that is evenly divisible by 2.

Question 34

The account Dividends has a normal credit balance.

Question 35

When the columns of the trial balance equal each other,it means that no errors have occurred in recording and posting the transactions.

Question 36

When a dividend is declared and paid,the Dividends account is debited and Cash is credited.

Question 37

In a trial balance,all debits are listed before all credits.

Question 38

When revenue has been earned,no entry is recorded until the related cash has been collected.

Question 39

Liabilities are established with debits and eliminated with credits.

Question 40

A contract is an example of a source document.

Question 41

The amount of profit would always be equal to the ending cash balance.

Question 42

Expenses should be recorded when they are paid,not when they have been incurred.

Question 43

In a journal entry,the Post.Ref.column is left blank until the entry has been posted.

Question 44

Journal entries are typically posted only at the end of the year.

Question 45

Despite the advantages of a computer accounting information system,posting still must be done manually.

Question 46

One can obtain a clear picture of a company's liquidity by referring to its statement of cash flows.

Question 47

In a financial report,a double line is placed below the final total(s).

Question 48

Revenue should be recorded when it has been earned,not when the related cash has been collected.

Question 49

Another name for the ledger is the book of original entry.

Question 50

One can obtain a clear picture of a company's liquidity by referring to its income statement.

Question 51

The chart of accounts makes finding accounts in the ledger easier.

Question 52

Accounts Receivable and Accounts Payable are used when there is a time delay between a transaction and its related cash flow.

Question 53

A net income of $10,000 means that the business received $10,000 more in cash from its customers than it spent to run the business.

Question 54

The ledger account form has a Balance column.

Question 55

In a journal entry,credits are always indented.

Question 56

One might see "J2" correctly placed in the Post.Ref.column of the journal.

Question 57

It is sometimes correct for a compound entry's debit totals and credit totals to be unequal.

Question 58

The journal is a chronological record of all transactions.

Question 59

In a journal entry,assets are always recorded before liabilities.

Question 60

Entering transactions into the journal is called posting.

Question 61

When a business erroneously records expenses as assets,it has violated the measurement issue of

A) communication.
B) classification.
C) valuation.
D) recognition.

Question 62

Office supplies are classified as an expense.

Question 63

All companies use the same standard set of accounts.

Question 64

Another word for expense is debt.

Question 65

Which of the following is a business event that is not considered a recordable transaction?

A) A company receives a product previously ordered.
B) A company pays an employee for work performed.
C) A customer inquires about the availability of a service.
D) A customer purchases a service.

Question 66

Which of the following is a business event that is considered a recordable transaction?

A) A company hires a new employee.
B) A customer purchases merchandise.
C) A company orders a product from a supplier.
D) An employee sends a purchase requisition to the purchasing department.

Question 67

The Land and Building accounts may be combined into one account.

Question 68

The issue of deciding when to record a transaction is solved by

A) properly classifying the transaction.
B) deciding on a point of recognition.
C) assigning historical cost to the transaction.
D) analyzing the intent of management.

Question 69

Wages payable is a type of expense.

Question 70

When a business reports an asset at an inflated dollar amount,it has violated the measurement issue of

A) recognition.
B) valuation.
C) classification.
D) realization.

Question 71

The numbering scheme of a chart of accounts should contain no gaps.

Question 72

The accounts in a chart of accounts are normally listed in alphabetical order.

Question 73

Dividends are classified as an expense.

Question 74

Which of the following is not a measurement issue in accounting?

A) Valuation
B) Recognition
C) Evaluation
D) Classification

Question 75

Which of the following is an illustration of the classification issue?

A) At what amount should an old machine be shown on the balance sheet?
B) At what point should the purchase of art supplies be recorded?
C) Should tools be recorded as an asset or as an expense?
D) At what point should a bill be paid for the purchase of an item?

Question 76

When a business records revenue before it has been earned,it has violated the measurement issue of

A) recognition.
B) evaluation.
C) classification.
D) valuation.

Question 77

Unearned revenues are classified as liabilities on the balance sheet.

Question 78

Which of the following is not a measurement issue in accounting?

A) When to record a business transaction
B) How to classify the items of a business transaction
C) What value to place on a business transaction
D) Where to record a business transaction

Question 79

A purchase is recognized in the accounting records when

A) payment is made for the item purchased.
B) the purchase requisition is sent to the purchasing department.
C) title transfers from the seller to the buyer.
D) the buyer receives the seller's bill.

Question 80

Investments by stockholders are recorded in the Common Stock account,not in the Retained Earnings account.