Deck 3: The Double-Entry Accounting System

Question 1

What is the term used to describe the right side of a T-account?

A)Credit Side
B)Claims Side
C)Debit Side
D)Equity Side

Answer 1

Credit Side

Question 2

Warren Company began the accounting period with a $32,000 debit balance in its accounts receivable account.During the accounting period,the company recorded revenue on account amounting to $88,000.The accounts receivable account at the end of the accounting period contained a $16,000 debit balance.Based on this information,what is the amount of cash collected from customers during the period?

A)$104,000
B)$40,000
C)$72,000
D)$84,000

Answer 2

$104,000

Question 3

A transaction has been recorded in the T-accounts of Horowitz Corporation as follows:


Which of the following reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Answer 3

Option B

Question 4

What is the term used to describe the left side of a T-account?

A)Equity Side
B)Debit Side
C)Credit Side
D)Claims Side

Question 5

A transaction has been recorded in the T-accounts of Powell Corporation as follows:


Which of the following reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 6

Which of the following accounts is increased with a credit?

A)Accounts Receivable
B)Prepaid Rent
C)Common Stock
D)Dividends

Question 7

Which of the following accounts is decreased with a debit?

A)Accounts Receivable
B)Accounts Payable
C)Prepaid Rent
D)Rent Expense

Question 8

What is the term that is used to describe the difference between the total debit and credit amounts in a T-account?

A)Net Income
B)Trial Balance
C)Equality
D)Account Balance

Question 9

Which of the following statements regarding credit entries is true?

A)Credits decrease liability accounts.
B)Credits increase asset accounts.
C)Credits increase the common stock account.
D)Credits increase asset and common stock accounts,and decrease liability accounts.

Question 10

-Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that appear on that particular financial statement. )

A)Account numbers 2,4,and 5 will appear on the income statement.
B)Account numbers 1,3,and 8 will appear on the balance sheet.
C)Account numbers 2,5,and 8 will appear on the statement of cash flows.
D)Account numbers 4,5,and 6 will appear on the statement of changes in stockholders' equity.

Question 11

Which of the following accounts is decreased with a credit?

A)Unearned Revenue
B)Prepaid Insurance
C)Accounts Payable
D)Service Revenue

Question 12

Which of the following accounts normally has a debit balance?

A)Prepaid Insurance
B)Unearned Service Revenue
C)Accounts Payable
D)Common Stock

Question 13

Benson Co.purchased land and paid the full purchase price in cash.Which of the following would be included in the journal entry necessary to record this event?

A)A debit to Land and a debit to Cash
B)A debit to Cash and a credit to Land
C)A credit to Land and a credit to Cash
D)A debit to Land and a credit to Cash

Question 14

Which account is increased by a credit?

A)Accounts Receivable
B)Service Revenue
C)Interest Expense
D)Supplies

Question 15

A transaction has been recorded in the T-accounts of Gibbs Company as follows:


Which of the following could be an explanation for this transaction?

A)Cash has been paid out to a company that will provide future services to Gibbs Company.
B)Gibbs has completed services for which they had earlier received cash in advance.
C)Gibbs has provided services to a customer on account.
D)Gibbs has received cash for service to be provided in the future.

Question 16

-Which of the following is a true statement? (Note: A statement may be true even if it does not identify all accounts that have debit balances on that particular financial statement).

A)Account numbers 1,3,and 5 normally have debit balances.
B)Account numbers 2,4,and 5 normally have debit balances.
C)Account numbers 2,5,and 8 normally have debit balances.
D)Account numbers 4,5,and 6 normally have debit balances.

Question 17

A transaction has been recorded in the T-accounts of Vernon Company as follows:


Which of the following reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 18

Which of the following accounts is increased with a debit?

A)Insurance Expense
B)Service Revenue
C)Accounts Payable
D)Common Stock

Question 19

Which of the following statements about debits is false?

A)Debits Increase Assets.
B)Debits Increase Expenses.
C)Debits Decrease Liabilities.
D)Debits Increase Liabilities.

Question 20

The Baker Company purchased $1,000 of supplies on account.How would this event be reflected in T-accounts?

A)On the right side of the Supplies T-account
B)On the left side of the Supplies T-account
C)On the left side of the Accounts Payable T-account
D)On the right side of the Cash T-account

Question 21

Which of the following statements is true?

A)Adjusting entries are recorded after the closing entries have been recorded.
B)Equal totals in a trial balance guarantees that no errors were made in the recording process.
C)Debits are equal to credits only after closing entries have been recorded.
D)The balance in the retained earnings account in the trial balance will equal the retained earnings balance on the balance sheet only after closing entries have been posted to the general ledger.

Question 22

During a company's first year of operations,the asset account,Office Supplies,was debited for $2,300 for the purchases of supplies.At year-end,a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use.How will the related adjusting entry affect the company's financial statements?

A)Expenses will increase and assets will decrease by $1,475.
B)Assets and expenses will both increase by $825.
C)Expenses and assets will both increase by $1,475.
D)The related adjusting entry has no effect on net income or the accounting equation.

Question 23

Which of the following statement is true regarding the trial balance?

A)Incorrectly recording a cash sale as a sale on account would not cause the trial balance to be out of balance.
B)The income statement is prepared using the post-closing trial balance.
C)A balance of debits and credits ensures that all transactions have been recorded correctly.
D)Trial balances are only prepared at the end of an accounting period.

Question 24

The following account balances were taken from the adjusted trial balance of Kendall Company:

What is the Retained Earnings account balance that will be included on the post-closing trial balance?

A)$19,900
B)$7,400
C)$2,900
D)$24,400

Question 25

During Year 5,Magellan Corporation earned net income of $32,000 and paid cash dividends of $8,500 to its stockholders.Which of the following choices reflects the effect of closing entries on the company's financial statements?

A)The income statement will report net income of $23,500 after the closing entries have been posted to the ledger accounts.
B)The balance sheet will report retained earnings of $23,500 after the closing entries have been posted to the ledger accounts.
C)The balance sheet will report retained earnings of $32,000 after the closing entries have been posted to the ledger accounts.
D)The amounts reported on the financial statements will not be affected by the closing entries.

Question 26

Which one of the following would not be included in a closing entry?

A)A credit to Rent Expense
B)A debit to Unearned Revenue
C)A debit to Service Revenue
D)A credit to Dividends

Question 27

What effect will the following closing entry have on the retained earnings account?

A)Retained earnings will remain unchanged.
B)Retained earnings will decrease by $2,550.
C)Retained earnings will increase by $2,550.
D)Retained earnings will be transferred to the income statement.

Question 28

Which of the following statement year,Valley Packaging Company's adjusted trial balance showed a zero balance in retained earnings.Which of the following is the most likely explanation for this?

A)Valley reported zero net income in the current year.
B)Valley's trial balance will be out of balance until closing entries are recorded.
C)The current year was Valley's first year in business.
D)An error must have been made in preparing Valley's trial balance.

Question 29

The closing entry for the Dividends account would involve which of the following?

A)A credit to Retained Earnings
B)A credit to Dividends
C)A credit to Common Stock
D)A credit to Cash

Question 30

The Wagner Company acquired $500,000 cash from the issue of common stock.How would this transaction be recorded in the company's T-accounts?

A)

B)

C)

D)

Question 31

The employees of Able Company have worked the last two weeks of Year 1,but the employees' salaries have not been paid or recorded as of December 31,Year 1.The adjusting entry that Able should make to accrue these unpaid salaries on December 31,Year 1 is:

A)debit to Salaries Expense and credit to Cash.
B)debit to Salaries Expense and credit to Salaries Payable.
C)debit to Salaries Payable and credit to Salaries Expense.
D)no entry is required until the employee is paid next period.

Question 32

On November 1,Year 1,Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months.Which of the following will be included in the adjustment required on December 31,Year 1?

A)A debit to Prepaid Insurance for $400
B)A credit to Prepaid Insurance for $400
C)A debit to Insurance Expense for $1,200
D)A credit to Insurance Expense for $1,200

Question 33

The trial balance of Barger Company at the end of the accounting period,immediately prior to recording closing entries,showed the following:

What will the balance of the retained earnings account be after the closing entries are recorded?

A)$17,600
B)$4,600
C)$18,600
D)$3,600

Question 34

On August 1,Year 1,Benjamin and Associates collected $18,000 in advance for legal services to be rendered for one year.Which of the following entries reflect the end-of-the-year adjustment to reflect revenue earned?

A)
B)
C)
D)

Question 35

On October 1,Year 1,Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200.On December 31,Year 1,the required adjusting entry was recorded.What are the adjusted account balances at December 31,Year 1?

A)Prepaid Rent,$300;Rent Expense,$900
B)Prepaid Rent,$1,200;Rent Expense,$0
C)Prepaid Rent,$0;Rent Expense,$1,200
D)Prepaid Rent,$900;Rent Expense,$300

Question 36

Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period.How would the related adjusting entry be recorded in the company's T-accounts?

A)

B)

C)

D)

Question 37

Why are adjusting entries recorded at the end of the accounting period?

A)The Cash account must be adjusted for the effects of the daily transactions with customers and creditors.
B)The company's accounts must be adjusted to ensure that debits are equal to credits prior to preparing the trial balance.
C)Unrecorded accruals and deferrals must be recognized before the financial statements can be prepared.
D)The data from the temporary accounts (revenues,expenses,and dividends)must be moved into the retained earnings account.

Question 38

A transaction has been recorded in the T-accounts of Simpson Company as follows:


Which of the following could be an explanation for this transaction?

A)The company borrowed $850.
B)The company loaned $850 to another company.
C)The company repaid a $850 debt.
D)Simpson acquired $850 cash from the issue of common stock.

Question 39

Bijan Corporation earned $4,000 of revenue that had been deferred.How would the related adjusting entry be recorded in the company's T-accounts?

A)

B)

C)

D)

Question 40

A transaction has been recorded in the T-accounts of Hough Company as follows:


Which of the following reflects how this event affects the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 41

The Lazarus Company recorded the following adjustment in general journal format:

Which of the following choices accurately reflects how this event would affect the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 42

Which of the following errors would cause the debit side of a trial balance to be larger than the credit side?

A)Revenue earned on account was recorded with a debit to Cash and a credit to Revenue.
B)Purchase of supplies on account was recorded with a credit to Supplies and a debit to Accounts Payable.
C)Land purchased with cash was recorded with a debit to the Land account and a credit to Accounts Payable.
D)None of these answer choices would cause the debit side of the trial balance to be larger than the credit side.

Question 43

How would the trial balance column totals be affected if a $600 credit to Service Revenue was erroneously posted as a $600 debit to Salaries Expense?

A)The credit column of the trial balance would be $600 more than the debit column.
B)The debit column of the trial balance would be $1,200 more than the credit column.
C)The credit column of the trial balance would be $1,200 more than the debit column.
D)The debit column of the trial balance would be $600 more than the credit column.

Question 44

Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month.Which of the following journal entries correctly records this transaction?

A)
B)
C)
D)

Question 45

The following is a trial balance of Barnhart Company as December 31,Year 1:

What is the total amount of assets that will be reported on the balance sheet prepared as of December 31,Year 1?

A)$21,350
B)$12,500
C)$15,750
D)$23,200

Question 46

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.


-Which company has the highest level of debt risk?

A)Grumpy
B)Happy
C)Doc
D)They all have equal debt risk

Question 47

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.


-Which of the following ratios would be most useful in evaluating a company's performance from the owners' perspective?

A)Return-on-assets ratio
B)Debt-to-assets ratio
C)Return-on-equity ratio
D)Either the debt-to-assets ratio or the return-on-equity ratio

Question 48

Explain how the following general journal entry affects the accounting equation.

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

Question 49

The Youngstown Company recorded the following adjustment in general journal format:

Which of the following choices accurately reflects how this event would affect the company's financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question 50

A transaction has been recorded in the general journal of Manella Company as follows:

Which of the following could be an explanation for this transaction?

A)Paid cash to a customer who requested a refund.
B)Received cash in advance for work to be performed in future months.
C)Recorded adjusting entry for work completed.
D)Received cash for services completed.

Question 51

A transaction has been recorded in the general journal of Deluty Company as follows:

Which of the following describes the effect of this transaction on the company's financial statements?

A)Increases Stockholders' Equity
B)Increases Liabilities
C)Decreases Assets
D)Increases Assets

Question 52

A transaction has been recorded in the general journal of Todd Company as follows:

Which of the following could be an explanation for this transaction?

A)Incurred supplies expense
B)Purchased supplies on account
C)Used supplies
D)Purchased supplies with cash

Question 53

Nelson Company began operations on December 1, Year 1. The following transactions and adjustments were recorded in December and posted to the company's ledger accounts:
1) Acquired $9,000 cash from the issue of common stock to its stockholders.
2) Provided services on account for $7,500.
3) Paid $4,500 cash for land.
4) Owed $3,000 of salaries expenses to employees for work done in December that will be paid during January.
5) Purchased $900 of supplies on account to be used in January.
6) Collected $3,900 from customers.


What is the total of the debit account balances that will be reported on the company's adjusted trial balance at December 31,Year 1?

A)$12,000
B)$20,400
C)$6,900
D)$28,800

Question 54

The following is a random list of the adjusted account balances of Wyoming Company as of the end of the current accounting period:

What is the total of the credit account balances that will be shown on the adjusted trial balance?

A)$112,200
B)$114,200
C)$116,200
D)$79,800

Question 55

A transaction has been recorded in the general journal of Van Buren Company as follows:

Which of the following describes how this entry affects the company's financial statements when it is posted to the ledger accounts?

A)Option A
B)Option B
C)Option C
D)Option D

Question 56

Which of the following statements is true regarding a trial balance that balances?

A)All transactions have been properly recorded.
B)There are no missing transactions.
C)This equality can only be achieved after closing entries have been recorded and posted to the ledger accounts.
D)The equality of debits and credits has been proven.

Question 57

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.


-Which company has the highest return-on-assets ratio?

A)Grumpy.
B)Happy.
C)Doc.
D)They all have equal return-on-assets ratios.

Question 58

The following transaction has been recorded in the general journal entry:

Which of the following could be an explanation for this transaction?

A)Provided services on account.
B)Paid cash to settle accounts payable.
C)Collected cash from customers.
D)Borrowed money to support operating activities.

Question 59

The following transaction has been recorded in the general journal:

How will this transaction affect the company's financial statements after it is posted to the ledger accounts?

A)Decreases Total Liabilities
B)Increases Retained Earnings
C)Decreases Total Assets
D)Decreases Stockholders' Equity

Question 60

At the end of Year 1,the following information is available for Grumpy,Happy,and Doc Companies.


-Which company is the most profitable from the stockholders' perspective?

A)Grumpy
B)Happy
C)Doc
D)Cannot be determined

Question 61

When a company receives cash in advance from a customer,it should debit Cash and credit Accounts Receivable.

Question 62

To record the purchase of supplies on account,an accountant would credit Supplies.

Question 63

The Dividends account normally has a credit balance.

Question 64

Chestnut,Inc.reported the following balances on its balance sheet at December 31,Year 1:

On January 1,Year 2,Chestnut purchased equipment for $40,000 on account.What is the company's debt-to-assets ratio immediately after the purchase of the equipment?

A)0.42
B)0.46
C)0.37
D)0.34

Question 65

A liability account normally has a credit balance.

Question 66

Source documents provide information that serves as the basis for entries into the accounting system.Examples of source documents include invoices and deposit tickets.

Question 67

The T-account format is also called the chart of accounts.

Question 68

An increase to a liability account is recorded with a debit entry.

Question 69

Generally accepted accounting principles require that a business's fiscal year must end on December 31.

Question 70

Debits decrease asset accounts.

Question 71

The left side of a T-account is the debit side.

Question 72

Double entry accounting requires that every entry must include at least one debit and at least one credit.

Question 73

Which of the following transactions would increase a company's return-on-assets ratio?

A)Received cash from customers for goods sold to them on account last month.
B)Borrowed cash from a local bank.
C)Incurred expenses on account.
D)Paid cash to settle accounts payable.

Question 74

A company's general ledger provides a chronological record of its business transactions.

Question 75

The balance in Retained Earnings is decreased by debiting the account.

Question 76

Wichita,Inc.reported the following amounts on its financial statements prepared as of the end of the current accounting period:


-What is the company's return-on-assets ratio?

A)5%
B)10%
C)20%
D)50%

Question 77

The general journal is a list of a business's accounts and their account numbers.

Question 78

Wichita,Inc.reported the following amounts on its financial statements prepared as of the end of the current accounting period:


-What is the company's debt-to-assets ratio?

A)5%
B)10%
C)45%
D)50%

Question 79

The year for which companies prepare their financial statements is their fiscal year.

Question 80

Wichita,Inc.reported the following amounts on its financial statements prepared as of the end of the current accounting period:


-What is the company's return-on-equity ratio?

A)5%
B)10%
C)20%
D)50%