Deck 2: The Accounting Cycle: During the Period

Question 1

Paying employees' salaries for the current month causes no change to stockholders' equity.Salaries expense would reduce stockholders' equity.

Answer 1

False

Question 2

The two components of stockholders' equity are Debits and Credits.The two components of stockholders' equity are Common Stock and Retained Earnings.

Answer 2

False

Question 3

Purchasing supplies on account increases the balance of the Accounts Receivable account.The balance of Accounts Payable increases.

Answer 3

False

Question 4

Borrowing cash from the bank causes assets to increase and liabilities to increase.

Question 5

After recording each transaction,total assets must equal total liabilities plus stockholders' equity.

Question 6

Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity.Examples are using supplies on hand and earning revenues after having received cash in advance from a customer.

Question 7

Revenues have the effect of increasing retained earnings.

Question 8

External transactions are transactions the firm conducts with a separate economic entity,such as selling products to a customer,purchasing supplies from a vendor,paying salaries to an employee,and borrowing money from a bank.

Question 9

If a transaction causes total assets of the company to increase by $2,000,then liabilities plus stockholders' equity also increases by $2,000.

Question 10

Purchasing office supplies on account causes assets to increase and liabilities to increase.

Question 11

Amounts owed from customers are recorded in the Accounts Receivable account.

Question 12

Receiving cash in advance from a customer for services to be provided in the future causes assets to increase and stockholders' equity to increase.Assets increase and liabilities increase.

Question 13

Providing services to customers on account causes assets to increase and stockholders' equity to increase.

Question 14

Selling common stock for cash causes assets to increase and stockholders' equity to decrease.Stockholders' equity increases.

Question 15

Paying for one year of rent in advance does not affect the accounting equation.

Question 16

A list of all account names used to record transactions of a company is referred to as a T-account.This is referred to as a chart of accounts.

Question 17

Providing services to customers for cash causes stockholders' equity to increase.

Question 18

Paying dividends to its stockholders causes a company's stockholders' equity to decrease.

Question 19

Purchasing equipment using cash causes assets to increase.One asset goes up;another asset goes down.There is no change to total assets.

Question 20

If a transaction causes total assets of the company to increase by $5,000 and total liabilities to increase by $3,000,then stockholders' equity increases by $8,000.

Question 21

A credit to an account balance always results in the balance decreasing.A credit decreases assets,dividends,and expenses,but increases liabilities,stockholders' equity,and revenues.

Question 22

For each transaction,the total debit amounts must equal the total credit amounts.

Question 23

Providing services to customers is recorded with a debit to Service Revenue.Providing services to customers is recorded with a credit to Service Revenue.

Question 24

Receiving cash in advance from customers increases the Service Revenue account.Receiving cash in advance from customers increases the Deferred Revenue account.

Question 25

Expenses have the effect of decreasing retained earnings.

Question 26

Deferred Revenue is a liability account.

Question 27

Revenue accounts increase with a debit and decrease with a credit.Revenue accounts increase with a credit and decrease with a debit.

Question 28

Liability accounts increase with a debit and decrease with a credit.Liability accounts increase with a credit and decrease with a debit.

Question 29

For each transaction,there must be at least one debit amount and one credit amount.

Question 30

The Dividends account increases with a credit and decreases with a debit.The Dividends account increases with a debit and decreases with a credit.

Question 31

A debit to an account balance always results in the balance increasing.A debit increases assets,dividends,and expenses,but decreases liabilities,stockholders' equity,and revenues.

Question 32

Expense accounts increase with a debit and decrease with a credit.

Question 33

Liability accounts increase with a credit and decrease with a debit.

Question 34

The general ledger includes all accounts used to record the company's transactions.

Question 35

Selling common stock for cash is recorded with a debit to common stock.Selling common stock for cash is recorded with a credit to common stock.

Question 36

Paying employees' salaries for the current period is recorded with a debit to Salaries Expense.

Question 37

Borrowing cash from the bank is recorded with a debit to cash.

Question 38

A journal provides a chronological record of all transactions affecting a firm.

Question 39

Purchasing office supplies is recorded with a credit to office supplies.Purchasing office supplies is recorded with a debit to office supplies.

Question 40

Common Stock increases with a credit and decreases with a debit.

Question 41

If total debits equal total credits in the trial balance,then all balances are correct.A trial balance could contain offsetting errors where the balance of one account is misstated in one direction but the balance of another account (with the same type of debit or credit balance)is misstated in the other direction.

Question 42

When cash payments are made to stockholders,what is the effect on the company's accounts?

A)Cash decreases and dividends increase.
B)Cash increases and dividends decrease.
C)Cash decreases and common stock decreases.

Question 43

The following amounts are reported in the ledger of Mariah Company: What is the balance in the Common Stock account?
$$\begin{array} { | l | r | } \hline \text { Assets } & \$ 80,000 \\\hline \text { Liabilities } & 36,000 \\\text { Retained Earnings } & 12,000 \\\hline\end{array}$$

A)$44,000.
B)$32,000.
C)$48,000.

Question 44

Pumpkin Inc.sold $500 in pumpkins to a customer on account on January 1.On January 11 Pumpkin collected the cash from that customer.What is the impact on Pumpkin's accounting equation from the collection of cash?

A)No net effect to the accounting equation.
B)Decrease assets and increase liabilities.
C)Increase assets and increase liabilities.

Question 45

Revenues have what effect on the accounting equation?

A)Increase liabilities.
B)Decrease assets.
C)Increase stockholders' equity.

Question 46

A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20.Which of the following statements is true?

A)The company records service revenue on October 15.
B)The company records cash collection on November 20.
C)The company records deferred revenue on October 15.

Question 47

External events include all of the following except:

A)Paying rent.
B)Purchasing equipment.
C)Using office supplies.

Question 48

Which of the following is not part of measuring external transactions?

A)Using source documents to analyze accounts affected.
B)Recording transactions.
C)Making payments on all amounts owed.

Question 49

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits for the period?

A)Use source documents to determine accounts affected by the transaction.
B)Prepare a trial balance.
C)Analyze the impact of the transaction on the accounting equation.

Question 50

When a company pays employees' salaries for the current period,how will the basic accounting equation be affected?

A)Stockholders' equity decreases.
B)Revenues decrease.
C)Expenses decrease.

Question 51

After posting transactions to the general ledger accounts,the sum of the accounts with debit balances should equal the sum of the accounts with credit balances.

Question 52

Receiving cash from customers before services are performed results in:

A)Prepaid Assets.
B)Service Revenue.
C)Deferred Revenues.

Question 53

An expense has what effect on the accounting equation?

A)Decrease liabilities.
B)Decrease stockholders' equity.
C)Increase assets.

Question 54

The process of transferring the debit and credit information from the journal to individual accounts in the general ledger is called journalizing.The process is called posting.

Question 55

A list of all account names used to record transactions of a company is referred to as the:

A)Chart of Accounts
B)Income statement
C)General journal

Question 56

A trial balance is a list of all accounts and their balances at a particular date,showing that assets equal liabilities.The trial balance shows that total debits equal total credits.

Question 57

For each transaction recorded in an accounting system,the basic equation that must be maintained at all times is:

A)Assets = Liabilities + Stockholders' Equity.
B)Cash Increases = Cash Decreases.
C)Revenues = Expenses + Dividends.

Question 58

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:

A)Trial balance
B)Accounting cycle
C)Chart of accounts

Question 59

Which of the following would increase assets and increase liabilities?

A)Provide services to customers on account.
B)Purchase office supplies on account.
C)Pay dividends to stockholders.

Question 60

A(n)_______________ summarizes all transactions related to a particular item over a period of time.

A)Debit
B)Account
C)Chart of accounts

Question 61

On January 1,Brad Inc.sold $30,000 in products to a customer on account.Then on January 10,Brad collected the cash on that account.What is the impact on Brad's accounting equation from the collection of cash on January 10?

A)No net effect on the accounting equation.
B)Assets increase and liabilities decrease.
C)Assets decrease and liabilities decrease.

Question 62

When a company issues common stock for cash,what is the effect on the accounting equation for the company?

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

Question 63

Consider the following transactions: Issued common stock for cash.Purchased equipment by signing a note payable.Paid rent for the current month.Collected cash from customers on account.How many of these four transactions increased the given company's total assets?

A)One.
B)Two.
C)Three.

Question 64

When a payment is made on an account payable:

A)Assets and stockholders' equity decrease.
B)Assets and liabilities decrease.
C)Liabilities and revenues decrease.

Question 65

Which of the following is not possible when recording a transaction?

A)Liabilities increase and assets decrease.
B)Stockholders' equity increases and assets increase.
C)One asset increases and another asset decreases.

Question 66

If a company provides services on account,which of the following is true?

A)Expenses increase.
B)Liabilities increase.
C)Stockholders' equity increases.

Question 67

Following are transactions of Gotebo Tanners,Inc. ,a new company,during the month of January: 1.Issued 10,000 shares of common stock for $15,000 cash.2.Purchased land for $12,000,signing a note payable for the full amount.3.Purchased office equipment for $1,200 cash.4.Received cash of $14,000 for services provided to customers during the month.5.Purchased $300 of office supplies on account.6.Paid employees $10,000 for their first month's salaries.How many of these transactions increased Gotebo's liabilities?

A)Four.
B)Three.
C)Two.

Question 68

Consider the following transactions: Issued common stock for cash.Purchased equipment by signing a note payable.Provided services to customers on account.Collected cash from customers on account.How many of these four transactions increased the given company's total liabilities?

A)One.
B)Two.
C)Three.

Question 69

Providing services and receiving cash will:

A)Increase assets and increase stockholders' equity.
B)Increase assets and increase liabilities.
C)Decrease assets and increase liabilities.

Question 70

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month,did assets increase or decrease and by how much?

A)$34,000 increase.
B)$55,000 increase.
C)$34,000 decrease.

Question 71

Which of the following is NOT possible for a business transaction?

A)Increase assets and decrease revenue.
B)Decrease assets and increase expense.
C)Increase liabilities and increase expense.

Question 72

Assume that Sallisaw Sideboards,Inc.had a retained earnings balance of $10,000 on April 1,and that the company had the following transactions during April.Issued common stock for cash,$5,000.Provided services to customers on account,$2,000.Provided services to customers in exchange for cash,$900.Purchased equipment and paid cash,$4,300.Paid April rent,$800.Paid employees' salaries for April,$700.What was Sallisaw's retained earnings balance at the end of April?

A)$11,400.
B)$12,100.
C)$16,400.

Question 73

How many of the following events would require an expense to be recorded? Ordering office supplies
Hiring a receptionist
Paying employees' salaries for the current month
Receiving but not paying a current utility bill
Paying for insurance in advance

A)One.
B)Two.
C)Three.

Question 74

Following are transactions of Gotebo Tanners,Inc. ,a new company,during the month of January: 1.Issued 10,000 shares of common stock for $15,000 cash.2.Purchased land for $12,000,signing a note payable for the full amount.3.Purchased office equipment for $1,200 cash.4.Received cash of $14,000 for services provided to customers during the month.5.Purchased $300 of office supplies on account.6.Paid employees $10,000 for their first month's salaries.What was the total amount of Gotebo's liabilities following these six transactions?

A)$12,300.
B)$27,300.
C)$22,600.

Question 75

Purchasing office equipment on account has what impact on the accounting equation?

A)Stockholders' equity decreases and assets increase.
B)Liabilities increase and assets increase.
C)Assets decrease and liabilities decrease.

Question 76

Purchasing office supplies on account will:

A)Not change assets.
B)Increase assets and decrease liabilities.
C)Increase assets and increase liabilities.

Question 77

Which of the following transactions causes a decrease in stockholders' equity?

A)Pay dividends to stockholders.
B)Obtain cash by borrowing from a local bank.
C)Provide services to customers on account.

Question 78

On September 30,MFP Co.paid employee salaries of $7,000,including $1,000 it owed to its employees last month.What are the effects of this transaction on the accounting equation?

A)Expenses increased,liabilities increased,and assets increased.
B)Assets decreased,liabilities decreased,and expenses increased.
C)Assets decreased,expenses decreased,and liabilities increased.

Question 79

Following are transactions of Gotebo Tanners,Inc. ,a new company,during the month of January: 1.Issued 10,000 shares of common stock for $15,000 cash.2.Purchased land for $12,000,signing a note payable for the full amount.3.Purchased office equipment for $1,200 cash.4.Received cash of $14,000 for services provided to customers during the month.5.Purchased $300 of office supplies on account.6.Paid employees $10,000 for their first month's salaries.How many of these transactions decreased Gotebo's total assets?

A)One.
B)Two.
C)Three.

Question 80

Which of the following transactions would cause a decrease in both assets and stockholders' equity?

A)Paying insurance premium for the next two years.
B)Purchasing office equipment on account.
C)Paying advertising for the current month.