Question 1

Revenues and expenses are specialized owners' equity accounts, all having debit balances.

Accepted Answer

A) True 
 B)False  False

Question 2

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

Accepted Answer

A)  A trial balance may be taken at any time during the accounting period.
B)  A trial balance shows that total debits equals total credits.
C)  A trial balance is a list of all accounts with their balances.
D)  All of the above is true. D

Question 3

Borrowing money from the bank by signing a note payable would:

Accepted Answer

A)  increase stockholders' equity.
B)  decrease liabilities.
C)  have no effect on stockholders' equity.
D)  increase net income. C

Question 4

Purchasing a three- year insurance policy for cash would include a:

Accepted Answer

A)  credit to Prepaid Insurance.
B)  debit to Prepaid Insurance.
C)  credit to Insurance Expense.
D)  debit to Insurance Expense.

Question 5

A company performed services for a customer on account. This transaction increased assets and:

Accepted Answer

A)  increased revenues.
B)  increased expenses.
C)  increased liabilities.
D)  decreased equity.

Question 6

The normal balance of an expense account is a because expenses decrease .

Accepted Answer

A)  debit, expenses
B)  debit, assets
C)  debit, stockholders' equity
D)  credit, stockholders' equity

Question 7

Accounts are grouped together in a book called the:

Accepted Answer

A)  trial balance.
B)  ledger.
C)  journal.
D)  accounting equation.

Question 8

If the credit amount of an entry to record the payment of salaries was not posted,:

Accepted Answer

A)  assets would be overstated and owners' equity would be overstated.
B)  there would be no effect on stockholders' equity.
C)  expenses would be understated and owners' equity would be understated.
D)  liabilities would be understated and owners' equity would be overstated.

Question 9

The entry to record the payment of salaries to employees would include a:

Accepted Answer

A)  debit to Accounts Receivable.
B)  credit to Salary Expense.
C)  debit to Salary Expense.
D)  debit to Accounts Payable.

Question 10

The purchase of office furniture for cash would include a debit to:

Accepted Answer

A)  Cash.
B)  Office Furniture.
C)  Office Furniture Expense.
D)  Accounts Payable.

Question 11

The left side of a T- account is always the:

Accepted Answer

A)  credit side.
B)  increase side.
C)  decrease side.
D)  debit side.

Question 12

If the debit amount of an entry to record the purchase of supplies on account was not posted:

Accepted Answer

A)  liabilities would be understated.
B)  liabilities would be overstated.
C)  assets would be understated.
D)  assets would be overstated.

Question 13

When the trial balance is out of balance due to a slide- type error, the difference between total debits and total credits will be evenly divisible by 9.

Accepted Answer

A) True 
 B)False

Question 14

What type of account is prepaid insurance?

Accepted Answer

A)  An asset
B)  A liability
C)  An expense
D)  Stockholders' equity

Question 15

Receiving a payment from a customer on account would:

Accepted Answer

A)  decrease liabilities.
B)  increase stockholders' equity.
C)  have no effect on total assets.
D)  decrease stockholders' equity.

Question 16

The payment for rent of the office building for one month would include a:

Accepted Answer

A)  debit to Cash.
B)  debit to Prepaid Rent.
C)  credit to Revenue.
D)  debit to Rent Expense.

Question 17

The normal balance of a revenue account is a because revenues increase .

Accepted Answer

A)  debit, expenses
B)  debit, stockholders' equity
C)  credit, stockholders' equity
D)  debit, assets

Question 18

The entry to record the purchase of supplies on account would include a debit to:

Accepted Answer

A)  Accounts Payable.
B)  Supplies Expense.
C)  Retained Earnings.
D)  Supplies.

Question 19

Double- entry accounting means that each transaction:

Accepted Answer

A)  debits at least one account and credits at least one account.
B)  is recorded in both the journal and in the ledger.
C)  increases at least one account and decreases at least one account.
D)  affects both an income statement account and a balance sheet account.

Question 20

Consider the following transactions: I. Owners invested $8,000 cash to begin the business
II. Provided services for cash, $6,000
III. Provided services on account, $4,000
IV. Paid cash for expenses, $7,500
How much net income did the business have?

Accepted Answer

A)  $6,000
B)  $2,500
C)  $4,000
D)  $3,000

Exam 2: Transaction Analysis