Question 1

Which element(s)of an accounting system provide(s)information about the balance in each account?

Accepted Answer

A) Source documents 
B) Journals 
C) Ledgers 
D) Accrual record

Question 2

The purchase of an automobile involving a cash down payment and a promise to pay the balance in the future would include a debit to:

Accepted Answer

A) Note Payable and a credit to Cash. 
B) Cash and a credit to Automobile. 
C) Cash and a debit to Note Payable. 
D) none of the above.

Question 3

A company received cash in exchange for issuing stock. This transaction increased assets and:

Accepted Answer

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

Question 4

The T-account is a tool for visualizing business transactions and usually can be easily prepared.

Accepted Answer

A) True 
 B)False

Question 5

Transactions affecting Stockholders' Equity include:

Accepted Answer

A) sale of common stock and payment of expenses. 
B) revenues and purchase of supplies on account. 
C) purchase of land and a sale on account. 
D) payment of a liability and payment of expenses.

Question 6

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. The journal entry to record the purchase of the company includes a:

Accepted Answer

A) credit to Building for $40,000. 
B) debit to Common Stock for $60,000. 
C) debit to Inventory for $20,000. 
D) credit to Cash for $40,000.

Question 7

Any event that has a financial impact on the business and can be measured reliably is a(n):

Accepted Answer

A) income statement. 
B) transaction. 
C) asset. 
D) journal.

Question 8

Accounts are records of increases and decreases in individual financial statement items.

Accepted Answer

A) True 
 B)False

Question 9

The Dividends account indicates an increase in common stock.

Accepted Answer

A) True 
 B)False

Question 10

Decreases in stockholders' equity that are due to the cost of operating the business are:

Accepted Answer

A) assets. 
B) revenues. 
C) expenses. 
D) liabilities.

Question 11

If a posting error has occurred when recording a transaction by posting a debit as a credit, then the out-of-balance amount will be evenly divisible by:

Accepted Answer

A) 11. 
B) 9) 
C) 2) 
D) 5)

Question 12

Income statement data appears as revenues and expenses under Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 13

What type of account is prepaid insurance?

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

The payment of an amount owed to a creditor would:

Accepted Answer

A) decrease assets. 
B) increase net income. 
C) decrease liabilities. 
D) both decrease assets and decrease liabilities.

Question 16

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

Accepted Answer

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

Question 17

The collection of cash from a cash sale would:

Accepted Answer

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

Question 18

If a person starting a business had an investment of a building, valued at $300,000 with an $180,000 outstanding mortgage and issued stock for the balance, the effect would be to:

Accepted Answer

A) increase assets by $120,000. 
B) increase assets by $180,000. 
C) increase stockholders' equity by $120,000. 
D) increase stockholders' equity by $300,000.

Question 19

The credit side of an account:

Accepted Answer

A) is the left side of the account. 
B) depends on whether the account is an asset or liability. 
C) is the right side of the account. 
D) can change as needed.

Question 20

Performing services on account would:

Accepted Answer

A) decrease both assets and liabilities. 
B) increase assets and decrease stockholders' equity. 
C) decrease revenues and decrease stockholders' equity. 
D) increase net income and stockholders' equity.

Exam 2: Transaction Analysis

Which element(s) of an accounting system provide(s) information about the balance in each account?

The purchase of an automobile involving a cash down payment and a promise to pay the balance in the future would include a debit to:

A company received cash in exchange for issuing stock. This transaction increased assets and:

The T-account is a tool for visualizing business transactions and usually can be easily prepared.

Transactions affecting Stockholders' Equity include:

Any event that has a financial impact on the business and can be measured reliably is a(n) :

Accounts are records of increases and decreases in individual financial statement items.

The Dividends account indicates an increase in common stock.

Decreases in stockholders' equity that are due to the cost of operating the business are:

If a posting error has occurred when recording a transaction by posting a debit as a credit, then the out-of-balance amount will be evenly divisible by:

Income statement data appears as revenues and expenses under Retained Earnings.

What type of account is prepaid insurance?

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

The payment of an amount owed to a creditor would:

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

The collection of cash from a cash sale would:

If a person starting a business had an investment of a building, valued at $300,000 with an $180,000 outstanding mortgage and issued stock for the balance, the effect would be to:

The credit side of an account:

Performing services on account would: