Deck 3: Double-Entry Accounting and the Accounting Cycle

Question 1

The right side of a T account is also known as the

A) debit side.
B) credit side.
C) asset side.
D) liability side.

Answer 1

B

Question 2

Closing entries are done monthly for all companies.

Answer 2

False

Question 3

Salary expense, sales revenue, and depreciation expense are examples of permanent accounts.

Answer 3

False

Question 4

Prepaid expenses, inventory and accounts payable are examples of permanent accounts.

Question 5

An income summary account can be used when closing the books.

Question 6

Balances in the revenue and expense accounts will affect retained earnings at the end of the period.

Question 7

An adjusting entry can be used to record transactions that have been missed.

Question 8

Which of the following statements regarding the retained earnings account is NOT true?

A) It normally has a credit balance.
B) Its balance is increased by revenues.
C) Its balance is decreased by expenses.
D) Its balance is increased by the declaration of dividends.

Question 9

Net income is calculated as net sales revenues minus the cost of goods sold.

Question 10

Which of the following results in a debit entry to the account identified?

A) increase in shareholders' equity
B) recording interest revenue
C) payment on accounts receivable
D) decrease in shareholders' equity

Question 11

Increases to assets are recorded on the credit side of a T account.

Question 12

All Statement of Financial Position items are temporary and must be closed out annually.

Question 13

Which of the following statements is true?

A) The normal balance is always on the side of the T account that is increasing.
B) The normal balance is always on the side of the T account that is decreasing.
C) The normal balance is always on the debit side of the T account.
D) The normal balance is always on the credit side of the T account.

Question 14

A Chart of Accounts lists the accounts and balances at a specific time.

Question 15

All accounts are increased by credits and decreased by debits.

Question 16

At the beginning of the fiscal year an entity's permanent and temporary accounts should all have a zero balance.

Question 17

Cash is normally a credit balance.

Question 18

Which of the following relationships best expresses the double-entry nature of an accounting system?

A) assets = liabilities
B) assets = debits
C) liabilities = credits
D) debits = credits

Question 19

Which of the following transactions would involve a debit to an asset account?

A) recording depreciation expense on capital assets
B) payment of an accounts payable
C) payment of a dividend
D) collection of an accounts receivable

Question 20

All Statement of Financial Position accounts increase with debits, while all Statement of Income accounts increase with credits.

Question 21

Which of the following accounts normally has a debit balance?

A) Accumulated depreciation
B) Prepaid insurance
C) Accounts payable
D) Common shares

Question 22

A list of all the accounts used by the company in its accounting records is referred to as a

A) Chart of accounts
B) adjusted trial balance
C) general journal
D) general ledger

Question 23

Which of the following types of accounts appear on the Statement of Financial Position and Statement of Income respectively?

Question 24

Which of the following is a listing of all the account balances at a specific point in time?

A) the Statement of Financial Position
B) the chart of accounts
C) the general ledger
D) the trial balance

Question 25

Which of the following is NOT part of the accounting cycle?

A) posting
B) financial statement analysis
C) adjusted trial balance
D) transaction analysis

Question 26

Which of the following is the first step in the accounting cycle?

A) Recognize that a transaction has occurred.
B) Prepare a source document.
C) Prepare a chart of accounts.
D) Journalize a transaction.

Question 27

Which of the following accounts would have a balance that carries over from one period to the next?

A) Revenue
B) Insurance expense
C) Prepaid insurance
D) Dividends declared

Question 28

When the board of directors declares and pays a $500 dividend, which of the following would be included in the resulting journal entry?

A) Dr. Retained earnings, Cr. Cash
B) Dr. Cash, Cr. Retained Earnings
C) Dr. Retained Earnings, Cr. Dividends declared
D) Dr. Cash, Cr. Dividends payable

Question 29

Which of the following accounts normally has a credit balance?

A) Accumulated depreciation
B) Accounts receivable
C) Dividends declared
D) Rent expense

Question 30

Which of the following accounts normally has a credit balance?

A) Cash
B) Dividends declared
C) Insurance expense
D) Retained earnings

Question 31

The sale of merchandise to a customer partly for cash and partly on account would require which of the following entries?

A) Dr. Accounts receivable, Dr. Cash, Cr. Sales revenue
B) Dr. Cash, Dr. Accounts payable, Cr. Sales revenue
C) Dr. Cash, Cr. Sales revenue
D) Dr. Accounts payable, Dr. Accounts receivable, Cr. Sales revenue

Question 32

Which of the following statements about accumulated depreciation is NOT true?

A) It is calculated in accordance with the matching principle.
B) It records the portion or how much of the asset has been used up.
C) It is reflected on the Statement of Financial Position.
D) It helps determine how much an asset can be sold for.

Question 33

The process of transferring data from the general journal to the general ledger is called

A) journalizing.
B) ledgerizing.
C) posting.
D) balancing.

Question 34

Which of the following sequences concerning the accounting cycle is correct?

A) journalize, post, adjusting entries, financial statements
B) transaction analysis, trial balance, post, adjusted trial balance
C) post, adjusting entries, closing entries, financial statements
D) adjusting entries, closing entries, adjusted trial balance, financial statements

Question 35

The purchase of land for a combination of cash and issuance of shares would require which of the following entries?

A) Dr. Land, Cr. Common shares, Cr. Cash
B) Dr. Cash, Dr. Common shares, Cr. Land
C) Dr. Land, Cr. Cash, Dr. Common Shares
D) Dr. Cash, Cr. Land, Cr. Common shares

Question 36

Which of the following accounting records is in chronological order?

A) the chart of accounts
B) the general journal
C) the general ledger
D) the statement of income

Question 37

The process of identifying and recording transactions is called

A) transaction analysis.
B) posting.
C) recognizing.
D) journalizing.

Question 38

The purchase of land for a combination of cash and a 15-year note would require which of the following entries?

A) Dr. Land, Dr. Cash, Cr. Long-term note payable
B) Dr. Land, Cr. Cash, Cr. Long-term note payable
C) Dr. Cash, Cr. Long-term note payable, Cr. Land
D) Dr. Land, Dr. Long-term note payable, Cr. Cash

Question 39

Which of the following accounts normally has a debit balance?

A) Accounts payable
B) Retained earnings
C) Land
D) Sales revenue

Question 40

The chart of accounts is ___.

A) static
B) dynamic
C) not generally useful
D) contains only permanent accounts

Question 41

Which of the following would be the adjusting journal entry to expense prepaid rent for the period?

A) Dr. Prepaid rent, Cr. Rent expense
B) Dr. Rent expense, Cr. Cash
C) Dr. Prepaid rent, Cr. Cash
D) Dr. Rent expense, Cr. Prepaid rent

Question 42

An example of a contra asset account is

A) Accumulated depreciation.
B) Depreciation expense.
C) Discount on Bonds Payable.
D) Prepaid expenses.

Question 43

Which of the following is NOT an example of an adjusting entry?

A) recording unpaid interest at year end relating to an outstanding loan balance at year end
B) recording depreciation on office equipment purchased during the year
C) recording the gain on the sale of equipment made during the year
D) reducing the prepaid rent account for the portion of rent actually used

Question 44

A net loss occurs when

A) assets exceed liabilities.
B) expenses exceed revenues for the year.
C) dividends exceed income for the year.
D) cumulative expenses and dividends have exceeded income.

Question 45

Which of the following is a current asset item on the Statement of Financial Position?

A) Equipment
B) Prepaid expenses
C) Accounts payable
D) Accrued wages payable

Question 46

Which of the following types of entries is used to reset the temporary accounts to zero and update the balance in the retained earnings?

A) journal entries
B) adjusting entries
C) closing entries
D) balancing entries

Question 47

Which of the following would cause the trial balance to be out of balance?

A) an entry recorded with only debits
B) an unrecorded entry
C) an entry recorded twice
D) an entry recorded to the wrong accounts

Question 48

Which of the following would be the adjusting entry to record accrued interest at the end of an accounting period?

A) Dr. Interest expense, Cr. Cash
B) Dr. Interest expense, Cr. Interest payable
C) Dr. Interest payable, Cr. Interest income
D) Dr. Interest payable, Cr. Cash

Question 49

Which of the following would be the adjusting journal entry to recognize earned but unpaid wages for the period?

A) Dr. Wages Expense, Cr. Cash
B) Dr. Wages Payable, Cr. Cash
C) Dr. Wages Payable, Cr. Wages Expense
D) Dr. Wages Expense, Cr. Wages Payable

Question 50

When an inventory item that cost $75 is sold on account for $100, which of the following would be included in the journal entry recording the cost of goods sold?

A) Dr. Cash $100
B) Cr. Cost of goods sold $75
C) Cr. Accounts Receivable $100
D) Cr. Inventory $75

Question 51

Which of the following would be the closing entry for dividends declared?

A) Dr. Expense summary, Cr. Dividends declared
B) Dr. Retained earnings, Cr. Dividends declared
C) Dr. Dividends declared, Cr. Expense summary
D) Dr. Dividends declared, Cr. Retained earnings

Question 52

Which of the following statements about the trail balance is NOT true?

A) Debit balances must equal credit balances.
B) It includes only assets, liability and equity accounts.
C) It is useful for detecting errors.
D) It is an important step in the accounting cycle.

Question 53

Which of the following would normally be recorded with an adjusting entry?

A) sales on account
B) payment for supplies bought on account
C) Wage expense
D) Depreciation expense