Deck 2: Recording Business Transactions

Question 1

The normal balance of the Accounts Payable account is a debit.

Answer 1

False

Question 2

Total debits must always equal total credits.

Answer 2

True

Question 3

A chart of accounts is a list of all of a company's accounts with their account numbers.

Answer 3

True

Question 4

A chart of accounts is organized in order of the accounting equation, with assets first, followed by liabilities and owner's equity.

Question 5

A chart of accounts is:

A)a source document.
B)another name for a trial balance.
C)a list of all of the accounts of an organization and their related account numbers.
D)prepared as the last step in analyzing transactions.

Question 6

All of the following are assets except:

A)cash.
B)accounts receivable.
C)land.
D)accounts payable.

Question 7

Which of the following most completely describes businesses that use a chart of accounts?

A)service but not merchandising or manufacturing businesses
B)merchandising but not service or manufacturing businesses
C)manufacturing but not service or merchandising businesses
D)Service, merchandising, and manufacturing businesses all use a chart of accounts.

Question 8

An organization's list of all its accounts and the related account numbers is called a:

A)balance sheet.
B)chart of accounts.
C)ledger.
D)trial balance.

Question 9

Accounts are grouped in a book called the:

A)trial balance.
B)chart of accounts.
C)journal.
D)ledger.

Question 10

The right side of the account is the correct side.

Question 11

The basic summary device of accounting is the account.

Question 12

The basic summary device of accounting is the:

A)ledger.
B)account.
C)debit.
D)credit.

Question 13

Notes receivable is a liability account.

Question 14

The year end balance in the capital account is determined by:

A)the change in cash from the beginning to the end of the year.
B)the beginning capital balance, investments, net income or loss, and withdrawals.
C)only investments and withdrawals.
D)the change in total assets from the beginning to the end of the year.

Question 15

The ledger is the first book of entry for a business transaction.

Question 16

An account receivable for the selling company is an account payable for the purchasing company.

Question 17

The right-hand side of an account is called the increase side.

Question 18

Which of the following is a revenue account?

A)accounts receivable
B)accumulated amortization
C)unearned revenue
D)service revenue

Question 19

A transaction always involves exactly two accounts.

Question 20

Assets, revenues, and withdrawals are all increased by debits.

Question 21

An owner investment of a building, valued at $200,000, along with a $55,000 outstanding mortgage, into an entity would:

A)increase owner's equity $145,000.
B)increase total assets $55,000.
C)decrease liabilities $145,000.
D)increase owner's equity $200,000.

Question 22

The normal balance of cash is a ________ because it is a(n)________ account.

A)debit; expense
B)credit; asset
C)debit; asset
D)credit; revenue

Question 23

The purchase of a building with a down payment of cash and the signing of a note payable for the remainder would include a debit to building and a credit to note payable and to cash.

Question 24

Incurring an expense in the current accounting period, which will be paid in the following accounting period, will require:

A)a debit to an expense and a credit to a liability.
B)a debit to a liability and a credit to an expense.
C)a debit to an expense and a credit to cash.
D)a debit to an expense and a credit to capital.

Question 25

The normal balance of a revenue account is a credit.

Question 26

The normal balance of an expense is a ________ while the normal balance of an asset is a ________.

A)debit; credit
B)debit; debit
C)credit; credit
D)credit; debit

Question 27

The normal balance of a liability is a ________ while the normal balance of revenue is a ________.

A)credit; debit
B)debit; debit
C)debit; credit
D)credit; credit

Question 28

Which of the following groups of accounts have normal debit balances?

A)assets, revenues, and owner withdrawals
B)assets, expenses, and owner withdrawals
C)assets, liabilities, and capital
D)assets, revenues, and expenses

Question 29

Purchasing a truck by signing a note payable would include a:

A)credit to truck.
B)debit to note payable.
C)credit to note payable.
D)debit to truck expense.

Question 30

Incurring an expense in the current accounting period, which is paid in the current accounting period, will require:

A)a debit to an expense and a credit to a liability.
B)a debit to a liability and a credit to an expense.
C)a debit to an expense and a credit to cash.
D)a debit to an expense and a credit to capital.

Question 31

Double-entry accounting means entering business transactions twice to avoid possible errors.

Question 32

Credit is a term representing:

A)the right side of an account.
B)an increase.
C)a decrease.
D)the left side of an account.

Question 33

The withdrawal of cash by the owner for personal use would include a:

A)debit to the owner's capital account.
B)credit to the owner's withdrawals account.
C)credit to the owner's capital account.
D)debit to the owner's withdrawals account.

Question 34

Performing a service on account would include a:

A)debit to accounts payable.
B)credit to accounts payable.
C)credit to the cash.
D)credit to service revenue.

Question 35

The purchase of equipment by issuing a note payable would involve a debit to note payable.

Question 36

The normal balance of land is a ________ because it is a(n)________ account.

A)debit; expense
B)credit; asset
C)debit; asset
D)credit; revenue

Question 37

The normal balance of wages payable is a ________ because it is a(n)________ account.

A)credit; liability
B)credit; revenue
C)credit; owner's equity
D)credit; asset

Question 38

An owner investment of cash into the business would include a:

A)debit to capital.
B)credit to withdrawals.
C)debit to withdrawals.
D)credit to capital.

Question 39

The normal balance of notes payable is a ________ because it is a(n)________ account.

A)debit; expense
B)credit; revenue
C)debit; asset
D)credit; liability

Question 40

The purchase of equipment for cash would:

A)increase total assets.
B)increase total assets and decrease liabilities.
C)decrease both liabilities and owner's equity.
D)have no effect on total assets.

Question 41

The account debited when payment is made for equipment purchased previously on account is:

A)accounts payable.
B)cash.
C)accounts receivable.
D)equipment.

Question 42

The purchase of a building by signing a note payable would:

A)increase owner's equity.
B)increase total liabilities.
C)decrease owner's equity.
D)decrease total assets.

Question 43

The account credited when cash is received from a customer on account is:

A)cash.
B)accounts payable.
C)accounts receivable.
D)service revenue.

Question 44

The investment of cash into the business by the owner would:

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

Question 45

Performing a service for cash would:

A)affect the accounting equation the same as if the service was performed on account.
B)increase assets more than if the service had been performed on account.
C)increase net income less than if the service had been performed on account.
D)decrease expenses more than if the service had been performed on account.

Question 46

An advertising bill received in the current period that will be paid the following period would:

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

Question 47

The payment of salaries to employees for wages of the current period would:

A)increase owner's equity and decrease liabilities.
B)increase net income and decrease assets.
C)decrease assets and owner's equity.
D)increase assets and decrease owner's equity.

Question 48

Performing services on account would:

A)increase net income, decrease total assets, and decrease owner's equity.
B)increase net income, increase owner's equity, and increase total assets.
C)increase total assets and liabilities.
D)decrease total assets, increase net income, and increase owner's equity.

Question 49

Performing a service and immediately collecting the cash would:

A)increase net income less than if the service had been performed on account.
B)increase assets more than if the service had been performed on account.
C)increase owner's equity less than if the service had been performed on account.
D)have no effect on liabilities.

Question 50

An owner investment of equipment into the business would:

A)increase net income.
B)have no effect on total assets.
C)have no effect on owner's equity.
D)have no effect on liabilities.

Question 51

The account debited when supplies are purchased on account is:

A)accounts payable.
B)cash.
C)capital.
D)supplies.

Question 52

Performing a service on account would:

A)affect the accounting equation the same as if the service was performed for cash.
B)increase assets more than if the service had been performed for cash.
C)increase net income less than if the service had been performed for cash.
D)decrease expenses more than if the service had been performed for cash.

Question 53

The owner withdrawing cash for personal use would:

A)have no effect on assets.
B)decrease owner's equity.
C)decrease net income.
D)increase assets.

Question 54

An owner withdrawal of $20,000 cash would:

A)decrease owner's equity and increase assets by $20,000.
B)increase owner's equity and decrease liabilities by $20,000.
C)increase liabilities and assets by $20,000.
D)decrease assets and owner's equity by $20,000.

Question 55

The payment of an amount owed to a supplier would:

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

Question 56

Receiving a payment from a customer on account would:

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

Question 57

The journal entry to record the payment of a telephone bill immediately upon receipt of the bill would:

A)have no effect on owner's equity.
B)decrease liabilities.
C)decrease owner's equity.
D)increase owner's equity.

Question 58

The payment of the owner's personal expenses from the business's chequebook should be recorded with a debit to:

A)withdrawals.
B)accounts payable.
C)cash.
D)capital.

Question 59

Making a payment on account of a liability would:

A)decrease assets and increase liabilities.
B)increase liabilities and decrease owner's equity.
C)decrease assets and decrease liabilities.
D)decrease assets and increase net income.

Question 60

The purchase of a building by signing a note payable would:

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

Question 61

Recording the transaction in the journal is the first step in the journalizing process.

Question 62

State whether the account should be debited or credited and the normal balance of the account for the items listed below:

Question 63

A journal produces a balance in each account.

Question 64

Describe owner's equity in relation to the assets of the business.

Question 65

In the double-entry accounting system, each transaction:

A)involves exactly two accounts.
B)involves at least two accounts.
C)involves an asset account and a liability account.
D)involves a liability account and an equity account.

Question 66

Journalizing is the process of copying information from the ledger to the journal.

Question 67

The last step in the journalizing process is to:

A)enter the transaction to the journal.
B)post the transaction to the ledger.
C)determine the accounts involved in the transaction.
D)identify the transaction and its data.

Question 68

Transactions are first recorded in a(n):

A)trial balance.
B)journal.
C)account.
D)ledger.

Question 69

A chronological record of an entity's transactions is called a(n):

A)journal.
B)ledger.
C)trial balance.
D)account.

Question 70

A payment to a creditor would increase assets and decrease liabilities.

Question 71

When posting transactions, debits must always equal credits.

Question 72

A journal is a chronological record of transactions.

Question 73

The first step in the journalizing process is to identify the transaction and its data.

Question 74

A journal is like a diary; it shows a chronological listing of a business's activities.

Question 75

The purchase of office equipment for cash would increase assets and decrease liabilities.

Question 76

Owner equity accounts include:

A)assets, liabilities and capital.
B)assets, revenues and expenses.
C)only the capital and withdrawal accounts.
D)the revenue, expense, capital and withdrawal accounts.

Question 77

State whether the account should be debited or credited and the normal balance of the account for the items listed below:

Question 78

If the debit part of a journal entry is not posted but the credit part is, assets will always be overstated.

Question 79

Explain the rules for debits and credits. Use the accounting equation as a basis for your explanation and indicate the specific rules for debits and credits as they apply to the various accounts. Your answer should include the rules for all types of accounts affecting owner's equity.

Question 80

Which of the following is correct?

A)liabilities = assets - owner's equity
B)owner's equity = assets + liabilities
C)assets = liabilities - owner's equity
D)assets = owner's equity - liabilities