Deck 2: Analyzing Business Transactions

Question 1

A decrease in a liability is recorded by a debit.

Answer 1

True

Question 2

The recognition issue deals with when a business transaction should be recorded.

Answer 2

True

Question 3

When a company makes an order,a transaction has occurred.

Answer 3

False

Question 4

The cost principle is a solution to the recognition issue.

Question 5

Column totals are called account balances.

Question 6

Purchase requisitions are recognized in the accounting records.

Question 7

An increase in an asset is recorded by a debit.

Question 8

The classification issue involves the assignment of accounts to business transactions.

Question 9

A debit has a favorable effect on an account.

Question 10

A credit to an asset account means that asset account has been increased.

Question 11

The most generally accepted value used in accounting is market value.

Question 12

All business transactions require the application of two basic accounting concepts: recording a transaction at the right time and placing the right value on it.

Question 13

In accounting,to value means to record a transaction or event.

Question 14

The double-entry system is possible because all business transactions have two equal and opposite aspects.

Question 15

Cost Value is the exchange price associated with a business transaction at the time the transaction is recognized.

Question 16

The valuation issue deals with how the components of a transaction should be categorized.

Question 17

When a business pays a new employee for the first time,a recordable transaction has occurred.

Question 18

When a company receives a product previously ordered,a recordable transaction has occurred.

Question 19

When a company purchases goods that it will resell,it must record the goods in an asset account.

Question 20

For a T account,an account balance is the difference in total dollars between total debit footings and total credit footings.

Question 21

Wages payable is a type of liability.

Question 22

A basic storage unit for accounting data is the account.

Question 23

Retained Earnings has a normal debit balance.

Question 24

Dividends should appear on the balance sheet.

Question 25

Liabilities are established with debits and eliminated with credits.

Question 26

When payment is received for services not yet rendered,no entry is recorded until that service has been rendered.

Question 27

Revenues have a normal debit balance.

Question 28

Investments by stockholders are recorded in the Common Stock account,not in the Retained Earnings account.

Question 29

A contract is an example of a source document.

Question 30

The dividends account has a normal credit balance.

Question 31

Office supplies are classified as an asset.

Question 32

An increase in revenue is recorded with a credit.

Question 33

When revenue has been earned,an entry can often be recorded before the related cash has been collected.

Question 34

Accounts Payable has a normal debit balance.

Question 35

Dividends are classified as an expense.

Question 36

A decrease in a dividend account is recorded with a credit.

Question 37

When a dividend is declared and paid,the Dividends account is credited and Cash is debited.

Question 38

When stockholders make an investment,the Common Stock account is debited.

Question 39

Unearned revenues are classified as assets on the balance sheet.

Question 40

Another word for expense is debt.

Question 41

In a journal entry,debits are always recorded before credits.

Question 42

A transposition error will cause the trial balance to be out of balance by an amount that is evenly divisible by 7.

Question 43

Generally,before Accounts Receivable is credited,it is debited.

Question 44

One might see "J2" correctly placed in the Post.Ref.column of the journal.

Question 45

In a journal entry,the Post.Ref.column is always left blank.

Question 46

Despite the advantages of a computer accounting information system,the ledger still must be maintained manually.

Question 47

A trial balance is normally prepared at the end of each week.

Question 48

The ledger is a chronological record of all transactions.

Question 49

Generally,before Accounts Payable is credited,it is debited.

Question 50

Recording an account with a debit balance as a credit,or vice versa,will cause the trial balance to be out of balance by an amount that is evenly divisible by 2.

Question 51

Accounts Receivable and Accounts Payable are used when there is a time delay between a transaction and its related cash flow.

Question 52

In a trial balance,accounts are listed in the order they appear on the financial statements.

Question 53

Expenses should be recorded when they have been incurred,not when they are paid.

Question 54

Revenue should be recorded when the related cash has been collected,not when it has been earned.

Question 55

When the columns of the trial balance equal each other,it means that no errors have occurred in recording and posting the transactions.

Question 56

The journal account form has a Balance column.

Question 57

A net income of $10,000 means that the business received $10,000 more in cash from its customers than it spent to run the business.

Question 58

In a journal entry,credits are always indented.

Question 59

Entering transactions into the journal is called posting.

Question 60

It is sometimes correct for a compound entry's debit totals and credit totals to be unequal.

Question 61

Which of the following business events is not a transaction?

A) Signing a contract
B) Paying wages
C) Receiving goods
D) Purchasing a service

Question 62

Another name for the ledger is the book of original entry.

Question 63

One can obtain a clear picture of a company's liquidity by referring to its income statement.

Question 64

When a business records revenue when it has been earned,it is addressing the measurement issue of

A) recognition.
B) evaluation.
C) classification.
D) valuation.

Question 65

Which of the following is not a measurement issue in accounting?

A) When to record a business transaction
B) How to classify the items of a business transaction
C) What value to place on a business transaction
D) Where to record a business transaction

Question 66

The numbering scheme of a chart of accounts usually contains gaps.

Question 67

The general journal makes finding accounts in the ledger easier.

Question 68

The issue of deciding when to record a transaction is solved by

A) properly classifying the transaction.
B) determining a point of recognition.
C) assigning actual cost to the transaction.
D) assigning a recurring order date.

Question 69

A purchase is recognized in the accounting records when

A) an order is placed with the seller
B) the purchase requisition is sent to the purchasing department.
C) title transfers from the seller to the buyer.
D) the buyer receives the bill from the seller

Question 70

Which of the following is not a measurement issue in accounting?

A) Valuation
B) Recognition
C) Evaluation
D) Classification

Question 71

All companies use the same standard set of accounts.

Question 72

The practice of recording transactions at cost is called

A) cost classification.
B) the cost principle.
C) the valuation issue.
D) cost recognition.

Question 73

The accounts in a chart of accounts are normally listed in order of their account number.

Question 74

When a business correctly records its expenses and assets,it has correctly addressed the measurement issue of

A) communication.
B) classification.
C) valuation.
D) recognition.

Question 75

Fair value relates most closely to the

A) recognition point.
B) recognition issue.
C) valuation issue.
D) classification issue.

Question 76

Journal entries are typically posted only at the end of the year.

Question 77

In a financial report,a single line is placed below the final total(s).

Question 78

When a business reports an asset at an inflated dollar amount,it has violated the measurement issue of

A) recognition.
B) valuation.
C) classification.
D) realization.

Question 79

The amount of profit would always be equal to the ending cash balance.

Question 80

One can obtain a clear picture of a company's liquidity by referring to its statement of cash flows.