Chapter 2 Accounting
An accountant has debited an asset account for $1,300 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?
Debit a Stockholders' account for $800.
Which of the following rules is incorrect?
Debits increase the common stock account.
An account consists of
a title, a debit side, and a credit side.
A trial balance may balance even when each of the following occurs except when
a transposition error is made.
A T-account is
a way of depicting the basic form of an account.
An accounting convention is best described as
an accounting custom.
Customarily, a trial balance is prepared
at the end of an accounting period.
A chart of accounts usually starts with
asset accounts.
A compound journal entry involves
three or more accounts
An account consists of
three parts.
Which one of the following is not a part of an account?
Trial balance
Evidence that would not help with determining the effects of a transaction on the accounts would be a(n)
advertising brochure
Which of the following correctly identifies normal balances of accounts?
Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Debit
For the basic accounting equation to stay in balance, each transaction recorded must
affect two or more accounts.
The standard form of a journal entry has the
debit account entered first at the extreme left margin.
Assets normally show
debit balances
The chart of accounts is a
listing of the accounts and the account numbers which identify their location in the ledger.
A chart of accounts for a business firm
lists the accounts and account numbers that identify their location in the ledger
On June 1, 2014 Ted Leo buys a copier machine for his business and finances this purchase with cash and a note. When journalizing this transaction, he will
make a compound entry
On June 1, 2014, Portugal Inc. reported a cash balance of $12,000. During June, Portugal made deposits of $3,000 and made disbursements totalling $14,000. What is the cash balance at the end of June?
$1,000 debit balance
At September 1, 2014, Promise Ring Co. reported stockholders' equity of $136,000. During the month, Promise Ring generated revenues of $38,000, incurred expenses of $21,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the amount of stockholders' equity at September 30, 2014?
$151,000
At January 31, 2014, the balance in Aislers Inc.'s supplies account was $250. During February, Aislers purchased supplies of $300 and used supplies of $375. At the end of February, the balance in the supplies account should be
$175 debit
At October 1, 2014, Padilla Industries had an accounts payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on account of $36,000. At October 31, 2014, the accounts payable balance is
$19,000
At December 1, 2014, Cursive Company's accounts receivable balance was $1,200. During December, Cursive had credit revenues of $4,800 and collected accounts receivable of $4,000. At December 31, 2014, the accounts receivable balance is
$2,000 debit
Electrelane Company showed the following balances at the end of its first year: Cash $ 2,000 Prepaid insurance 3,500 Accounts receivable 2,500 Accounts payable 2,000 Notes payable 3,000 Common stock 1,000 Dividends 500 Revenues 16,000 Expenses 12,500 What did Electrelene Company show as total credits on its trial balance?
$22,000
During February 2014 its first month of operations, the owner of Ariel Pink Enterprises invested cash of $25,000. Ariel had cash revenues of $5,000 and paid expenses of $7,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
$23,000 debit
In the first month of operations for Gallowsbird Industries, the total of the debit entries to the cash account amounted to $9,000 ($4,000 investment by stockholders and revenues of $5,000). The total of the credit entries to the cash account amounted to $5,500 (purchase of equipment $2,000 and payment of expenses $3,500). At the end of the month, the cash account has a(n)
$3,500 debit balance
Chik Chik Company showed the following balances at the end of its first year: Cash $ 3,000 Prepaid insurance 4,700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 1,400 Dividends 700 Revenues 22,000 Expenses 17,500 What did Chik Chik Company show as total credits on its trial balance?
$30,400
In the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $600. The cash account has a(n)
$300 debit balance.
During 2013, its first year of operations, Neko's Bakery had revenues of $60,000 and expenses of $33,000. The business paid dividends of $20,000. What is the amount of stockholders' equity at December 31, 2014?
$7,000 credit
At January 1, 2014, Alligator Industries reported retained earnings of $130,000. During 2014, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2014, the amount of retained earnings is
$85,000.
A trial balance would only help in detecting which one of the following errors?
A transposition error when transferring the debit side of journal entry to the ledger
An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
A credit balance in an expense account
Which of the following statements is true?
Credits decrease assets and increase liabilities
Management could determine the amounts due from customers by examining which ledger account?
Accounts Receivable
An account is a part of the financial information system and is described by all except which one of the following?
An account is a source document.
Which of the following is the correct sequence of steps in the recording process?
Analyzing, journalizing, posting
Which one of the following represents the expanded basic accounting equation?
Assets +Dividends +Expenses =Liabilities+Common stock+Retained Earnings+Revenues.
Which account below is not a subdivision of retained earnings?
Common stock
A debit is not the normal balance for which of the following?
Common stock account
An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction?
Credit a different asset account for $700.
Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?
Credit an asset account for $400.
On August 13, 2014, Swell Maps Enterprises purchased equipment for $1,300 and supplies of $200 on account. Which of the following journal entries is recorded correctly and in the standard format? A) Equipment 1,300 Account Payable 1,500 Supplies 200 B) Equipment. 1,300 Supplies 200 Accounts Payable 1,500 C) Accounts Payable 1,500 Equipment 1,300 Supplies 200 D) Equipment 1,300 Supplies 200 Accounts Payable. 1,500
D. Equipment: 1,300 Supplies: 200 Accounts Payable. 1500
Devendra Company pays cash dividends of $600. The entry for this transaction will include a debit of $600 to
Dividends
A credit is not the normal balance for which account listed below?
Dividends account
The first step in posting involves
Entering in the appropriate ledger account the date, journal page, and debit amount shown in the journal
Which of the following statements is incorrect?
Expenses increase stockholders' equity.
The ledger should be arranged in
Financial statement order
Which of the following is false about a journal?
It keeps in one place all the information about changes in specific account balances.
Which of the following is incorrect regarding a trial balance?
It proves that the company has recorded all transactions.
Which of the following statements is false?
Revenues are increased by debits
A debit is not the normal balance for which account listed below?
Service Revenue
Which of the following is not true of the terms debit and credit?
They can be interpreted to mean increase and decrease.
The standard format of a journal would not include
a T-account.
A journal provides
a chronological record of transactions
On July 7, 2014, Hidden Camera Enterprises performed cash services of $1,700. The entry to record this transaction would include
a debit to Cash of $1,700
On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
a debit to Supplies and a credit to Accounts Payable.
A trial balance will not balance if
a journal entry is only partially posted.
Posting
accumulates the effects of journalized transactions in the individual accounts
A debit to an asset account indicates
an increase in the asset.
The usual sequence of steps in the transaction recording process is
analyze -> journal -> ledger.
The first step in the recording process is to
analyze each transaction for its effect on the accounts
Beethoven Company provided consulting services and billed the client $3,100. As a result of this event,
assets increased by $3,100, and stockholders' equity increased by $3,100
Delta72 Company received a cash advance of $700 from a customer. As a result of this event,
assets increased by $700
An account is an individual accounting record of increases and decreases in specific
assets, liabilities, and stockholders' equity items
The usual order of accounts in the general ledger is
assets, liabilities, common stock, retained earnings, dividends, revenues, and expenses.
Another name for journal is
book of original entry.
In recording business transactions, evidence that an accounting transaction has taken place is obtained from
business documents
The first step in designing a computerized accounting system is the creation of the
chart of accounts.
Transactions in a journal are recorded in
chronological order
Posting of journal entries should be done in
chronological order.
When three or more accounts are required in one journal entry, the entry is referred to as a
compound entry
On October 3, Karl Schickele, a carpenter, received a cash payment for services previously billed to a client. Karl paid his telephone bill, and he also bought equipment on credit. For the three transactions, at least one of the entries will include a
credit to Accounts Payable.
TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and
credited a liability account for $2,100.
An account will have a credit balance if the
credits exceed the debits.
Which of the following journal entries is recorded correctly and in the standard format? A) Salaries and Wages Expense 500 Cash 1,500 Advertising Expense . 1,000 B) Salaries and Wages Expense . 500 Advertising Expense . 1,000 Cash 1,500 C) Cash 1,500 Salaries and Wages Expense 500 Advertising Expense 1,000 D) Salaries and Wages Expense 500 Advertising Expense 1,000 Cash . 1,500
d. Salaries and Wages Expense 500 Advertising Expense 1,000. Cash 1,500
The procedure of transferring journal entries to the ledger accounts is called
posting
Deerhoof Company purchases equipment for $1,700 and supplies for $400 from Milkman Co. for $2,100 cash. The entry for this transaction will include a
debit to Equipment $1,700 and a debit to Supplies $400 for Deerhoof.
A three column form of account is so named because it has columns for
debit, credit, and balance
Credits
decrease assets and increase liabilities.
Mt. Zion Inc. pays its employees twice a month, on the 7 th and
decrease net income for the month by $5,000.
A journal is not useful for
effect of a transaction. b. preparing
When journalizing, the reference column is
left blank
The ledger accounts should be arranged in
financial statement order.
An accounting record of the balances of all assets, liabilities, and stockholders' equity accounts is called a
general ledger
The entire group of accounts maintained by a company is called the
general ledger
A trial balance is a listing of
general ledger accounts and balances.
The double-entry system requires that each transaction must be recorded
in at least two different accounts.
A credit to a liability account
indicates an increase in the amount owed to creditors.
The Dividends account
is increased with debits and decreased with credits.
The right side of an account
is the credit side.
The explanation column of the general ledger
is used infrequently.
When a company pays dividends
it doesn't have to be cash, it could be another asset.
If a company has overdrawn its bank balance,then
its cash account will show a credit balance.
The usual sequence of steps in the recording process is to analyze each transaction, enter the transaction in the
journal, and transfer the information to the ledger accounts.
The name given to entering transaction data in the journal is
journalizing.
After transaction information has been recorded in the journal, it is transferred to the
ledger
After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
ledger accounts
The final step in the recording process is to transfer the journal information to the
ledger.
After journal entries are posted, the reference column
of the general ledger will show journal page numbers
The recording process occurs
repeatedly during the accounting period.
The best interpretation of the word credit is the
right side of an account.
The normal balance of any account is the
side which increases that account.
When two accounts are required in one journal entry, the entry is referred to as
simple entry.
A number in the reference column in a general journal indicates
that the entry has been posted to a particular account
In recording an accounting transaction in a double-entry system
the amount of the debits must equal the amount of the credits.
The left side of an account is
the debit side.
If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
the mathematical equality of the accounting equation.
A complete journal entry does not show
the new balance in the accounts affected by the transaction.
Camper Van Company purchased equipment for $2,600 cash. As a result of this event,
total assets remained unchanged
The final step in the recording process is to
transfer journal information to ledger accounts
The steps in preparing a trial balance include all of the following except
transferring journal amounts to ledger accounts
A list of accounts and their balances at a given time is called a(n)
trial balance.
A numbering system for a chart of accounts
usually starts with balance sheet accounts
