Accounting exam 1

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.)

- Another name for a note receivable is a promissory note. - It is the promise of another entity to pay a specific sum of money on a specified future date. - Notes receivable is classified as an asset.

Which of the following accounts would be considered an asset? (Check all that apply.)

- Cash - Building - Supplies - Accounts receivable

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.)

- Equipment purchases are reported on the balance sheet. - Equipment is an asset. - Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. - Equipment is reported on the left side of the accounting equation.

Which of the following statements is accurate about the Land account? (Check all that apply.)

- The Land account is an asset. -The Land account is used to record the costs of land purchased by the business. - The Land account is increased on the left side of its T-account.

Which of the following statements are accurate regarding supplies? (Check all that apply.)

- Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. - Unused supplies are treated as assets. - When supplies are purchased, they are added to the Supplies account. - Supplies are assets until they are used.

Which of the following items would be considered "cash" and reflected in a company's Cash account? (Check all that apply.)

- coins - checks - money orders

Which of the following are examples of prepaid (expense) accounts? (Check all that apply.)

- prepaid insurance - prepaid rent

The general ledger can be used to determine which of the following (select all answers which apply):

- which accounts are being used by a company and their balances at any given time. - common and unique accounts used by a business. - increases and decreases in all accounts in a business.

Which of the following accounts has a normal debit balance? (Check all that apply.)

-Cash -Accounts receivable - Supplies - Buildings

Which of the following statements is (are) correct? (Check all that apply.)

-Crediting a liability account will increase it. -Crediting the Owner, Capital account means to increase it. -Crediting means to enter transactions on the right side of a T-account. -Crediting can be abbreviated "Cr".

Select the statements that are true regarding debiting and crediting. (Check all that apply.)

-For an account where a debit is an increase, the credit is a decrease. -A credit will always decrease an asset account. -A debit or a credit can increase or decrease an account, depending on the account. -A debit can increase an expense account.

Which of the following statements is (are) correct regarding a journal? (Check all that apply.)

-In a journal, both the debit and credit side of the transaction can be seen. -Transactions are generally entered in chronological order. -A journal is used to record business transactions.

All of the following are examples of accrued liabilities:

-interest payable -wages payable -taxes payable

Which of the following statements is accurate regarding the Building account?

A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements is accurate regarding Accounts payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

Which of the following statements is correct regarding expenses.

Expenses are increased on the left side of their T-account because they decrease equity.

A business pays $500 for rent. How would this payment affect the equity of a business?

Expenses are increased, so equity is decreased.

The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business?

Expenses would be increased, so equity is decreased.

Which set of accounts below would have a normal debit balance?

Expenses; Owner, Withdrawals; Cash

True or false: Assets are claims (by creditors) against the company.

False

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

False

From the lists of accounts below, which one contains only revenue accounts?

Interest revenue, Professional fees earned, Sales

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

There are several types of accounts that impact equity. Which of the accounts below cause equity to increase?

Owner's capital and revenues

Which of the following statements is the correct definition of owner's equity?

Owner's equity is the owner's claim on a company's assets.

Jeff, the owner of a business, invests an additional $100 into his business from his personal checking account. How would this affect the equity of his business?

Owner, Capital would be increased and total equity would also increase.

Simon, the owner of a business, invests $10,000 in his new business, Simon's Sports. How would this affect the equity of a business?

Owner, Capital would be increased, so equity is increased.

Which of the following accounts impact equity? (Check all that apply.)

Owner, Withdrawal Revenue Expenses Owner, Capital

From the following lists of accounts, choose the list(s) which contains only expense accounts.

Rent expense, wages expense, insurance expense

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account.

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business?

Revenues increase, so total equity is increased.

The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased.

Which of the following best and fully describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Which of the following statements best describes the purpose of the Owner, Capital account?

When an owner invests in a business, the invested amount is recorded in the Owner, Capital account

Notes receivable is considered a(n)____ (asset/liability).

asset

Notes receivable is considered a(n)________

asset

The Building account is a(n)_____(asset/liability/expense) account and is reported on the______(left/right) side of the accounting equation.

asset, left

The T- account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a (debit/credit)_____balance of $________

debit, 270

To enter transactions on the left side of a T-account means you will_____ (debit/credit) the account and will cause a(n)______(decrease/increase) in an asset account.

debit, increase

An account is a record of increases and ______ in a specific asset, liability, equity, revenue or expense.

decrease

Accounts payable refer to promises to pay later by the business and are classified as a(n)_____(asset/liability/expense)

liability

The Notes payable account is a(n)_____(asset/liability/expense) account and is increased on the_____(left/right) side of the T-account.

liability, right

Accrued liabilities are amounts owed that are not yet ______

paid

When the product or service related to an unearned revenue is delivered, the earned portion of the unearned revenue is transferred to a _____ account.

revenue

The rules of double-entry accounting say that for each transaction at least _____ accounts are involved, with at least one debit and one _________

two, credit

Which of the following are accurate statements regarding how to report or treat prepaid accounts? (Check all that apply.)

- Over time, the expired portion of prepaid accounts is removed from the account and reported as an expense. - The unexpired portion of prepaid accounts are treated as assets. - The expired portion of prepaid accounts is reported on the income statement as an expense.

Which of the following would be considered a source document in an accounting system? (Check all that apply.)

- Purchase order - Sales receipt - Payroll records - checks

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time? (Check all that apply.)

- The initial payment will be recorded as an increase to a Prepaid Insurance account. - As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. - Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset.

Which of the following statements is (are) correct regarding the sides of a T-account? (Check all that apply.)

- The left side is called the debit side. -Asset accounts will be increased on the left side. - The right side is called the credit side. - Liability accounts will be increased on the right side.

Which of the following statements is (are) correct regarding the effect of debiting or crediting accounts? (Check all that apply.)

- To reduce Cash, you would credit it. - To increase an expense account, you would debit it. - To decrease an asset, you would credit it. - To increase the Withdrawals account, you would debit it. - To reduce Accounts payable, you would debit it

Which of the following statements is (are) correct regarding a T-account? (Check all that apply.)

-A T-account may be used as a tool to visualize the effects of a transaction. -A T-account will show the debit and credit effects of transactions. -A T-account represents a ledger account.

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.)

-A liability can be settled by transferring assets or providing products or services to others. -A liability is a debt owed by the business. -A liability is a claim by creditors against the assets of a business.

Which of the following statements is (are) correct regarding the Notes payable account? (Check all that apply.)

-Notes payable is reported on the balance sheet. -Notes payable is a written promise to pay a future amount. -Notes payable is a liability account.

Which of the following statements about the Owner, Withdrawal account is (are) correct? (Check all that apply.)

-Owner Withdrawals is increased when the owner withdraws assets for personal use. -Owner Withdrawals is used to record distributions of assets to the owner of a business. -Owner Withdrawals decrease equity.

Choose the account(s) below, that would have a normal credit balance.

-Retained Earnings -Accounts Payable -Unearned Revenues -Revenues

Which of the following accounts are examples of revenues? (Check all that apply.)

-Service revenue -Sales -Fees earned

Which of the following statements is (are) correct regarding the Owner, Capital account? (Check all that apply.)

-The Owner, Capital account is increased on the right side of the T-account. -The Owner, Capital account is used to record investments by the owner. -The Owner, Capital account is an equity account.

Which of the following accounts has a normal credit balance? (Check all that apply.)

-Unearned consulting revenue -Accounts payable -Owner's Capital

Which of the following statements is (are) correct regarding unearned revenues? (Check all that apply.)

-Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service. -Unearned revenues refer to a liability that is settled when a company delivers a product or performs a service.

When entering transactions into accounts, the rules of double-entry accounting must be followed. These rules include: (Check all that apply.)

-the total amount debited must equal the total amount credited. -The accounting equation must remain in balance. -There must be at least one credit and one debit.

Which of the following statements is the correct definition of a creditor?

A creditor is an individual or organization that has a right to receive payments from a business.

Which of the following statements is correct in regards to debiting and crediting an account?

A debit or a credit can increase an account, depending on what kind of account it is.

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

When Myrtle withdraws $50 from the business for personal use, how would this affect the equity of a business?

Assets are decreased and equity is decreased.

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

Identify which of the following lists include only examples of assets.

Building, cash, accounts receivable

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

Coins, checks, money orders

Which of the following statements is correct regarding the effect of debits and credits in accounts?

Expenses reduce equity, so to increase an expense account you would debit it.

Jeff, the owner of a business, withdrew $100 from the business's checking account for personal use. How would this affect the total equity of his business?

Owner, Withdrawals would be increased and total equity would decrease as well.

Which of the following accounts are examples of expenses? (Check all that apply.)

Supplies expense Rent expense

Equipment is a(n) ____ Blank 1 asset, Correct Unavailable (asset/liability/expense) account. It is reported on the _____(left/right) side of the accounting equation and is______ (increased/decreased) when equipment is purchased.

asset, left, increased

Supplies are ______(assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as _________ (assets/expenses/liabilities).

assets, expenses

The T-account for Accounts payable had 4 transactions entered into it. It was increased by $300 and by $100 and decreased by $50 and by $150, respectively. Its balance at the end of the period would be a (debit/credit)_____balance of $______

credit, 200

Since expenses are the costs of doing business and cause equity to______ (increase/decrease), expenses are increased on the______(right/left) side of their T-account.

decrease, left