Accounting Chapter 3
A credit is not the normal balance for which account listed below? A. Dividends account B. Revenue account C. Common Stock account D. Liability account
A. Dividends account
When a company performs a service but has not yet received payment, it A. makes no entry until cash is received. B. debits Service Revenue and credits Accounts Payable. C. debits Service Revenue and credits Accounts Receivable. D. debits Accounts Receivable and credits Service Revenue.
Answer: D. debits Accounts Receivable and credits Service Revenue.
A person who wants to determine the balance of a particular account should refer to the A. journal. B. chart of accounts. C. source document. D. ledger.
Answer: D. ledger
When a company receives a utility bill but will not pay it right away, it should A. debit Utilities Expense and credit Accounts Payable. B. debit Accounts Payable and credit Utilities Expense. C. make no entry until the bill is paid. D. debit Utilities Expense and credit Accounts Receivable.
Answer: A. debit Utilities Expense and credit Accounts Payable.
A company that receives money in advance of performing a service A. debits Cash and credits Unearned Service Revenue. B. debits Cash and credits Accounts Receivable. C. debits Unearned Service Revenue and credits Accounts Payable D. debits Cash and credits Prepaid Insurance.
Answer: A. debits Cash and credits Unearned Service Revenue
A paid dividend A. decreases assets and stockholders' equity. B. increases assets and stockholders' equity. C. increases assets and decreases stockholders' equity. D. decreases assets and increases stockholders' equity.
Answer: A. decreases assets and stockholders' equity
If services are rendered on account, then A. liabilities will increase. B. stockholders' equity will increase. C. liabilities will decrease. D. assets will decrease.
Answer: B. stockholders' equity will increase.
Barnes Company showed the following balances at the end of its first year: Cash $14000 Prepaid insurance 700 Accounts receivable 3500 Accounts payable 2800 Notes payable 4200 Common stock 5400 Dividends 700 Revenues 29000 Expenses 17500 What amount did Barnes Company show as total credits? A. $42800 B.$41400 C.$42100 D.$40700
Answer: B. $41400
Which accounts normally have debit balances? A. Assets, liabilities, and dividends B. Assets, expenses, and dividends C. Assets, expense, and retained earnings D. Assets, expenses, and revenues
Answer: B. Assets, expenses, and dividends
The usual sequence of steps in the transaction recording process is A. journalize, post to the ledger, analyze. B. analyze, journalize, post to the ledger. C. post to the ledger, journalize, analyze. D. journalize, analyze, post to the ledger.
Answer: B. analyze, journalize, post to the ledger
An investment by the stockholders in a business increases A. assets only. B. assets and stockholders' equity. C. liabilities and stockholders' equity. D. assets and liabilities.
Answer: B. assets and stockholders' equity
Debits A. decrease both assets and liabilities. B. increase assets and decrease liabilities. C. decrease assets and increase liabilities. D. increase both assets and liabilities.
Answer: B. increase assets and decrease liabilities.
Collection of a $600 Accounts Receivable A. decreases a liability $600; increases stockholders' equity $600. B. increases an asset $600; decreases an asset $600. C. increases an asset $600; decreases a liability $600. D. decreases an asset $600; decreases a liability $600.
Answer: B. increases an asset $600; decreases an asset $600.
The purchase of an asset on credit A. increases assets and stockholders' equity. B. increases assets and liabilities. C. decreases assets and increases liabilities. D. leaves total assets unchanged.
Answer: B.increases assets and liabilities.
The payment of a liability A. increases assets and decreases liabilities. B. decreases assets and increases liabilities. C. decreases assets and liabilities. D. decreases assets and stockholders' equity.
Answer: C. decreases assets and liabilities.
The double-entry system requires that each transaction must be recorded A. first as a revenue and then as an expense. B. in a journal and in a ledger. C. in at least two different accounts. D. in two sets of books.
Answer: C. in at least two different accounts
Posting A. involves transferring all debits and credits on a journal page to the trial balance. B. provides a chronological record of transactions. C. transfers journal entries to ledger accounts. D. transfers ledger transaction data to the journal.
Answer: C. transfers journal entries to ledger accounts.
On March 1, 2017, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? A. Yes, the company is now obligated to pay the employee, thus that event must be recorded. B. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known. C. Yes, failure to record the event would cause the financial statements to be misleading. D. No, hiring an employee is an important event; however it is not an economic event that should be recorded.
Answer: D. No, hiring an employee is an important event; however it is not an economic event that should be recorded.
Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? A. No, the amount of revenue cannot be adequately determined until the company completes the work. B. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. C. Yes, they are treated as revenue at the time of receipt because the company has access to the cash. D. No, revenue cannot be recognized until the work is performed.
Answer: D. No, revenue cannot be recognized until the work is performed.
A revenue account A. is increased with a debit. B. has a normal balance of a debit. C. is decreased with a credit. D. is increased with a credit.
Answer: D. is increased with a credit
