Chapter 2 Practice Questions

If a company has an increase in total revenues of $10,000, which of the following is possible? 1. Total assets increase by $10,000. 2. Total liabilities increase by $10,000. 3. Total stockholders' equity decreases by $10,000. a. 1 only b. 2 only c. 3 only d. 2 or 3

a. 1 only

Providing services to customers on account for $100 is recorded as: a. accounts receivable debit $100 service revenue credit $100 b. cash debit $100 accounts receivable credit $100 c. service revenue debit $100 accounts receivable credit $100 d. service expense debit $100 accounts payable credit $100

a. accounts receivable debit $100 service revenue credit $100

After transactions are recorded in the journal, they are posted to the: a. general ledger b. financial statements c. chart of accounts d. trial balance

a. general ledger

Which of the following transactions causes a decrease in stockholders' equity? a. paying advertising expense for the current month b. repaying amount borrowed from the bank c. providing services to customers for cash d. providing services to customers on account

a. paying advertising expense for the current month

The process of transferring debit and credit information from the general journal to the general ledger is known as: a. posting b. charting c. journalizing d. processing

a. posting

Which of the following transactions increases total assets? a. provide services to customers on account b. purchase supplies for cash c. collect cash from customer for services provided on account last month d. pay dividends to current stockholders

a. provide services to customers on account

Purchasing office supplies on account for $10 is recorded as a. supplies debit 100 accounts payable credit 100 b. cash debit 100 supplies credit 100 c. supplies debit 100 cash credit 100 d. accounts payable debit 100 supplies credit 100

a. supplies debit 100 accounts payable credit 100

A debit is used to increase which of the following accounts? a. utilities expense b. accounts payable c. service revenue d. common stock

a. utilities expense

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits? a. Use source documents to determine accounts affected by the transaction. b. Prepare a trial balance. c. Analyze the impact of the transaction on the accounting equation. d. Post the transaction to the T-account in the general ledger.

b. Prepare a trial balance.

A debit is used to decrease which of the following accounts? a. salaries expense b. accounts payable c. dividends d. supplies

b. accounts payable

A list of all account names used to record transactions of a company is referred to as a: a. transaction b. chart of accounts c. financial statement d. journal

b. chart of accounts

Providing services to customers for cash would be recorded with a: a. credit to cash b. credit to service revenue c. debit to service expense d. debit to accounts receivable

b. credit to service revenue

The purchase of supplies with cash would be recorded as a. debit cash; credit supplies expense b. debit supplies; credit cash c. debit cash; credit supplies d. debit supplies expense; credit cash

b. debit supplies; credit cash

A debit to Salaries Expense will: a. increase stockholders' equity b. decrease stockholders' equity c. decrease liabilities d. increase assets

b. decrease stockholders' equity

Which of the following transactions decreases stockholders' equity? a. purchase supplies on account b. pay salaries for the current period c. repay amounts previously borrowed from the bank d. purchase office supplies on account

b. pay salaries for the current period

Which of the following is true about a trial balance? a. only income statement accounts are shown b. total debit amounts should always equal total credit amounts c. only balance sheets accounts are shown d. the trial balance shows the change in all account balances over the accounting period

b. total debit amounts should always equal total credit amounts

Which of the following correctly describes a list of accounts and their balances, showing that total debits equal total credits? a. general ledger b. trial balance c. journal d. chart of accounts

b. trial balance

All transactions related to a particular item over a period of time are summarized in a(n): a. chart b. entry c. account d. schedule

c. account

Paying dividends to stockholders would be recorded with a: a. credit to dividends b. credit to common stock c. debit to dividends d. debit to salaries expense

c. debit to dividends

The payment for utilities of the current month would be recorded as a. debit cash; credit utilities payable b. debit utilities expense; credit utilities payable c. debit utilities expense; credit cash d. debit utilities payable; credit cash

c. debit utilities expense; credit cash

A credit to Cash will: a. increase assets b. decrease liabilities c. decrease assets d. decrease stockholders' equity

c. decrease assets

Which of the following is possible for a particular business transaction? a. increase assets; decrease liabilities b. decrease assets; increase stockholders' equity c. decrease assets; decrease liabilities d. decrease liabilities; increase expenses

c. decrease assets; decrease liabilities

Which of the following does not represent an external business transaction? a. purchasing office supplies b. paying employees' salaries c. expiration of an insurance policy over time d. providing services to customers

c. expiration of an insurance policy over time

Which of the following causes the accounting equation not to balance? a. increase assets; increase liabilities b. decrease assets; increase expenses c. increase assets; increase dividends d. decrease liabilities; increase revenues

c. increase assets; increase dividends

Which of the following transactions causes an increase in total assets? a. pay employee salaries for the current month b. pay dividends to stockholders c. issue common stock in exchange for cash d. purchase office equipment for cash

c. issue common stock in exchange for cash

In the language of accounting, the term "debit" always means a. increase b. decrease c. left-hand side d. right-hand side

c. left-hand side

Which of the following transactions decreases total assets? a. purchase supplies on account b. receive a utility bill but do not pay it c. pay dividends to stockholders d. receive cash from customers for sales in the current period

c. pay dividends to stockholders

Which of the following represents an external transaction? a. lapse of insurance due to passage of time b. use of office supplies by employees over time c. payment of utility bill d. salaries earned by employees but not yet paid

c. payment of utility bill

Account balances in the general ledger are updated for transactions through the process of: a. balancing b. analyzing c. posting d. journalizing

c. posting

Which of the following transactions causes an increase in stockholders' equity? a. pay dividends to stockholders b. obtain cash by borrowing from a local bank c. provide services to customers on account d. purchase advertising on a local radio station

c. provide services to customers on account

Which of the following accounts normally has a debit balance? a. accounts payable b. common stock c. supplies d. service revenue

c. supplies

Posting is the process of a. analyzing the impact of the transaction on the accounting equation. b. obtaining information about external transactions from source documents. c. transferring the debit and credit information from the journal to individual accounts in the general ledger. d. listing all accounts and their balances at a particular date and showing the equality of total debits and total credits.

c. transferring the debit and credit information from the journal to individual accounts in the general ledger

A trial balance can best be explained as a list of a. the income statement accounts used to calculate net income b. revenue, expense, and dividend accounts used to show the balances of the components of retained earnings c. the balance sheet accounts used to show the equality of the accounting equation d. all accounts and their balances at a particular date

d. all accounts and their balances at a particular date

Which of the following is not a step in the process of measuring external transactions? a. analyze the impact of the transaction on the accounting equation b. record the transaction using debits and credits c. post the transaction to the T-account in the general ledger d. all of the steps listed are steps in the measurement process of external transactions

d. all of the steps listed are steps in the measurement process of external transactions

A credit is used to decrease which of the following accounts? a. service revenue b. common stock c. salaries payable d. cash

d. cash

The purchase of supplies on account would be recorded with a: a. debit to supplies payable b. credit to supplies expense c. debit to cash d. debit to supplies

d. debit to supplies

Providing services to customers for cash would have what effect on the accounting equation? a. increase total assets b. increase total liabilities c. increase total stockholders' equity d. increase total assets and total stockholders' equity

d. increase total assets and total stockholders' equity

Transactions are recorded using debits and credits in a(n): a. financial statement b. annual report c. chart of accounts d. journal

d. journal

Purchasing land with cash would have what effect on the accounting equation? a. total assets decrease b. total liabilities increase c. total assets increase d. no effect

d. no effect

Which of the following transactions increases total liabilities? a. pay for rent in the current period b. purchase equipment with cash c. pay dividends to stockholders d. purchase office supplies on account

d. purchase office supplies on account

Which of the following transactions causes a decrease in total liabilities? a. paying maintenance expenses for the current month b. providing services to customers on account c. paying dividends to stockholders d. repay amounts previously borrowed from the bank

d. repay amounts previously borrowed from the bank

A credit is used to increase which of the following accounts? a. dividends b. insurance expense c. cash d. service revenue

d. service revenue

Which of the following accounts normally has a credit balance? a. cash b. accounts receivable c. dividends d. service revenue

d. service revenue

Which of the following shows a chronological record of all transactions? a. the general ledger b. the chart of accounts c. the trial balance d. the general journal

d. the general journal

If a company has an increase in total expenses of $10,000, which of the following is possible? a. total liabilities decrease by $10,000 b. total assets increase by $10,000 c. total stockholders' equity increases by $10,000 d. total assets decrease by $10,000

d. total assets decrease by $10,000