Practice Multiple Choice Questions Ch 02

A trial balance: (a) Is a list of accounts with their balances at a given time. (b) Proves the jornalized transactions are correct. (c) Will not balance if a correct journal entry is posted twice. (d) Proves that all transactions have been recorded.

(/a/) The trial balance is a list of accounts with their balances at a given time.

A revenue account: (a) Is increased by debits. (b) Is decreased by credits. (c) Has a normal balance of a debit. (d) Is increased by credits.

(/d/) A revenue account is increased by credits.

Which of the following statements about a journal is FALSE? (a) It is not a book of original entry. (b) It provides a chronological record of transactions. (c) It helps to locate errors because the debit and credit amounts for each entry can be readily compared. (d) It discloses in one place the complete effect of a transaction.

(/a/) The journal is a book of original entry.

The trial balance of Jeong Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner's Capital $42,000; Owner's Drawings $15,000;Equipment $61,000. In preparing a trial balance, the total in the debit column is: (a) $131,000 (b) $216,000 (c) $91,000 (d) $116,000

(/a/) The total debit column = $5,000 (Cash) + $40,000 (Salaries and Wages Expense) + $10,000 (Rent Expense) + $15,000 (Owner's Drawings) + $61,000 (Equipment) = $131,000.

Which of the following statements about an account is TRUE? (a) The right side of an account is the debit or increased side (b) An account is an individual accounting record of increases and decreases in specific asset, liability, and owner's equity items. (c) There are separate accounts for specific assets and liabilities but only one account for owner's equity items. (d) The left side of an account is the credit or decrease side.

(/b/) An account is an individual accounting record of increases and decreases in a specific asset, liability, and owner's equity items.

Which of the following is NOT part of the recording process? (a) Analyzing transactions. (b) Preparing a trial balance. (c) Entering transactions in a journal. (d) Posting transactions.

(/b/) Preparing the trial balance is not part of the recording process.

The order of accounts in the ledger is: (a) Assets, revenues, expenses, liabilities, owner's capital, owner's drawings. (b) Assets, liabilities, owner's capital, owner's drawings, revenues, expenses. (c) Owner's capital, assets, revenues, expenses, liabilities, owner's drawings. (d) Revenues, assets, expenses, liabilities, owner's capital, owner's drawings.

(/b/) The correct order of the accounts in the ledger is assets, liabilities, owner's capital, owner's drawings, revenues, expenses.

A ledger: (a) Contains only asset and liability accounts. (b) Should show accounts in alphabetical order. (c) Is a collection of the entire group of accounts maintained by a company. (d) Is a book of original entry.

(/c/) A ledger is a collection of all of the accounts maintained by a company.

Debits: (a) Increase both assets and liabilities. (b) Decrease both assets and liabilities. (c) Increase assets and decrease liabilities. (d) Decrease assets and increase liabilities.

(/c/) Debits increase assets but they decrease liabilities.

Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was: (a) $21,000. (b) $ 5,000. (c) $11,000. (d) Cannot be determined.

(/c/) The balance is $11,000 ($16,000 normal balance - $5,000 payment).

The purchase of supplies on account should result in: (a) A debit to Supplies Expense and a credit to Cash. (b) A debit to Supplies Expense and a credit to Accounts Payable. (c) A debit to Supplies and a credit to Accounts Payable. (d) A debit to Supplies and a credit to Accounts Receivable.

(/c/) The purchase of supplies on account results in a debit to Supplies and a credit to Accounts Payable.

A trial balance will not balance if: (a) A correct journal entry is posted twice. (b) The purchase of supplies on account is debited to Supplies and credited to Cash. (c) A $100 cash drawing by the owner is debited to Owner's Drawings for $1,000 and credited to cash for $100. (d) A $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

(/c/) The trial balance will not balance in this case because the debit of $1,000 to Owner's Drawings is not equal to the credit of $100 to Cash.

Accounts that normally have debit balances are: a. Assets, expenses, and revenues. b. Assets, expenses, and owner's capital. c. Assets, liabilities, and owner's drawings. d. Assets, owner's drawings, and expenses.

(/d/) Assets, owner's drawings, and expenses all have normal debit balances.

Posting: (a) Normally occurs before journalizing. (b) Transfers ledger transaction data to the journal. (c) Is an optional step in the recording process. (d) Transfers journal entries to ledger accounts.

(/d/) Posting transfers journal entries to ledger accounts.

The expanded accounting equation is: (a) Assets + Liabilities = Owner's Capital + Owner's Drawings + Revenues + Expenses (b) Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues - Expenses. (c) Assets = Liabilities - Owner's Capital - Owner's Drawings - Revenues - Expenses. (d) Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues - Expenses.

(/d/) The expended accounting equations is Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues - Expenses.