Accounting Chapter 3

14. The principal purpose of posting is to A. help identify errors made in the journal. B. accumulate the effects of journalized transactions in the individual accounts. C. enter transactions directly into the ledger. D. help determine if the financial statements are ready to be prepared

B. accumulate the effects of journalized transactions in the individual accounts.

8. The usual sequence of steps in the transaction recording process is A. journalize, analyze, post to the ledger. B. analyze, journalize, post to the ledger. C. journalize, post to the ledger, analyze. D. post to the ledger, journalize, analyze.

B. analyze, journalize, post to the ledger.

12. If the beginning Cash account balance of Rainbow, Inc. was $36,800, the ending balance was $20,400, and total cash received during the period was $88,000, what amount of cash was paid out during the period? A. $ 3,600 B. $ 84,800 C. $104,400 D. $ 71,600

C. $104,400

13. Management could determine the amounts due from customers by examining which ledger account? A. Service Revenue B. Accounts Payable C. Accounts Receivable D. Supplies

C. Accounts Receivable

5.Purchasing supplies on account involves A. An increase and a decrease to assets B. An increase in assets and a decrease to liabilities C. An increase in assets and an increase to liabilities D. A decrease to assets and a decrease to liabilities

C. An increase in assets and an increase to liabilities

15. A trial balance is a listing of A. transactions in a journal. B. the chart of accounts. C. general ledger accounts and balances. D. the totals from the journal pages.

C. general ledger accounts and balances.

11. The purpose of the ledger is to A. record chronologically the day's transactions. B. keep a record of documentation to support each transaction. C. keep in one place all information about changes in specific account balances. D. make sure that all assets, liabilities, etc., have normal balances at all times.

C. keep in one place all information about changes in specific account balances.

6. The normal balance of any account is the A. left side. B. right side. C. side which increases that account. D. side which decreases that account.

C. side which increases that account.

7. In recording an accounting transaction in a double-entry system A. the number of debit accounts must equal the number of credit accounts. B. there must always be entries made on both sides of the accounting equation. C. the amount of the debits must equal the amount of the credits. D. there must only be two accounts affected by any transaction.

C. the amount of the debits must equal the amount of the credits.

2. Comstock Company provided consulting services and billed the client $2,500. As a result of this event A. assets remained unchanged. B. assets increased by $2,500. C. equity increased by $2,500 D. Both assets and stockholders' equity increased by $2,500.

D. Both assets and stockholders' equity increased by $2,500.

3. If an asset account such as cash is increased by $5,000, which one of the following financial events must also occur to keep the accounting equation in balance? A. Another asset, such as Accounts Receivable, must decrease by $5,000 B. A liability, such as Accounts Payable, must increase by $5,000 C. Stockholders' equity, such as Common Stock, must increase by $5,000 D. Each of the above is correct

D. Each of the above is correct

4. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? A. Yes, they are treated as revenue at the time of receipt because the company has access to the cash. B. No, the amount of revenue cannot be adequately determined until the company completes the work. C. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. D. No, revenue cannot be recognized until the work is performed.

D. No, revenue cannot be recognized until the work is performed.

10. Which of the following journal entries is recorded correctly and in the basic format? A. Salaries and Wages Expense 550 Cash 1,500 Advertising Expense 950 B. Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,600 C. Cash 1,500 Salaries and Wages Expense 550 Advertising Expense 950 D. Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,500

D. Salaries and Wages Expense 550 Advertising Expense 950 Cash 1,500

1. If expenses are paid in cash, then A. assets will increase and stockholders' equity will increase. B. liabilities will decrease and stockholders' equity will increase. C. liabilities will increase and stockholders' equity will increase. D. assets will decrease and stockholders' equity will decrease.

D. assets will decrease and stockholders' equity will decrease.

9. Transactions in a journal are initially recorded in A. account number order. B. dollar amount order. C. alphabetical order. D. chronological order.

D. chronological order.