Ch 2: The Recording Process

Prepare the debit-credit analysis for each transaction Hires an administrative assistant.

Debit: No Effect/No Entry Credit: No Effect/No Entry

The ledger accounts should be arranged in a) financial statement order. b) chronological order. c) alphabetical order. d) order of appearance in the journal.

a) financial statement order.

A credit to a liability account indicates a(n) a) increase in the liability. b) error. c) debit could only be made to an asset account. d) decrease in the liability.

a) increase in the liability.

A Revenue Account: a. is increased by debits b. is decreased by debits c. has a normal balance of debit d. is increased by credits

d. is increased by credits

Before posting a payment of $5,000, the Accounts Payable of Chola Corporation had a normal balance of $18,000. The balance after posting this transaction was: (a)$13,000. (b)$5,000. (c)$23,000. (d)Cannot be determined

(a)$13,000.

A trial balance: (a)is a list of accounts with their balances at a given time. (b)proves the mathematical accuracy of journalized transactions. (c)will not balance if a correct journal entry is posted twice. (d)proves that all transactions have been recorded.

(a)is a list of accounts with their balances at a given time.

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

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)is a collection of the entire group of accounts maintained by a company.

The expanded accounting equation is: (a)Assets + Liabilities = Common Stock + Retained Earnings + Revenues + Expenses + Dividends. (b)Assets = Liabilities + Common Stock + Retained Earnings + Revenues − Expenses + Dividends. (c)Assets = Liabilities − Common Stock − Retained Earnings − Revenues − Expenses − Dividends. (d)Assets = Liabilities + Common Stock + Retained Earnings + Revenues − Expenses − Dividends.

(d)Assets = Liabilities + Common Stock + Retained Earnings + Revenues − Expenses − Dividends.

Accounts that normally have debit balances are: (a)assets, expenses, and revenues. (b)assets, expenses, and common stock. (c)assets, liabilities, and dividends. (d)assets, dividends, and expenses.

(d)assets, dividends, and expenses.

Prepare the debit-credit analysis for each transaction Pays $1,050 on the balance related to the transaction of previous transaction.

Debit: Decrease Liabilities/Accounts Payable Credit: Decrease Assets/Cash

Prepare the debit-credit analysis for each transaction Sells a house and lot for N. Fennig; bills N. Fennig $3,600 for realty services performed.

Debit: Increase Assets/Accounts Receivable Credit: Increase Revenues/Service Revenue

Prepare the debit-credit analysis for each transaction Diane Lexington begins business as a real estate agent with a cash investment of $22,700 in exchange for common stock.

Debit: Increase Assets/Cash Credit: Increase Stockholders' Equity/Common Stock

Prepare the debit-credit analysis for each transaction Purchases office furniture for $2,350, on account.

Debit: Increase Assets/Equipment Credit: Increase Liabilities/Accounts Payable

Prepare the debit-credit analysis for each transaction Pays the administrative assistant $2,150 in salary for October.

Debit: Increase Expenses/Salaries and Wages Expense Credit: Decrease Assets/Cash

True/False: Transferring journal entries to the ledger accounts is called journalizing.

False

The chart of accounts is a a) listing of the accounts and the account numbers that identify their location in the ledger. b) device used to prove the mathematical accuracy of the ledger. c) required step in the recording process. d) list of accounts and their balances at a given time.

a) listing of the accounts and the account numbers that identify their location in the ledger.

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 accounts for each entry can be readily compared d. it discloses in one place the complete effect of a transaction

a. it is not a book of original entry

A list of accounts and their balances at a given point in time is called a a) general journal. b) trial balance. c)chart of accounts. d) general ledger.

b) trial balance.

Which of the following is not part of the recording process? a) posting transactions. b) analyzing transactions. c) preparing a trial balance. d) entering transactions in a journal.

c) preparing a trial balance.

The trial balance of Scarlet Corp. had the following normal account balances: Cash $5,000 Service Revenue $85,000 Salaries Payable $4,000 Salaries Expense $40,000 Rent Expense $10,000 Common Stock $42,000 Dividends $13,000 Equipment $61,000 Based on these amounts the total in the debit column is: a. $116,000 b.$118,000 c. $129,000 d. $131,000

c. $129,000

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 withdrawal by the owner is debited to Owner's Drawing 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. a $100 cash withdrawal by the owner is debited to Owner's Drawing for $1,000 and credited to Cash for $100.

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. a debit to Supplies and a credit to Accounts Payable

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. increase assets and decrease liabilities.

The second step in the recording process is a) preparing a trial balance. b) analyzing a transaction. c) posting to the general ledger. d) journalizing a transaction.

d) journalizing a transaction.

The primary purpose of a trial balance is to a) take the place of the balance sheet. b) determine the net income for the year. c) prove that all transactions have been recorded. d) prove that the debits equal the credits after posting

d) prove that the debits equal the credits after posting

The order of the accounts in the ledger is a) common stock, assets, revenues, expenses, liabilities, dividends. b) assets, revenues, expenses, liabilities, common stock, dividends. c)revenues, assets, expenses, liabilities, common stock, dividends. d)assets, liabilities, common stock, dividends, revenues, expenses.

d)assets, liabilities, common stock, dividends, revenues, expenses.

Accounts that normally have debit balances are: a. assets, expenses, and revenues. b. assets, expenses, and equity. c. assets, liabilities, and dividends. d. assets, dividends, and expenses.

d. assets, dividends, and expenses.

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. transfers journal entries to ledger accounts.