Chapter 3 Self Test (ACCT220)

Assets are increased by credits. True or false?

False

In what section of the statement of cash flows would the purchase of office equipment for $10,000 cash appear? a. Operating activities b. Investing activities c. Financing activities d. In the notes to the statement of cash flows

b. Investing activities

What journal entry is recorded as a result of issuing stock to investors for cash? a. a debit to Common Stock and a credit to Cash b. a debit to Cash and a credit to Common Stock c. a debit to Cash and a credit to Retained Earnings d. a credit to Cash and a debit to Retained Earnings

b. a debit to Cash and a credit to Common Stock

An account is a part o the financial information system and is described by all EXCEPT which one of the following? a. an account has a debit and credit side b. an account is a source document c. an account consists of three pants d. an account has title

b. an account is a source document

Which of the following is the correct sequence of events? a. analyze a transaction; post it to the ledger; record it in the journal b. analyze a transaction; record it in the journal, post it to the ledger c. record a transaction in the journal; analyze the transaction; post it to the ledger d. none of the answer choices provides the correct sequence

b. analyze a transaction; record it in the journal; post it to the ledger

What is evidence that a transaction has occurred? a. journal b. ledger c. source document d. anyone of the answer choices can be considered evidence

c. source document

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates a. no errors have been made b. no errors can be discovered c. that all accounts reflect correct balances d. the mathematical equality of the accounting equation

d. the mathematical equality of the accounting equation

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

Which of the following is the correct sequence of events? a. Prepare a trial balance, journalize, post b. journalize, post, prepare a trial balance c. post, journalize, prepare a trial balance d. prepare a trial balance, post, journalize

b. journalize, post, prepare a trial balance

Which 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 a trial balance

Each account has a left or credit side and a right or debit side. True or false?

False

Issuance of stock is an investing activity. True or false?

False

The entire group of accounts maintained by a company is referred to collectively as the journal. True or false?

False

If an account is debited in the journal entry, then a. that account will be debited in the ledger b. that account will be credited in the ledger c. that account will be both debited and credited in the ledger d. the transactions will not balance

a. that account will be debited in the ledger

Which of the following is NOT one of the primary types of the financing activities in the statement of cash flows? a. buying equipment b. borrowing money c. issuing shares of stock d. paying dividends

a. buying equipment

What is the appropriate order for a company's chart of accounts?

assets, liabilities, stockholders' equity, revenues, expenses

Each transaction affects at least two accounts. True or false?

True

Expenses decrease retained earnings. True or false?

True

Transactions are recorded in chronological order in the journal. True or false?

True

Which of the following is one of the issues that the SEC said should be considered in deciding if the U.S. should adopt IFRS? a. Whether IFRS is sufficiently developed and consistent in applications b. Whether IFRS modifies its structure to agree with current U.S. GAAP c. Whether IFRS will eliminate U.S.GAAP d. Whether U.S. citizens will vote to accept IFRS

a. Whether IFRS is sufficiently developed and consistent in applications

If an expense is paid with cash a. assets will decrease b. retained earnings will increase c. liabilities will increase d. expenses will decrease

a. assets will decrease

Receipt of an unearned revenue a. increased an asset; increased a liability b. increases an asset; increases a revenue c. decreases a liability; increases stockholders' equity d. decreases a revenue; increase stockholders' equity

a. increases an asset; increases a liability

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 these statements about a journal is false? a. it contains only revenue and expense accounts 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 the complete effect of a transaction in one place

a. it cintains only revenue and expense accounts

Transactions are initially recorded in chronological order in a ___________ before they are transferred to the accounts. a. journal b. register c. ledger d. T account

a. journal

Which of the following is NOT a part of a complete journal entry? a. the balance of each account affected by the transaction b. the accounts and amounts to be debited and credited c. the date of the transaction d. a brief explanation of the transaction

a. the balance of each account affected by the transaction

Which statement about an account is true? a. in its simplest form, an account consists of two parts. 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 for stockholders' equity items. d. the right side of an account is the debit side.

b. an account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.

Which of the following events is NOT recording in the accounting records? a. equipment is purchased on account b. an employee is terminated c. a cash investment is made into the business d. the owner withdraws cash for personal use

b. an eployee is terminated

Genesis Company buys equipment for $900 machine on credit. This transaction will immediately affect the... a. income statement only b. balance sheet only c. income statement and retained earnings statement only d. income statement, retained earnings statement, and balance sheet

b. balance sheet only

The effect on the basic accounting equation of performing services for cash are to a. increase assets and decrease stockholders' equity b. increase assets and increase stockholders' equity c. increase assets and increase liabilities d. increase liabilities and increase stockholders' equity

b. increase assets and increase stockholders' equity

Which of the following differs somewhat under IFRS compared to U.S. GAAP? a. the trial balance b. name for the balance sheet c. definitions of assets and liabilities d. the double-entry accounting system

b. name for the balance sheet

A complete journal entry does NOT show a. the date of the transaction b. the new balance in the accounts affected by the transaction c. a brief explanation of the transaction d. the accounts and amounts to be debited and credited

b. the new balance in the accounts affected by the transaction

Accounts are listed on the trial balance in a. chronological order b. the order that they appear in the ledger c. alphabetical order d. the order in which they are posted

b. the order that they appear in the ledger

On Jan.10, Novis Company purchases manufacturing equipment for $80,000 cash. What kind of activity is this? a. Operating activity b. Financing activity c. Investing activity d. Accrual activity

c. Investing activity

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 dividend is debited to Dividends 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 dividend is debited to Dividends for $1,000 and credited to Cash for $100

What does a general ledger of a company contain? a. asset and liability accounts only b. asset and stockholders' equity accounts only c. all the asset, liability, stockholders' equity, revenue, and expense accounts d. revenue and expense accounts only

c. all the asset, liability, stockholders' equity, revenue, and expense accounts

If total liabilities increase by $5,000 then a. assets decrease by $5,000 b. stockholders' equity increase by $5,000 c. assets increase by $5,000 or stockholders' equity decrease by $5,000 d. assets and stockholders' equity each increase by $2,500

c. assets increase by $5,000 or stockholders' equity decrease by $5,000

When a trial balance balances, it is an indication that a. all journal entries have been posted b. the account balances are correct c. debits equal credits d. all transactions have been journalized

c. debits equal credits

Payment of a dividend a. increases expenses; decreases cash b. decreases cash; increases stockholders' equity c. decreases cash; decreases retained earnings d. increases retained earnings; increases expenses

c. decreases cash; decreases retained earnings

Retained earnings is decreased by a. revenues b. assets c. expenses d. owner's investments

c. expenses

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

Accounts with normal credit balances include a. assets and liabilities b. revenues and expenses c. liabilities and stockholders' equity d. revenues and assets

c. liabilities and stockholders' equity

If cash is received in advance from a customer a. assets will decrease b. retained earnings will increase c. liabilities will increase d. stockholders' equity will decrease

c. liabilities will increase

Which statement is true concerning IFRS? a. IFRS will change the way transactions are recorded b. IFRS will change the format of the trial balance c. IFRS will cause companies to report less profit than under U.S. GAAP d. IFRS may differ somewhat in principles from U.S. GAAP

d. IFRS may differ somewhat in principles from U.S. GAAP

If a company receives cash from a customer before performing services for the customer, then a. assets increase and liabilities decrease b. assets increase and stockholders' equity increases c. assets decrease and liabilities increase d. assets increase and liabilities increase

d. assets increase and liabilities increase

Which accounts normally have debit balances? a. assets, expenses, and revenues b. assets, expenses, and retained earnings c. assets, liabilities, and dividends d. assets, dividends, and expenses

d. assets, dividends, and expenses

What effects occur when an account payable is paid with cash? a. decreases stockholders' equity and decrease liabilities b. increases assets and decreases liabilities c. decreases assets and increases stockholders' equity d. decreases assets and decrease liabilities

d. decreases assets and decreases liabilities

Accounts with normal debit balances include a. assets and liabilities b. liabilities and expenses c. stockholders' equity and revenues d. expenses and assets

d. expenses and assets

Where is the first place every transaction is recorded? a. in the ledger b. in the respective accounts c. in the basic accounting equation d. in the journal

d. in the journal

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. is increased by credits

What type of account is unearned revenue? a. asset b. revenue c. expense d. liability

d. liability