FA - test bank ch 2
Joshua Scott invests $40,000 into his new business. How would this transaction be entered in the journal in good form? a. Cash 40,000 Common Stock 40,000 Issued common stock for cash. b. Accounts Receivable 40,000 Common Stock 40,000 Issued common stock for cash. c. Common Stock 40,000 Cash 40,000 Issued common stock for cash. d. Loans Payable 40,000 Cash 40,000 Issued common stock for cash.
a
Which one of the statements below is not a purpose for the journal? a. to show increases and decreases in accounts b. to show chronological order of transactions c. to show a complete transaction in one place d. to help locate errors
a
Expenses can result from a. selling stock b. consuming services c. using up liabilities d. paying creditors on account
b
Which of the following entries records the payment of insurance for the current month? a. Cash, debit; Insurance Expense, credit b. Insurance Expense, debit; Cash, credit c. Insurance Expense, debit; Accounts Receivable, credit d. Prepaid Insurance, debit; Cash, credit
b
Accounts are classified in the ledger a. chronologically b. alphabetically c. in accordance with their appearance in the financial statements d. with the accounts used most often listed first
c
The payment for the monthly rent will require which of the following entries? a. debit Cash and debit Rent Expense b. credit Cash and credit Rent Expense c. debit Rent Expense and credit Cash d. credit Rent Expense and debit Cash
c
Which of the following entries records the collection of cash from cash customers? a. Fees Earned, debit; Cash, credit b. Fees Earned, debit; Accounts Receivable, credit c. Cash, debit; Fees Earned, credit d. Accounts Receivable, debit; Fees Earned, credit
c
The Posting Reference columns are used to trace transactions from the accounts to the journal. What will be entered in the Posting Reference column of (1) the journal and (2) the account? a. (1) the amount of the debit or credit and (2) the journal page number b. (1) the journal page number and (2) the date of the transaction c. (1) the journal page number and (2) the account number d. (1) the account number and (2) the journal page number
d
The balance of an account is determined by a. adding all of the debits to all of the credits b. always subtracting the debits from the credits c. always subtracting the credits from the debits d. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum
d
The classification and normal balance of the dividends account is a. an expense with a credit balance b. an expense with a debit balance c. a liability with a credit balance d. stockholders' equity with a debit balance
d
The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred. What will the accountant do to confirm this suspicion? a. Determine the amount of the error and look for that amount on the trial balance. b. Determine the amount of the error and divide by two, then look for that amount on the trial balance. c. Determine the amount of the error and refer to the journal entries for that amount. d. Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
d
When a transposition error is made on the trial balance, the difference between the debit and credit totals on the trial balance will be a. zero b. twice the amount of the transposition c. one-half the amount of the transposition d. divisible by 9
d
Which of the following describes the classification and normal balance of the fees earned account? a. asset, credit b. liability, credit c. stockholders' equity, debit d. revenue, credit
d
Which of the following statements is not true about liabilities? a. Liabilities are debts owed to outsiders. b. Account titles of liabilities often include the term "payable." c. Cash received before a service is performed creates a liability. d. Liabilities do not include wages owed to employees of the company.
d
slide
error that involved moving the decimal point
A chart of accounts is a listing of accounts that make up the journal. a. True b. False
false
A trial balance determines the complete accuracy of the numbers. a. True b. False
false
For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries. a. True b. False
false
Journalizing is the process of entering amounts in the ledger. a. True b. False
false
Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. a. True b. False
false
Revenues are equal to the difference between cash receipts and cash payments. a. True b. False
false
The Dividends account is an expense. a. True b. False
false
The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. a. True b. False
false
The post reference notation used in the journal is the page number. a. True b. False
false
The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal. a. True b. False
false
When an owner invests assets in the business, the retained earnings account increases due to revenue being earned. a. True b. False
false
When an account receivable is collected in cash, the total assets of the business increase. a. True b. False
false (AR goes down)
Dividends decrease stockholders' equity and are listed on the income statement as a deduction from revenue. a. True b. False
false (NOT listed on IS)
The post reference notation used in the ledger is the account number. a. True b. False
false (post ref is abbrev name and page it appears)
Prepaid expenses are an example of an expense. a. True b. False
false, they're assets
A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger. a. True b. False
true
Postings made to standard account forms show a new balance after each entry. a. True b. False
true
The Unearned Revenues account is an example of a liability. a. True b. False
true
The process of transferring the debits and credits from the journal entries to the accounts is known as posting. a. True b. False
true
transposition
two digits reversed
