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Test Bank For Accounting, Volume 1, Ninth Canadian Edition 9th Edition Charles T. Horngren
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Test Bank For Accounting, Volume 1, Ninth Canadian Edition 9th Edition Charles T. Horngren
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WITH ANSWERS
Accounting, Volume 1, Ninth Canadian Edition 9th Edition Charles T. Horngren
Test Bank
Accounting, Vol. 1, 9e Cdn. Ed. (Horngren et al.)
Chapter 2 Recording Business Transactions
Objective 2-1
1) The basic summary device of accounting is the account.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
2) Notes receivable is a liability account.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
3) A chart of accounts is a list of all of a companys accounts with their account numbers.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
4) A chart of accounts is organized in order of the accounting equation, with assets first, followed by liabilities and owners equity.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
5) The ledger is the first book of entry for a business transaction.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
6) An account receivable for the selling company is an account payable for the purchasing company.
Answer: TRUE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-1 Define and use key accounting terms
7) The basic summary device of accounting is the:
- A) ledger.
- B) account.
- C) debit.
- D) credit.
Answer: B
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
8) Accounts are grouped in a book called the:
- A) trial balance.
- B) chart of accounts.
- C) journal.
- D) ledger.
Answer: D
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
9) All of the following are assets except:
- A) cash.
- B) accounts receivable.
- C) land.
- D) accounts payable.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
10) An organizations list of all its accounts and the related account numbers is called a:
- A) balance sheet.
- B) chart of accounts.
- C) ledger.
- D) trial balance.
Answer: B
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
11) A chart of accounts is:
- A) a source document.
- B) another name for a trial balance.
- C) a list of all of the accounts of an organization and their related account numbers.
- D) prepared as the last step in analyzing transactions.
Answer: C
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
12) Which of the following is a revenue account?
- A) accounts receivable
- B) accumulated amortization
- C) unearned revenue
- D) sales
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-1 Define and use key accounting terms
13) Which of the following most completely describes businesses that use a chart of accounts?
- A) service but not merchandising or manufacturing businesses
- B) merchandising but not service or manufacturing businesses
- C) manufacturing but not service or merchandising businesses
- D) Service, merchandising, and manufacturing businesses all use a chart of accounts.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
14) The year end balance in the capital account is determined by:
- A) the change in cash from the beginning to the end of the year.
- B) the beginning capital balance, investments, net income or loss, and withdrawals.
- C) only investments and withdrawals.
- D) the change in total assets from the beginning to the end of the year.
Answer: B
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-1 Define and use key accounting terms
Match the following.
- A) account
- B) ledger
- C) journal
- D) chart of accounts
15) The basic summary device of accounting
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
16) The book of accounts
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
17) The chronological record of an entitys transactions
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
18) A list of all an entitys accounts and their account numbers
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
Answers: 15) A 16) B 17) C 18) D
For the items listed below, choose the appropriate code letter to indicate whether the item is an asset, liability, owners equity, revenue, expense or withdrawal item:
Asset A
Liability L
Owners Equity OE
Revenue R
Expense E
Withdrawal W
19) Accounts receivable
Diff: 1
Learning Outcome:
Skill: Knowledge
A-03 Analyze and record transactions and their effects on the financial statements
Objective: 2-1 Define and use key accounting terms
20) Service revenue
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
21) Salary expense
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
22) Accounts payable
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
23) Office supplies
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
24) Cash
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
25) Note payable
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
26) Tim Brown, Capital
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
27) Building
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
28) Tim Brown, withdrawals
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
29) Land
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
30) Truck
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
31) Rent expense
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
32) Furniture
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
33) Equipment
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
34) Supplies expense
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-1 Define and use key accounting terms
Answers: 19) A 20) R 21) E 22) L 23) A 24) A 25) L 26) OE 27) A 28) W 29) A 30) A 31) E 32) A 33) A
34) E
Objective 2-2
1) A transaction always involves exactly two accounts.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
2) The right-hand side of an account is called the increase side.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
3) Assets, revenues, and withdrawals are all increased by debits.
Answer: FALSE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
4) Total debits must always equal total credits.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
5) The right side of the account is the correct side.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
6) The normal balance of account Accounts Payable is a debit.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
7) The purchase of equipment by issuing a note payable would involve a debit to note payable.
Answer: FALSE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
8) The purchase of a building with a down payment of cash and the signing of a note payable for the remainder would include a debit to building and a credit to note payable and to cash.
Answer: TRUE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
9) The normal balance of a revenue account is a credit.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
10) Double-entry accounting means entering business transactions twice to avoid possible errors.
Answer: FALSE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
11) Credit is a term representing:
- A) the right side of an account.
- B) an increase.
- C) a decrease.
- D) the left side of an account.
Answer: A
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
12) Which of the following groups of accounts have normal debit balances?
- A) assets, revenues, and owner withdrawals
- B) assets, expenses, and owner withdrawals
- C) assets, liabilities, and capital
- D) assets, revenues, and expenses
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
13) The normal balance of an expense is a ________ while the normal balance of an asset is a ________.
- A) debit, credit
- B) debit, debit
- C) credit, credit
- D) credit, debit
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
14) The normal balance of a liability is a ________ while the normal balance of revenue is a ________.
- A) credit, debit
- B) debit, debit
- C) debit, credit
- D) credit, credit
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
15) Incurring an expense in the current accounting period, which is paid in the current accounting period, will require:
- A) a debit to an expense and a credit to a liability.
- B) a debit to a liability and a credit to an expense.
- C) a debit to an expense and a credit to cash.
- D) a debit to an expense and a credit to capital.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
16) Incurring an expense in the current accounting period, which will be paid in the following accounting period, will require:
- A) a debit to an expense and a credit to a liability.
- B) a debit to a liability and a credit to an expense.
- C) a debit to an expense and a credit to cash.
- D) a debit to an expense and a credit to capital.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
17) The withdrawal of cash by the owner for personal use would include a:
- A) debit to the owners capital account.
- B) credit to the owners withdrawals account.
- C) credit to the owners capital account.
- D) debit to the owners withdrawals account.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
18) An owner investment of cash into the business would include a:
- A) debit to capital.
- B) credit to withdrawals.
- C) debit to withdrawals.
- D) credit to capital.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
19) Purchasing a truck by signing a note payable would include a:
- A) credit to truck.
- B) debit to note payable.
- C) credit to note payable.
- D) debit to truck expense.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
20) Performing a service on account would include a:
- A) debit to accounts payable.
- B) credit to accounts payable.
- C) credit to the cash.
- D) credit to service revenue.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
21) The normal balance of cash is a ________ because it is a(n) ________ account.
- A) debit, expense
- B) credit, asset
- C) debit, asset
- D) credit, revenue
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
22) The normal balance of notes payable is a ________ because it is a(n) ________ account.
- A) debit, expense
- B) credit, revenue
- C) debit, asset
- D) credit, liability
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
23) The normal balance of wages payable is a ________ because it is a(n) ________ account.
- A) credit, liability
- B) credit, revenue
- C) credit, owners equity
- D) credit, asset
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
24) The normal balance of land is a ________ because it is a(n) ________ account.
- A) debit, expense
- B) credit, asset
- C) debit, asset
- D) credit, revenue
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
25) The purchase of equipment for cash would:
- A) increase total assets.
- B) increase total assets and decrease liabilities.
- C) decrease both liabilities and owners equity.
- D) have no effect on total assets.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
26) An owner investment of a building, valued at $200,000, along with a $55,000 outstanding mortgage, into an entity would:
- A) increase owners equity $145,000.
- B) increase total assets $55,000.
- C) decrease liabilities $145,000.
- D) increase owners equity $200,000.
Answer: A
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Analysis
Objective: 2-2 Apply the rules of debit and credit
27) Performing services on account would:
- A) increase net income, decrease total assets, and decrease owners equity.
- B) increase net income, increase owners equity, and increase total assets.
- C) increase total assets and liabilities.
- D) decrease total assets, increase net income, and increase owners equity.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
28) The payment of the owners personal expenses from the businesss chequebook should be recorded with a debit to:
- A) withdrawals.
- B) accounts payable.
- C) cash.
- D) capital.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
29) The account debited when supplies are purchased on account is:
- A) accounts payable.
- B) cash.
- C) capital.
- D) supplies.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
30) The account credited when cash is received from a customer on account is:
- A) cash.
- B) accounts payable.
- C) accounts receivable.
- D) service revenue.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
31) The owner withdrawing cash for personal use would:
- A) have no effect on assets.
- B) decrease owners equity.
- C) decrease net income.
- D) increase assets.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
32) An advertising bill received in the current period that will be paid the following period would:
- A) decrease liabilities.
- B) have no effect on liabilities.
- C) increase net income.
- D) decrease owners equity.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
33) The account debited when payment is made for equipment purchased previously on account is:
- A) accounts payable.
- B) cash.
- C) accounts receivable.
- D) equipment.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
34) The purchase of a building by signing a note payable would:
- A) increase owners equity.
- B) decrease total liabilities.
- C) have no effect on owners equity.
- D) decrease total assets.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
35) The purchase of a building by signing a note payable would:
- A) increase owners equity.
- B) increase total liabilities.
- C) decrease owners equity.
- D) decrease total assets.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
36) The investment of cash into the business by the owner would:
- A) increase net income.
- B) decrease owners equity.
- C) have no effect on liabilities.
- D) decrease assets.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
37) The payment of an amount owed to a supplier would:
- A) have no effect on total assets or liabilities.
- B) increase owners equity and liabilities.
- C) decrease net income and increase assets.
- D) decrease assets and liabilities.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
38) The payment of salaries to employees for wages of the current period would:
- A) increase owners equity and decrease liabilities.
- B) increase net income and decrease assets.
- C) decrease assets and owners equity.
- D) increase assets and decrease owners equity.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
39) Performing a service for cash would:
- A) affect the accounting equation the same as if the service was performed on account.
- B) increase assets more than if the service had been performed on account.
- C) increase net income less than if the service had been performed on account.
- D) decrease expenses more than if the service had been performed on account.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
40) Performing a service on account would:
- A) affect the accounting equation the same as if the service was performed for cash.
- B) increase assets more than if the service had been performed for cash.
- C) increase net income less than if the service had been performed for cash.
- D) decrease expenses more than if the service had been performed for cash.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
41) Performing a service and immediately collecting the cash would:
- A) increase net income less than if the service had been performed on account.
- B) increase assets more than if the service had been performed on account.
- C) increase owners equity less than if the service had been performed on account.
- D) have no effect on liabilities.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
42) The journal entry to record the payment of a telephone bill immediately upon receipt of the bill would:
- A) have no effect on owners equity.
- B) decrease liabilities.
- C) decrease owners equity.
- D) increase owners equity.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
43) Making a payment on account of a liability would:
- A) decrease assets and increase liabilities.
- B) increase liabilities and decrease owners equity.
- C) decrease assets and decrease liabilities.
- D) decrease assets and increase net income.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
44) Receiving a payment from a customer on account would:
- A) increase both assets and owners equity.
- B) increase net income and decrease liabilities.
- C) have no effect on total assets or owners equity.
- D) decrease liabilities and increase owners equity.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
45) An owner investment of equipment into the business would:
- A) increase net income.
- B) have no effect on total assets.
- C) have no effect on owners equity.
- D) have no effect on liabilities.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
46) An owner withdrawal of $20,000 cash would:
- A) decrease owners equity and increase assets by $20,000.
- B) increase owners equity and decrease liabilities by $20,000.
- C) increase liabilities and assets by $20,000.
- D) decrease assets and owners equity by $20,000.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-2 Apply the rules of debit and credit
47) In the double-entry accounting system each transaction:
- A) involves exactly two accounts.
- B) involves at least two accounts.
- C) involves an asset account and a liability account.
- D) involves a liability account and an equity account.
Answer: B
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
48) Owner equity accounts include:
- A) assets, liabilities and capital.
- B) assets, revenues and expenses.
- C) only the capital and withdrawal accounts.
- D) the revenue, expense, capital and withdrawal accounts.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
49) Which of the following is correct?
- A) liabilities = assets owners equity
- B) owners equity = assets + liabilities
- C) assets = liabilities owners equity
- D) assets = owners equity liabilities
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
Match the following.
- A) debit
- B) normal balance
- C) credit
50) The left-hand side of an account
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
51) The right-hand side of an account
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
52) The side of the account where increases are recorded
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-2 Apply the rules of debit and credit
Answers: 50) A 51) C 52) B
53) State whether the account should be debited or credited and the normal balance of the account for the items listed below:
| Account | Recorded as a
debit or credit |
Normal balance
of the account |
| a) Increase in Accounts payable | ||
| b) Increase in Salary expense | ||
| c) Increase in Withdrawals | ||
| d) Decrease in Capital | ||
| e) Decrease in Supplies | ||
| f) Increase in Accounts receivable | ||
| g) Decrease in Note payable | ||
| h) Decrease in Note receivable | ||
| i) Increase in Utilities expense | ||
| j) Decrease in Land |
Answer:
| Account | Recorded as a
debit or credit |
Normal balance
of the account |
| a) Increase in Accounts payable | Credit | Credit |
| b) Increase in Salary expense | Debit | Debit |
| c) Increase in Withdrawals | Debit | Debit |
| d) Decrease in Capital | Debit | Credit |
| e) Decrease in Supplies | Credit | Debit |
| f) Increase in Accounts receivable | Debit | Debit |
| g) Decrease in Note payable | Debit | Credit |
| h) Decrease in Note receivable | Credit | Debit |
| i) Increase in Utilities expense | Debit | Debit |
| j) Decrease in Land | Credit | Debit |
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
54) State whether the account should be debited or credited and the normal balance of the account for the items listed below:
| Account | Recorded as a
debit or credit |
Normal balance
of the account |
| a) Decrease in Accounts payable | ||
| b) crease in Salary expense | ||
| c) Decrease in Withdrawals | ||
| d) Increase in Capital | ||
| e) Increase in Supplies | ||
| f) Decrease in Accounts receivable | ||
| g) Increase in Note payable | ||
| h) Increase in Note receivable | ||
| i) Decrease in Rent expense | ||
| j) Increase in Land |
Answer:
| Account | Recorded as a
debit or credit |
Normal balance
of the account |
| a) Decrease in Accounts payable | Debit | Credit |
| b) Decrease in Salary expense | Credit | Debit |
| c) Increase in Withdrawals | Debit | Debit |
| d) Increase in Capital | Credit | Credit |
| e) Increase in Supplies | Debit | Debit |
| f) Decrease in Accounts receivable | Credit | Debit |
| g) Increase in Note payable | Credit | Credit |
| h) Increase in Note receivable | Debit | Debit |
| i) Decrease in Rent expense | Credit | Debit |
| j) Increase in Land | Debit | Debit |
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
55) Explain the rules for debits and credits. Use the accounting equation as a basis for your explanation and indicate the specific rules for debits and credits as they apply to the various accounts. Your answer should include the rules for all types of accounts affecting owners equity.
Answer:
Assets = Liabilities + Owners Equity
Dr | Cr Dr | Cr Dr | Cr
+ + +
Capital
Dr | Cr
+
Revenues
Dr | Cr
+
Expenses
Dr | Cr
+
Withdrawals
Dr | Cr
+
Debits are on the left-hand side and credits are on the right-hand side. Depending upon which side of the equation you are on, debits will either increase or decrease an accounting equation item. Owners equity has four specific accounts that have an effect on the owners investment in the firm. Revenues and capital (investments by the owner) increase with credits while expenses and withdrawals increase with debits.
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
56) Describe owners equity in relation to the assets of the business.
Answer: Owners equity represents a residual interest in the assets of the business available to the owners.
The accounting equation can be presented showing owners equity as being the net assets:
Owners equity = Assets Liabilities
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-2 Apply the rules of debit and credit
Objective 2-3
1) The purchase of office equipment for cash would increase assets and decrease liabilities.
Answer: FALSE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-3 Analyze and record transactions in the journal
2) A payment to a creditor would increase assets and decrease liabilities.
Answer: FALSE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Comprehension
Objective: 2-3 Analyze and record transactions in the journal
3) A journal is a chronological record of transactions.
Answer: TRUE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
4) The first step in the journalizing process is to identify the transaction and its data.
Answer: TRUE
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
5) A journal is like a diary; it shows a chronological listing of a businesss activities.
Answer: TRUE
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
6) Recording the transaction in the journal is the first step in the journalizing process.
Answer: FALSE
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
7) Transactions are first recorded in a(n):
- A) trial balance.
- B) journal.
- C) account.
- D) ledger.
Answer: B
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
8) A chronological record of an entitys transactions is called a(n):
- A) journal.
- B) ledger.
- C) trial balance.
- D) account.
Answer: A
Diff: 1
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
9) The last step in the journalizing process is to:
- A) enter the transaction to the journal.
- B) post the transaction to the ledger.
- C) determine the accounts involved in the transaction.
- D) identify the transaction and its data.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
10) All of the following are included in the journal entry for a transaction except:
- A) the name of the person making the entry.
- B) the titles of the accounts to be debited and credited.
- C) the date of the transaction.
- D) the dollar amounts of the debit and credit.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Knowledge
Objective: 2-3 Analyze and record transactions in the journal
11) A business purchases equipment for cash of $100,000. This transaction will cause:
- A) cash to be credited for $100,000.
- B) equipment to be credited for $100,000.
- C) capital to be credited for $100,000.
- D) capital to be debited for $100,000.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
12) A business acquires equipment costing $10,000 by making a $2,000 down payment and issuing a note for the balance. This transaction will cause:
- A) equipment to be debited for $10,000.
- B) notes payable to be debited for $8,000.
- C) cash to be credited for $8,000.
- D) equipment to be credited for $8,000.
Answer: A
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
13) A payment of $400 to a creditor, on account, will cause:
- A) cash to be debited for $400.
- B) accounts receivable to be credited for $400.
- C) accounts payable to be debited for $400.
- D) accounts payable to be credited for $400.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
14) Providing services for $2,000 where cash is immediately received, will cause:
- A) service revenue to be debited for $2,000.
- B) service revenue to be credited for $2,000.
- C) cash to be credited for $2,000.
- D) accounts receivable to be credited for $2,000.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
15) An owner investment of land valued at $20,000 and a building valued at $55,000 into the business would include a:
- A) debit to the land and building account for $75,000.
- B) debit to the land account for $75,000.
- C) debit to the capital account for $75,000.
- D) debit to the building account for $55,000.
Answer: D
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
16) An owner investment of land valued at $20,000 and a building valued at $55,000 into the business would include a:
- A) debit to the land account for $55,000 and building account for $20,000.
- B) debit to the land account for $75,000.
- C) debit to the land account for $20,000 and building account for $55,000.
- D) debit to the building account for $75,000.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
17) Purchasing supplies on account would include a:
- A) debit to supplies and a credit to note payable.
- B) debit to supplies and a credit to cash.
- C) debit to supplies and a debit to accounts payable.
- D) debit to supplies and a credit to accounts payable.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
18) Purchasing supplies and office equipment for cash would include a:
- A) debit to supplies; credit to office equipment and cash.
- B) debit to supplies and office equipment; credit to cash.
- C) debit to office equipment; credit to supplies and cash.
- D) debit to cash; credit to office equipment and supplies.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
19) Which of the following records the payment of the current months rent bill for a business?
- A) debit to cash and a credit to rent expense
- B) debit to rent expense and a credit to cash
- C) debit to rent expense and a credit to accounts payable
- D) debit to accounts payable and a credit to cash
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
20) Receiving cash on account of $1,200 from a customer would include a:
- A) debit to accounts receivable and a credit to service revenue for $1,200.
- B) debit to cash and a credit to accounts receivable for $800.
- C) debit to accounts payable and a credit to cash for $1,200.
- D) debit to cash and a credit to accounts receivable for $1,200.
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
21) Making a $350 payment on an account with a current balance of $800 would include a:
- A) debit to accounts receivable and a credit to cash for $350.
- B) debit to accounts payable and a credit to cash for $450.
- C) debit to accounts payable and a credit to cash for $350.
- D) debit to accounts receivable and a credit to capital for $350.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
22) Receiving a $350 payment on an account with a current balance of $800 would include a:
- A) debit to cash and a credit to accounts payable for $350.
- B) debit to cash and a credit to accounts receivable for $350.
- C) credit to cash and a credit to accounts receivable for $350.
- D) debit to accounts receivable and a credit to cash for $350.
Answer: B
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
23) Which of the following entries records the billing of service revenue performed on account for $5,400?
- A) debit to service revenue and a credit to accounts receivable for $5,400
- B) debit to accounts payable and a credit to service revenue for $5,400
- C) debit to accounts receivable and a credit to the owners capital for $5,400
- D) debit to accounts receivable and a credit to service revenue for $5,400
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
24) Which of the following entries records the billing of service revenue performed for cash for $5,400?
- A) debit to service revenue and a credit to cash for $5,400
- B) debit to accounts payable and a credit to cash for $5,400
- C) debit to cash and a credit to the owners capital for $5,400
- D) debit to cash and a credit to service revenue for $5,400
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
25) Performing a service for $500 cash and $700 on account would include a:
- A) debit to cash for $1,200.
- B) debit to service revenue for $1,200.
- C) credit to service revenue for $500.
- D) debit to accounts receivable for $700.
Answer: D
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
26) Performing a service for $500 cash and $700 on account would include a:
- A) debit to cash for $700.
- B) debit to service revenue for $700.
- C) credit to service revenue for $1,200.
- D) credit to accounts receivable for $700.
Answer: C
Diff: 3
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
27) A $500 rent bill received for the current period that will be paid in the following period would include a:
- A) debit to accounts payable for $500.
- B) credit to rent expense for $500.
- C) debit to rent expense for $500.
- D) credit to cash for $500.
Answer: C
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
28) The entry to record the purchase of supplies for $200 cash would be:
A)
| Supplies | 200 | |
| Accounts Payable | 200 |
B)
| Cash | 200 | |
| Supplies | 200 |
C)
| Cash | 200 | |
| Supplies Expense | 200 |
D)
| Supplies | 200 | |
| Cash | 200 |
Answer: D
Diff: 2
Learning Outcome: A-03 Analyze and record transactions and their effects on the financial statements
Skill: Application
Objective: 2-3 Analyze and record transactions in the journal
29) The entry to record an owner investment of $400 cash into the business would be:
A)
| Withdrawals | 400 | |
| Capital | 400 |
B)
| Cash | 400 | |
| Accounts Receivable | 400 |
C)
