26) An account that normally has a debit balance may occasionally have a credit balance.
27) The normal balance of an account is the increase side of the account.
28) Which one of the following account groups normally has a credit balance?
A) assets and liabilities
B) equity and assets
C) liabilities and revenues
D) assets and expenses
29) Which one of the following account groups normally has a debit balance?
A) assets and expenses
B) revenues and expenses
C) liabilities and revenues
D) assets and liabilities
30) Accounts Receivable is a(n) ________ account and has a normal ________ balance.
A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit
31) Accounts Payable is a(n) ________ account and has a normal ________ balance.
A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit
32) Prepaid Rent is a(n) ________ account and has a normal ________ balance.
A) asset; debit
B) liability; credit
C) liability; debit
D) asset; credit
33) Which of the following statements is true of the Common Stock account?
A) It is an equity account that has a normal credit balance.
B) It is a liability account that has a normal credit balance.
C) It is a liability account that has a normal debit balance.
D) It is an equity account that has a normal debit balance.
34) For Office Supplies, the category of account and its normal balance is ________.
A) liabilities and a debit balance
B) assets and a debit balance
C) liabilities and a credit balance
D) assets and a credit balance
35) The Salaries Payable account is a(n) ________.
A) liability account with a normal debit balance
B) asset account with a normal debit balance
C) liability account with a normal credit balance
D) asset account with a normal credit balance
36) For expenses, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) assets and a credit balance
D) equity and a debit balance
37) For revenues, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) assets and a credit balance
D) equity and a debit balance
38) For Retained Earnings, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) equity and a debit balance
D) assets and a credit balance
39) Dividends is a(n) ________ account that has a normal ________ balance.
A) liability; credit
B) equity; debit
C) liability; debit
D) equity; credit
40) Which of the following statements is true of revenues?
A) Revenues decrease equity, so a revenue account’s normal balance is a credit balance.
B) Revenues decrease equity, so a revenue account’s normal balance is a debit balance.
C) Revenues increase equity, so a revenue account’s normal balance is a debit balance.
D) Revenues increase equity, so a revenue account‘s normal balance is a credit balance.
41) State whether the normal balance of each of the following accounts is a debit or credit.
Account
Normal Balance
Service Revenue
Dividends
Accounts Payable
Prepaid Insurance
Service Revenue
Credit
Dividends
Debit
Accounts Payable
Credit
Prepaid Insurance
Debit
Account
Normal Balance
Common Stock
Accounts Receivable
Salaries Expense
Unearned Revenue
Account
Normal Balance
Common Stock
Credit
Accounts Receivable
Debit
Salaries Expense
Debit
Unearned Revenue
Credit
43) In reviewing the T-account for Accounts Receivable, you find that the beginning balance is zero, the
total increases are $5,200 and the total decreases are $2,400. This means that the ending balance of the
account is a credit balance of $2,800.
44) In reviewing the T-account for Accounts Payable, you find that the beginning balance is zero, the total
increases are $7,900 and the total decreases are $4,200. This means that the ending balance of the account
is a credit balance of $3,700.
45) The Accounts Receivable account of Brownstone, Inc. has the following postings:
Calculate the ending balance of the account.
A) $28,000 debit
B) $25,000 debit
C) $3,000 credit
D) $22,000 debit
46) The Accounts Payable account of Waterford, Inc. has the following postings:
Calculate the ending balance of the account.
A) $12,000 credit
B) $14,000 debit
C) $14,000 credit
D) $8,000 debit
1) Source documents provide the evidence and data for accounting transactions.
2) A bank deposit slip is a source document that shows the total of all checks written by a company.
3) The first step in the flow of accounting data is the preparation of source documents.
4) Which of the following is a source document that provides the evidence and data for accounting
transactions?
A) Journal
B) Sales invoice
C) Ledger
D) Trial balance
5) Which of the following represents the correct flow of accounting data?
A) transactions occur; transactions are analyzed; transactions are journalized and posted; source
documents are prepared
B) transactions occur; source documents are prepared; transactions are journalized and posted;
C) transactions occur; source documents are prepared; transactions are analyzed; transactions are
journalized and posted
D) source documents are prepared; transactions occur; transactions are analyzed; transactions are
journalized and posted
6) List the four steps in the flow of accounting data.
7) Briefly describe each of the following source documents:
Source Document
Description
Bank checks
Sales invoices
Source Document
Description
Bank checks
Documents that illustrate the
amounts and date of cash
payments.
Sales invoices
Documents provided to clients
when a business sells services
or goods; tells the seller how
much revenue to record.
Diff: 2
LO: 2-3
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Concept
H2: Source Documents – The Origin of the Transactions
8) Briefly describe each of the following source documents:
Source Document
Description
Purchase invoices
Bank deposit slips
Source Document
Description
Purchase invoices
Documents that tell the business
how much and when to pay a
vendor for purchases on
account.
Bank deposit slips
Documents that show the
amount of cash put in the
business’s bank account.
9) Debits in the journal are always posted as debits in the ledger.
10) The process of transferring data from the ledger to the journal is called posting.
11) A compound journal entry has more than two accounts, but the total dollar value of the debits still
must equal the total dollar value of the credits.
12) When a business makes a cash payment, the Cash account is debited.
13) When a business collects cash, the Cash account is debited.