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71. A debit:
A. Always increases an account.
B. Is the right-hand side of a T-account.
C. Always decreases an account.
D. Is the left-hand side of a T-account.
E. Is not need to record a transaction.
72. The right side of a T-account is a(n):
A. Debit.
B. Increase.
C. Credit.
D. Decrease.
E. Account balance.
73. Which of the following statements is incorrect?
A. The normal balance of accounts receivable is a debit.
B. The normal balance of owner's withdrawals is a debit.
C. The normal balance of unearned revenues is a credit.
D. The normal balance of an expense account is a credit.
E. The normal balance of the owner's capital account is a credit.
74. A credit is used to record:
A. An increase in an expense account.
B. A decrease in an asset account.
C. A decrease in an unearned revenue account.
D. A decrease in a revenue account.
E. A decrease in a capital account.
75. A simple account form widely used in accounting as a tool to understand how debits and
credits affect an account balance is called a:
A. Withdrawals account.
B. Capital account.
C. Drawing account.
D. T-account.
E. Balance column sheet.
76. Which of the following statements is correct?
A. The left side of a T-account is the credit side.
B. Debits decrease asset and expense accounts, and increase liability, equity, and revenue
accounts.
C. The left side of a T-account is the debit side.
D. Credits increase asset and expense accounts, and decrease liability, equity, and revenue
accounts.
E. In certain circumstances the total amount debited need not equal the total amount credited
for a particular transaction.
77. An account balance is:
A. The total of the credit side of the account.
B. The total of the debit side of the account.
C. The difference between the total debits and total credits for an account including the
beginning balance.
D. Assets = liabilities + equity.
E. Always a credit.
78. Of the following accounts, the one that normally has a credit balance is:
A. Cash.
B. Office Equipment.
C. Wages Payable.
D. Owner, Withdrawals.
E. Sales Salaries Expense.
79. A debit is used to record:
A. A decrease in an asset account.
B. A decrease in an expense account.
C. An increase in a revenue account.
D. An increase in the balance of an owner's capital account.
E. An increase in the balance of the owner's withdrawals account.
80. A credit entry:
A. Increases asset and expense accounts, and decreases liability, owner's capital, and revenue
accounts.
B. Is always a decrease in an account.
C. Decreases asset and expense accounts, and increases liability, owner's capital, and revenue
accounts.
D. Is recorded on the left side of a T-account.
E. Is always an increase in an account.
81. Double-entry accounting is an accounting system:
A. That records each transaction twice.
B. That records the effects of transactions and other events in at least two accounts with equal
debits and credits.
C. In which each transaction affects and is recorded in two or more accounts but that could
include two debits and no credits.
D. That may only be used if T-accounts are used.
E. That insures that errors never occur.
82. Rocky Industries received its telephone bill in the amount of $300, and immediately paid
it. Rocky's general journal entry to record this transaction will include a
A. Debit to Telephone Expense for $300.
B. Credit to Accounts Payable for $300.
C. Debit to Cash for $300.
D. Credit to Telephone Expense for $300.
E. Debit to Accounts Payable for $300.
83. Management Services, Inc. provides services to clients. On May 1, a client prepaid
Management Services $60,000 for 6-months services in advance. Management Services'
general journal entry to record this transaction will include a:
A. Debit to Unearned Management Fees for $60,000.
B. Credit to Management Fees Earned for $60,000.
C. Credit to Cash for $60,000.
D. Credit to Unearned Management Fees for $60,000.
E. Debit to Management Fees Earned for $60,000.
84. Wisconsin Rentals purchased office supplies on credit. The general journal entry made by
Wisconsin Rentals will include a:
A. Debit to Accounts Payable.
B. Debit to Accounts Receivable.
C. Credit to Cash.
D. Credit to Accounts Payable.
E. Credit to Wisconsin Rentals, Capital.
85. An asset created by prepayment of an expense is:
A. Recorded as a debit to an unearned revenue account.
B. Recorded as a debit to a prepaid expense account.
C. Recorded as a credit to an unearned revenue account.
D. Recorded as a credit to a prepaid expense account.
E. Not recorded in the accounting records until the earnings process is complete.
86. Robert Haddon contributed $70,000 in cash and land worth $130,000 to open a new
business, RH Consulting. Which of the following general journal entries will RH Consulting
make to record this transaction?
A. Debit Assets $200,000; credit Haddon, Capital, $200,000.
B. Debit Cash and Land, $200,000; credit Haddon, Capital, $200,000.
C. Debit Cash $70,000; debit Land $130,000; credit Haddon, Capital, $200,000.
D. Debit Haddon, Capital, $200,000; credit Cash $70,000, credit Land, $130,000.
E. Debit Haddon, Capital, $200,000; credit Assets, $200,000.
87. A liability created by the receipt of cash from customers in payment for products or
services that have not yet been delivered to the customers is:
A. Recorded as a debit to an unearned revenue account.
B. Recorded as a debit to a prepaid expense account.
C. Recorded as a credit to an unearned revenue account.
D. Recorded as a credit to a prepaid expense account.
E. Not recorded in the accounting records until the earnings process is complete.
88. On September 30, the Cash account of Value Company had a normal balance of $5,000.
During September, the account was debited for a total of $12,200 and credited for a total of
$11,500. What was the balance in the Cash account at the beginning of September?
A. A $0 balance.
B. A $4,300 debit balance.
C. A $4,300 credit balance.
D. A $5,700 debit balance.
E. A $5,700 credit balance.
89. On April 30, Holden Company had an Accounts Receivable balance of $18,000. During
the month of May, total credits to Accounts Receivable were $52,000 from customer
payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of
credit sales during May?
A. $ 5,000.
B. $47,000.
C. $52,000.
D. $57,000.
E. $32,000.
90. During the month of February, Hoffer Company had cash receipts of $7,500 and cash
disbursements of $8,600. The February 28 cash balance was $1,800. What was the January
31 beginning cash balance?
A. $700.
B. $1,100.
C. $2,900.
D. $0.
E. $4,300.
91. The following transactions occurred during July:
1. Received $900 cash for services provided to a customer during July.
2. Received $2,200 cash investment from Barbara Hanson, the owner of the business.
3. Received $750 from a customer in partial payment of his account receivable which arose
from sales in June.
4. Provided services to a customer on credit, $375.
5. Borrowed $6,000 from the bank by signing a promissory note.
6. Received $1,250 cash from a customer for services to be rendered next year.
What was the amount of revenue for July?
A. $ 900.
B. $ 1,275.
C. $ 2,525.
D. $ 3,275.
E. $11,100.
92. If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business to
purchase a family automobile, the business should record this use of cash with an entry to:
A. Debit Salary Expense and credit Cash.
B. Debit Tim Jones, Salary and credit Cash.
C. Debit Cash and credit Tim Jones, Withdrawals.
D. Debit Tim Jones, Withdrawals and credit Cash.
E. Debit Automobiles and credit Cash.
93. Zed Bennett opened an art gallery and as a dealer completed these transactions:
1. Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000.
2. Purchased $70 of office supplies on credit.
3. Paid $1,200 cash for the receptionist's salary.
4. Sold a painting for an artist and collected a $4,500 cash commission on the sale.
5. Completed an art appraisal and billed the client $200.
What was the balance of the cash account after these transactions were posted?
A. $12,230.
B. $12,430.
C. $43,300.
D. $43,430.
E. $61,430.
94. At the beginning of January of the current year, Thomas Law Center's ledger reflected a
normal balance of $52,000 for accounts receivable. During January, the company collected
$14,800 from customers on account and provided additional services to customers on account
totaling $12,500. Additionally, during January one customer paid Thomas $5,000 for services
to be provided in the future. At the end of January, the balance in the accounts receivable
account should be:
A. $54,700.
B. $49,700.
C. $2,300.
D. $54,300.
E. $49,300.
95. During the month of March, Cooley Computer Services made purchases on account
totaling $43,500. Also during the month of March, Cooley was paid $8,000 by a customer for
services to be provided in the future and paid $36,900 of cash on its accounts payable balance.
If the balance in the accounts payable account at the beginning of March was $77,300, what is
the balance in accounts payable at the end of March?
A. $83,900.
B. $91,900.
C. $6,600.
D. $75,900.
E. $4,900.
96. On January 1 of the current year, Bob's Lawn Care Service reported owner's capital
totaling $122,500. During the current year, total revenues were $96,000 while total expenses
were $85,500. Also, during the current year Bob withdrew $20,000 from the company. No
other changes in equity occurred during the year. If, on December 31 of the current year, total
assets are $196,000, the change in owner's capital during the year was:
A. A decrease of $9,500.
B. An increase of $9,500.
C. An increase of $30,500.
D. A decrease of $30,500
E. Impossible to determine from the information provided.
97. Andrea Conaway opened Wonderland Photography on January 1 of the current year.
During January, the following transactions occurred and were recorded in the company's
books:
1. Conaway invested $13,500 cash in the business.
2. Conaway contributed $20,000 of photography equipment to the business.
3. The company paid $2,100 cash for an insurance policy covering the next 24 months.
4. The company received $5,700 cash for services provided during January.
5. The company purchased $6,200 of office equipment on credit.
6. The company provided $2,750 of services to customers on account.
7. The company paid cash of $1,500 for monthly rent.
8. The company paid $3,100 on the office equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance in the cash account at the end of January would be:
A. $41,450.
B. $12,225
C. $18,700.
D. $15,250.
E. $13,500.
98. Andrea Conaway opened Wonderland Photography on January 1 of the current year.
During January, the following transactions occurred and were recorded in the company's
books:
1. Conaway invested $13,500 cash in the business.
2. Conaway contributed $20,000 of photography equipment to the business.
3. The company paid $2,100 cash for an insurance policy covering the next 24 months.
4. The company received $5,700 cash for services provided during January.
5. The company purchased $6,200 of office equipment on credit.
6. The company provided $2,750 of services to customers on account.
7. The company paid cash of $1,500 for monthly rent.
8. The company paid $3,100 on the office equipment purchased in transaction #5 above.
9. Paid $275 cash for January utilities.
Based on this information, the balance in the Andrea Conaway, Capital account reported on
the Statement of Owner's Equity at the end of the month would be:
A. $31,400.
B. $39,200.
C. $31,150.
D. $40,175.
E. $30,875.
99. The debt ratio is used:
A. To measure the ratio of equity to expenses.
B. To assess the risk associated with a company's use of liabilities.
C. Only by banks when a business applies for a loan.
D. To determine how much debt a firm should pay off.
E. To determine how much debt a company should borrow.
100. Which of the following is the formula used to calculate the debt ratio?
A. Total Equity/Total Liabilities.
B. Total Liabilities/Total Equity.
C. Total Liabilities/Total Assets.
D. Total Assets/Total Liabilities.
E. Total Equity/Total Assets.
101. Which of the following statements is incorrect?
A. Higher financial leverage involves higher risk.
B. Risk is higher if a company has more liabilities.
C. Risk is higher if a company has higher assets.
D. The debt ratio is one measure of financial risk.
E. Lower financial leverage involves lower risk.
102. Stride Along has total assets of $425 million. Its total liabilities are $110 million. Its
equity is $315 million. Calculate the debt ratio.
A. 38.6%.
B. 13.4%.
C. 34.9%.
D. 25.9%.
E. 14.9%.
103. Stride Along has total assets of $385 million. Its total liabilities are $100 million and its
equity is $285 million. Calculate its debt ratio.
A. 35.1%.
B. 26.0%.
C. 38.5%.
D. 28.5%.
E. 58.8%.
104. Which of the following statements describing the debt ratio is false?
A. It is of use to both internal and external users of accounting information.
B. A relatively high ratio is always desirable.
C. The dividing line for a high and low ratio varies from industry to industry.
D. Many factors such as a company's age, stability, profitability and cash flow influence the
determination of what would be interpreted as a high versus a low ratio.
E. The ratio might be used to help determine if a company is capable of increasing its income
by obtaining further debt.
105. At the end of the current year, Norman Company reported total liabilities of $300,000
and total equity of $100,000. The company's debt ratio on the last year-end was:
A. 300%.
B. 33.3%
C. 75.0%.
D. $400,000.
E. Cannot be determined from the information provided.
106. At the beginning of the current year, Taunton Company's total assets were $248,000 and
its total liabilities were $175,000. During the year, the company reported total revenues of
$93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other
changes in owner's capital during the year and total assets at the end of the year were
$260,000. Taunton Company's debt ratio at the end of the current year is:
A. 70.6%.
B. 67.3%.
C. 32.7%.
D. 48.6%.
E. Cannot be determined from the information provided.
107. The process of transferring general journal information to the ledger is:
A. Double-entry accounting.
B. Posting.
C. Balancing an account.
D. Journalizing.
E. Not required unless debits do not equal credits.
108. A column in journals and ledger accounts used to cross reference journal and ledger
entries is the:
A. Account balance column.
B. Debit column.
C. Posting reference column.
D. Credit column.
E. Description column.
109. The record in which transactions are first recorded is the:
A. Account balance.
B. Ledger.
C. Journal.
D. Trial balance.
E. Cash account.
110. The general journal provides a place for recording all of the following except:
A. The transaction date.
B. The names of the accounts involved.
C. The amount of each debit and credit.
D. An explanation of the transaction.
E. The balance in each account.
111. A balance column ledger account is:
A. An account entered on the balance sheet.
B. An account with debit and credit columns for posting entries and another column for
showing the balance of the account after each entry is posted.
C. Another name for the withdrawals account.
D. An account used to record the transfers of assets from a business to its owner.
E. A simple form of account that is widely used in accounting to illustrate the debits and
credits required in recording a transaction.
112. A general journal is:
A. A ledger in which amounts are posted from a balance column account.
B. Not required if T-accounts are used.
C. A complete record of any transaction and the place from which transaction amounts are
posted to the ledger accounts.
D. Not necessary in electronic accounting systems.
E. A book of final entry because financial statements are prepared from it.
113. A record in which the effects of transactions are first recorded and from which
transaction amounts are posted to the ledger is a(n):
A. Account.
B. Trial balance.
C. Journal.
D. T-account.
E. Balance column account.
