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114. A company had the following accounts and balances year-end:
Cash $30,000
Accounts receivable 32,000
Accounts payable 20,000
Fees earned 65,000
Rent expense 15,000
Insurance expense 4,800
Supplies 5,000
Sam, Capital 19,800
Sam, Withdrawals 18,000
If all of the accounts have normal balances, what are the totals for the trial balance?
A. $ 45,200.
B. $ 67,000.
C. $104,800.
D. $209,600.
E. $186,600.
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115. An accountant has debited an account for $3,500 and credited a liability account for
$2,000. Which of the following would be an incorrect way to complete the recording of this
transaction:
A. Credit another asset account for $1,500.
B. Credit another liability account for $1,500.
C. Credit an expense account for $1,500.
D. Credit the owner's capital account for $1,500.
E. Debit another asset account for $1,500.
116. A report that lists accounts and their balances, in which the total debit balances should
equal the total credit balances, is called a(n):
A. Account balance.
B. Trial balance.
C. Ledger.
D. Chart of accounts.
E. General Journal.
117. Which of the following statements is true?
A. If the trial balance is in balance, it proves that no errors have been made in recording and
posting transactions.
B. The trial balance is a book of original entry.
C. Another name for the trial balance is the chart of accounts.
D. The trial balance is a list of all accounts from the ledger with their balances at a point in
time.
E. The trial balance is another name for the balance sheet as long as debits balance with
credits.
118. While in the process of posting from the journal to the ledger a company failed to post a
$500 debit to the Office Supplies account. The effect of this error will be that:
A. The Office Supplies account balance will be overstated.
B. The trial balance will not balance.
C. The error will overstate the debits listed in the journal.
D. The total debits in the trial balance will be larger than the total credits.
E. The error will overstate the credits listed in the journal.
119. A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error?
A. $150 understated.
B. $135 overstated.
C. $150 overstated.
D. $15 understated.
E. $135 understated.
120. A trial balance taken at year-end showed total credits exceed total debits by $4,950. This
discrepancy could have been caused by:
A. An error in the general journal where a $4,950 increase in Accounts Receivable was
recorded as an increase in Cash.
B. A net income of $4,950.
C. The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950.
D. The balance of $5,500 in the Office Equipment account being entered on the trial balance
as a debit of $550.
E. An error in the general journal where a $4,950 increase in Accounts Payable was recorded
as a decrease in Accounts Payable.
121. In which of the following situations would the trial balance not balance?
A. A $1,000 collection of an account receivable was erroneously posted as a debit to
Accounts Receivable and a credit to Cash.
B. The purchase of office supplies on account for $3,250 was erroneously recorded in the
journal as $2,350 debit to Office Supplies and credit to Accounts Payable.
C. A $50 cash receipt for the performance of a service was not recorded at all.
D. The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a
credit to Cash for $1,200.
E. The cash payment of a $750 account payable was posted as a debit to Accounts Payable
and a debit to Cash for $750.
122. The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a
$4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on
the trial balance?
A. The total of the Debit column of the trial balance will exceed the total of the Credit column
by $4,700.
B. The total of the Credit column of the trial balance will exceed the total of the Debit column
by $4,700.
C. The total of the Debit column of the trial balance will exceed the total of the Credit column
by $9,400.
D. The total of the Credit column of the trial balance will exceed the total of the Debit column
by $9,400.
E. The total of the Debit column of the trial balance will equal the total of the Credit column.
123. If the Debit and Credit column totals of a trial balance are equal, then:
A. All transactions have been recorded correctly.
B. All entries from the journal have been posted to the ledger correctly.
C. All ledger account balances are correct.
D. The total debit entries and total credit entries are equal.
E. The balance sheet would be correct.
124. Of the following errors, which one by itself will cause the trial balance to be out of
balance?
A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries
Expense.
B. A $100 cash receipt from a customer in payment of his account posted as a $100 debit to
Cash and a $10 credit to Accounts Receivable.
C. A $75 cash receipt from a customer in payment of his account posted as a $75 debit to
Cash and a $75 credit to Cash.
D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a
$50 credit to Cash.
E. An $800 prepayment from a customer for services to be rendered in the future was posted
as an $800 debit to Unearned Revenue and an $800 credit to Cash.
125. A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what
amounts are the accounts under- or overstated as a result of this error?
A. Office Equipment, understated $130; Fees Earned, overstated $130.
B. Office Equipment, understated $260; Fees Earned, overstated $130.
C. Office Equipment, overstated $130; Fees Earned, overstated $130.
D. Office Equipment, overstated $130; Fees Earned, understated $130.
E. Office Equipment, overstated $260; Fees Earned, understated $130.
126. All of the following are asset accounts except:
A. Accounts Receivable.
B. Buildings.
C. Supplies expense.
D. Cash.
E. Prepaid insurance.
127. All of the following are liability accounts except:
A. Accounts Payable.
B. Unearned Ticket Revenue.
C. Taxes Payable.
D. Commissions Earned.
E. Notes Payable.
128. Which financial statement reports an organization’s financial position at a point in time?
A. Income statement.
B. Balance sheet.
C. Statement of owner’s equity.
D. Cash flow statement.
E. Trial balance.
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129. Hal Smith opened Smith’s Repairs on March 1 of the current year. During March, the
following transactions occurred and were recorded in the company's books:
1. Smith invested $25,000 cash in the business.
2. Smith contributed $100,000 of equipment to the business.
3. The company paid $2,000 cash to rent office space for the month.
4. The company received $16,000 cash for repair services provided during March.
5. The company paid $6,200 for salaries for the month.
6. The company provided $3,000 of services to customers on account.
7. The company paid cash of $500 for monthly utilities.
8. The company received $3,100 cash in advance of providing repair services to a customer.
9. Smith withdrew $5,000 for his personal use from the company.
Based on this information, net income for March would be:
A. $10,300.
B. $13,400
C. $5,300
D. $8,400
E. $13,500.
130. Hal Smith opened Smith’s Repairs on March 1 of the current year. During March, the
following transactions occurred and were recorded in the company's books:
1. Smith invested $25,000 cash in the business.
2. Smith contributed $100,000 of equipment to the business.
3. The company paid $2,000 cash to rent office space for the month.
4. The company received $16,000 cash for repair services provided during March.
5. The company paid $6,200 for salaries for the month.
6. The company provided $3,000 of services to customers on account.
7. The company paid cash of $500 for monthly utilities.
8. The company received $3,100 cash in advance of providing repair services to a customer.
9. Smith withdrew $5,000 for his personal use from the company.
Based on this information, the balance in Hal Smith, Capital reported on the Statement of
Owner’s Equity at the end of March would be:
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A. $133,400.
B. $130,300
C. $125,300
D. $8,400
E. $13,500.
131. Inge Industries received $3,000 from a customer for services rendered and not previously
recorded. Inge’s general journal entry to record this transaction will be:
A. Debit Services Revenue, credit Accounts Receivable.
B. Debit Cash, credit Accounts Payable.
C. Debit Cash, credit Accounts Receivable.
D. Debit Cash, credit Services Revenue.
E. Debit Accounts Payable, credit Services Revenue.
132. Match the following definitions and terms by placing the letter that identifies the best
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definition in the blank space next to the term.
____ 1. Source documents
____ 2. Debit
____ 3. Posting
____ 4. Double-entry accounting
____ 5. Ledger
____ 6. Journal
____ 7. Account
____ 8. Credit
____ 9. T-account
____ 10. Accounting records
A. Decrease in an asset and expense account, and increase in a liability, owner's capital and
revenue account; recorded on the right side of a T-account.
B. A file containing all accounts of a company and their balances.
C. An accounting system where each transaction affects and is recorded in at least two
accounts; the sum of the debits for each entry must equal its credits.
D. A company's record of each transaction in one place that shows debits and credits for each
transaction.
E. An increase in an asset and expense account, and decrease in a liability, owner's capital,
and revenue account; recorded on the left side of a T-account.
F. A record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
G. A simple account form used as a helpful tool in showing the effects of transactions and
events on specific accounts.
H. Another name for the accounting books, or simply the books.
I. The process of transferring journal entry information to the ledger.
J. The sources of accounting information.
133. Match the following definitions and terms by placing the letter that identifies the best
definition in the blank space next to the term.
____ 1. Debit
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____ 2. Note payable
____ 3. Ledger
____ 4. Journal
____ 5. Debt ratio
____ 6. Chart of accounts
____ 7. Trial balance
____ 8. Credit
____ 9. Account balance
____ 10. Balance column account
A. An increase in an asset and expense account, and a decrease in a liability, owner's capital,
and revenue account; recorded on the left side of a T-account.
B. A decrease in an asset and expense account, and an increase in a liability, owner's capital,
and revenue account; recorded on the right side of a T-account.
C. A written promise to pay a definite sum of money on a specified future date.
D. The difference between total debits and total credits for an account including the beginning
balance.
E. A list of accounts and their balances at a point in time; the total debit balances should equal
the total credit balances.
F. A list of all accounts used by a company and the identification number assigned to each
account.
G. The ratio of total liabilities to total assets; used to reflect the risk associated with the
company's debts.
H. An account with debit and credit columns for recording entries and a third column for
showing the balance of the account after each entry.
I. A complete record of each transaction in one place that shows debits and credits for each
transaction.
J. A file containing all accounts of a company and their balances.
134. Match the following definitions and terms by placing the letter that identifies the best
definition in the blank space next to the term.
____ 1. General journal
____ 2. Chart of accounts
____ 3. Note receivable
____ 4. T-account
____ 5. Unearned revenues
____ 6. Compound journal entry
____ 7. Posting reference column
____ 8. Posting
____ 9. Account
____ 10. Trial Balance
A. A simple form used as a helpful tool in understanding the effect of transactions and events
on specific accounts.
B. The most flexible type of journal, it can be used to record any kind of transaction.
C. A journal entry that affects at least three accounts.
D. A written promise from a customer to pay a definite sum of money on a specified future
date.
E. A record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
F. A list of all accounts used by a company and the identification number assigned to each
account.
G. The process of transferring journal entry information to the ledger.
H. A list of accounts and their balances at a point in time; the total debit balances should equal
the total credit balances.
I. A column in journals where individual account numbers are entered when entries are posted
to ledger accounts.
J. Liabilities created when customers pay in advance for products or services; satisfied by
delivering the products or services in the future.
135. Identify each of the following accounts as a revenue (R), expense (E), asset (A),
liability (L), or equity (OE) by placing initials (R,E,A,L or OE) in the blanks.
____ 1. Salary Expense
____ 2. Cash
____ 3. Equipment
____ 4. Owner, Capital
____ 5. Fees Revenue
____ 6. Accounts Receivable
____ 7. Accounts Payable
____ 8. Owner, Withdrawals
____ 9. Supplies
____ 10. Unearned Fee Revenue
____ 11. Prepaid Insurance
____ 12. Office Furniture
136. The following accounts appear on either the Income Statement (IS) or Balance Sheet
(BS). In the space provided next to each account write the letters, IS or BS, that identify the
statement on which the account appears.
____ 1. Office Equipment
____ 2. Rent Expense
____ 3. Unearned Fees Revenues
____ 4. Rent Expense
____ 5. Accounts Payable
____ 6. Owner, Capital
____ 7. Fees Revenue
____ 8. Cash
____ 9. Notes Receivable
____ 10. Wages Payable
137. Vicki Lake is a computer consultant. Shown below are (a) several accounts in her ledger
with each account preceded by an identification number, and (b) several transactions
completed by Lake. Indicate the accounts debited and credited when recording each
transaction by placing the proper account identification numbers to the right of each
transaction.
1. Accounts Payable 7. Telephone Expense
2. Accounts Receivable 8. Unearned Consulting Fees
3. Cash 9. Vicki Lake, Capital
4. Consulting Fees Earned 10. Vicki Lake, Withdrawals
5. Office Supplies 11. Insurance Expense
6. Office Supplies Expense 12. Prepaid Insurance
Debit Credit
Example: 2 4
Completed consulting work for a client who will pay at a later date.
A. Received cash in advance from a customer for designing a software package.
B. Purchased office supplies on credit.
C. Paid for the supplies purchased in B
D. Received the telephone bill of the business and immediately paid it.
E. Paid for a 3-year insurance policy
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138. David Roberts is a real estate appraiser. Shown below are (a) several accounts in his
ledger with each account preceded by an identification number, and (b) several transactions
completed by Roberts. Indicate the accounts debited and credited when recording each
transaction by placing the proper account identification numbers to the right of each
transaction.
1. Accounts Payable 8. Office Supplies Expense
2. Accounts Receivable 9. Prepaid Insurance
3. Appraisal Fees Earned 10. Salaries Expense
4. Cash 11. Telephone Expense
5. Insurance Expense 12. Unearned Appraisal Fees
6. Office Equipment 13. David Roberts, Capital
7. Office Supplies 14. David Roberts, Withdrawals
Debit Credit
Example:
Completed an appraisal for a client who promised to pay at a later date. 2 3
A. Received cash in advance for appraising an office
building………………………………….
B. Purchased office supplies on credit……………
C. David Roberts used cash from the business to pay his home telephone bill. There were no
business calls on the bill……………………….
D. Received the telephone bill of the business and immediately paid
it…………………………….
E. Paid the salary of the office assistant………….
F. Paid for the supplies purchased
in transaction B………………………………..
G. Completed an appraisal for a client and immediately collected cash for the work done…
139. List the steps in processing transactions.
140. Describe source documents and their purpose.
141. Explain how accounts are used in recording information about transactions.
142. Explain the difference between a ledger and a chart of accounts.
143. Explain debits and credits and their role in the accounting system.
144. Explain the debt ratio and its use in analyzing a company's financial condition.
145. Explain the recording and posting processes.
146. What is a trial balance? What is its purpose?
147. Describe the link between the income statement, the statement of owner's equity, and the
balance sheet.
Problems
148. Identify each of the following items would likely serve as a source document by marking
an X in the appropriate column. The first one is done as an example
Yes No
Ex. Credit card X
a. Credit card receipt
b. Purchase order
c. Invoice
d. Balance sheet
e. Bank statement
f. Journal entry
g. Electric power bill
h. Employee earnings record
