29) An investment of cash in a business:
A) represents an obligation of the business.
B) decreases Stockholders’ Equity.
C) increases cash.
D) appears in a liability account.
30) The difference between the total debits and total credits of an account is called a:
A) trial balance.
B) sub-total.
C) ruling.
D) balance.
31) When the bank takes money out of a company’s account, why does the bank say that they
have debited that account?
A) The bank has increased the company’s assets and assets increase with debits.
B) The bank has decreased its’ liability to the company and liabilities decrease with debits.
C) The bank has decreased the company’s assets and assets decrease with debits.
D) The bank has increased its’ liability to the company and liabilities increase with debits.
32) A company has a fifty million dollar debit balance in its cash account. Given this
information, which of the following is a TRUE statement?
A) It is not normal for a business to have this much cash, therefore this is NOT a normal account
balance.
B) It is NOT ever normal for the cash account to have a debit balance.
C) Normal account balances differ from company to company; therefore it is impossible to
evaluate the given statement without more information.
D) It is ALWAYS normal for the cash account to have a debit balance.
33) A company has a ten million dollar credit balance in the payable accounts. Given this
information, which of the following is a TRUE statement?
A) It is NOT normal for payable accounts to have a credit balance.
B) Not enough information provided, since normal account balances are different for each
company.
C) It is ALWAYS normal for payable accounts to have a credit balance.
D) Payable accounts shouldn’t be this high, so this is not a normal balance.
34) A company has a forty million dollar credit balance in the cash account. Given this
information, which of the following is a TRUE statement?
A) This is NOT a normal account balance—companies don’t normally have this much cash on
hand.
B) It is NOT normal for the cash account to have a credit balance.
C) Not enough information provided, since normal account balances are different for each
company.
D) It is ALWAYS normal for the cash account to have a credit balance.
35) A company has a ten million dollar debit balance in the payable accounts. Given this
information, which of the following is a TRUE statement?
A) It is NOT normal for payable accounts to have a debit balance
B) Not enough information provided, since normal account balances are different for each
company.
C) Payable accounts don’t tend to run this high, so this is not a normal balance.
D) It is ALWAYS normal for payable accounts to have a debit balance.
36) Revenues ________ Retained Earnings, and increase on the ________ side.
A) increase, debit
B) increase, credit
C) decrease, debit
D) decrease, credit
37) Expenses ________ Retained Earnings, and increase on the ________ side.
A) increase, debit
B) increase, credit
C) decrease, debit
D) decrease, credit
2.3 Questions
1) The general journal was developed to organize transactions by account.
2) The general journal is used to record the events (transactions) of a business.
3) The act of recording a transaction is called “journalizing.”
4) Journalizing is the transfer of information from the general journal to the general ledger.
5) The posting reference column of the general journal will include the number of the account to
which the information is being posted.
6) The posting reference column of the general ledger shows the sources of the transferred
information.
7) Transactions are recorded in order of the dollar amount of the transaction.
8) Chronological order dictates the order in which transactions are journalized.
9) The difference between total debits and total credits is known as the balance.
10) If an account’s total credits are more than its total debits, then it has a positive balance.
11) Carters pays wages in the amount of $11, 327. This transaction includes a:
A) debit to Cash.
B) credit to Wages Expense.
C) credit to Cash.
D) credit to Revenue.
12) The account “Cash” began with a zero balance and then had the following changes: increase
of $250, decrease of $75, increase of $113 and a decrease of $35. The final balance is a:
A) debit balance of $253.
B) credit balance of $253.
C) debit balance of $363.
D) credit balance of $110.
13) The account “Notes Payable” began with a zero balance and then had the following changes:
increase of $500, increase of $200, decrease of $550, and an increase of $250. The final balance
is a:
A) credit balance of $550.
B) debit balance of $950.
C) credit balance of $400.
D) debit balance of $400.
14) The first step in analyzing a transaction is to determine:
A) if the account balance will increase or decrease.
B) the accounts that are involved.
C) the type of accounts that are involved.
D) which accounts are to be debited and credited.
15) The second step in analyzing a transaction is to determine:
A) if the account balance will increase or decrease.
B) the accounts that are involved.
C) the type of accounts that are involved.
D) which accounts are to be debited and credited.
16) The third step in analyzing a transaction is to determine:
A) if the account balance will increase or decrease.
B) the accounts that are involved.
C) the type of accounts that are involved.
D) which accounts are to be debited and credited.
17) The fourth step in analyzing a transaction is to determine:
A) if the account balance will increase or decrease.
B) the accounts that are involved.
C) the type of accounts that are involved.
D) which accounts are to be debited and credited.
18) The general ledger is arranged in the:
A) numerical order of the chart of accounts.
B) alphabetical order of the account names.
C) order with normal debit balance accounts first.
D) order with normal credit balance accounts first.
19) The first step in recording a transaction in the general journal is to record the:
A) explanation of the entry.
B) account(s) to be credited and the amount(s).
C) date of the entry.
D) account(s) to be debited and the amount(s).
20) The second step in recording a transaction in the general journal is to record the:
A) explanation of the entry.
B) account(s) to be credited and the amount(s).
C) date of the entry.
D) account(s) to be debited and the amount(s).
21) The third step in recording a transaction in the general journal is to record the:
A) explanation of the entry.
B) account(s) to be credited and the amount(s).
C) date of the entry.
D) account(s) to be debited and the amount(s).
22) The fourth step in recording a transaction in the general journal is to record the:
A) explanation of the entry.
B) account(s) to be credited and the amount(s).
C) date of the entry.
D) account(s) to be debited and the amount(s).
23) Once you post the transaction to the general ledger, you must go back to the general journal
and fill in:
A) the date.
B) the amount debited or credited.
C) the posting reference column with the account number of the posting.
D) the account name that was involved in the transaction.
24) Heather invested $25,000 in her business, Hair by Heather. The journal entry would include
a:
A) debit to Cash for $25,000 and a credit to Sales for $25,000.
B) debit to Cash for $25,000 and a credit to Common Stock for $25,000.
C) credit to Cash for $25,000 and a debit to Common Stock for $25,000.
D) debit to Cash for $25,000 and a credit to Dividends for $25,000.
25) Office equipment was purchased for $2,400 on account from Office Express. The journal
entry would include a:
A) debit to Office Equipment and a credit to Cash.
B) credit to Cash and a debit to Office Equipment Expense.
C) debit to Office Equipment and a credit to Accounts Payable.
D) debit to Accounts Payable and a credit to Cash.
26) Salaries of $675 were paid in cash. The journal entry would include a:
A) debit to Salaries Expense and a credit to Cash.
B) credit to Salaries Expense and a debit to Cash.
C) debit to Accounts Payable and a credit to Cash.
D) debit to Accounts Payable and a credit to Salary Expense.
27) Oceans, Inc. collected $400 from one of its customers for payment on their account. The
journal entry would include a:
A) debit to Accounts Receivable and a credit to Cash.
B) debit to Cash and a credit to Accounts Payable.
C) debit to Cash and a credit to Accounts Receivable.
D) debit to Cash and a credit to Sales Revenue.
28) Able and Sons, Inc. purchases a building for $35,000 cash. The journal entry would include
a:
A) debit to Building and a credit to Cash.
B) debit to Common Stock and a credit to Building.
C) debit to Building and a credit to Accounts Payable.
D) debit to Building and a credit to Common Stock.
29) Which of the following has a four column format?
A) Income statement
B) Balance sheet
C) General ledger sheet
D) General journal
30) Mackay, Inc. paid one of its creditors $678 on their balance due. The journal entry would
require a:
A) debit to Cash and a credit to Accounts Payable.
B) debit to Cash and a credit to Accounts Receivable.
C) credit to Cash and a debit to Accounts Receivable.
D) debit to Accounts Payable and credit to Cash.
31) Winn Corporation purchased $400 of office supplies on account and treated the supplies as a
prepaid expense. The journal entry would require a:
A) debit to Office Supplies Expense and a credit to Cash.
B) debit to Office Supplies and a credit to Cash.
C) debit to Office Supplies and a credit to Accounts Payable.
D) debit to Office Supplies Expense and a credit to Office Supplies.
32) Binford Corporation purchased a $600 two-year insurance policy for cash. The journal entry
would require a:
A) debit to Prepaid Insurance and a credit to Cash.
B) debit to Insurance Expense and credit to Cash.
C) debit to Insurance Expense and a credit to Accounts Payable.
D) debit to Insurance Expense and a credit to Retained Earnings.
33) Allied, Inc. sold season tickets for $7,000 on account. The journal entry would be to:
A) debit Cash and credit season Ticket Sales Revenue.
B) debit Accounts Receivable and credit season Ticket Sales Revenue.
C) debit Cash and credit Accounts Payable.
D) debit Cash and credit Accounts Receivable.
34) The ________ keeps a running balance of an individual account.
A) general journal
B) Balance Sheet
C) general ledger
D) posting reference
35) The ________ indicates where the information originated and to where the information was
transferred.
A) general journal
B) Balance Sheet
C) general ledger
D) posting reference