Chapter 2 – Analyzing Transactions
1. Accounts are records of increases and decreases in individual accounting equation elements.
a.
True
b.
False
2. A chart of accounts is a listing of accounts that make up the journal.
a.
True
b.
False
3. The chart of accounts should be the same for each business.
a.
True
b.
False
4. Accounts payable are accounts that you expect will be paid to you.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
5. Consuming goods and services in the process of generating revenues results in expenses.
a.
True
b.
False
6. Prepaid expenses are an example of an expense.
a.
True
b.
False
7. The Unearned Revenues account is an example of a liability.
a.
True
b.
False
8. The Dividends account is an expense.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
9. Accounts in the ledger are usually maintained in alphabetical order.
a.
True
b.
False
10. Depending on the account title, the right side of the account is referred to as the credit side.
a.
True
b.
False
11. To determine the balance in an account, always subtract credits from debits.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
12. An account in its simplest form has three parts to it: a title, an increase side, and a decrease side.
a.
True
b.
False
13. The T account got its name because it resembles the letter “T.”
a.
True
b.
False
14. The right hand side of a T account is known as a debit and the left hand side is known as a credit.
a.
True
b.
False
15. Debiting the cash account will increase the account.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
16. A credit to the cash account will increase the account.
a.
True
b.
False
17. The cash account will always be debited.
a.
True
b.
False
18. The recording of cash receipts to the cash account will be done by debiting the account.
a.
True
b.
False
19. The recording of cash payments from the cash account is done by entering the amount as a credit.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
20. The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the
amounts together.
a.
True
b.
False
21. Liabilities are debts owed by the business entity.
a.
True
b.
False
22. The accounts payable account is listed in the chart of accounts as an asset.
a.
True
b.
False
23. A dividends account represents the amount of earnings paid to the stockholders.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
24. Revenues are equal to the difference between cash receipts and cash payments.
a.
True
b.
False
25. Expenses result from selling services or products to customers.
a.
True
b.
False
26. Stockholders’ equity is reduced by the amount in the dividends account.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
27. When an owner invests assets in the business, the retained earnings account increases due to revenue being earned.
a.
True
b.
False
28. When an account receivable is collected in cash, the total assets of the business increase.
a.
True
b.
False
29. When an account payable is paid with cash, the stockholders’ equity in the business decreases.
a.
True
b.
False
30. For a month’s transactions for a typical medium-sized business, the salary expense account is likely to have only credit
entries.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
31. When a business receives a bill from the utility company, no entry should be made until the invoice is paid.
a.
True
b.
False
32. A debit is abbreviated as Db. and a credit is abbreviated as Cr.
a.
True
b.
False
33. For a month’s transactions for a typical medium-sized business, the accounts payable account is likely to have only
credit entries.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
34. Dividends decrease stockholders’ equity and are listed on the income statement as a deduction from revenue.
a.
True
b.
False
35. The normal balance of revenue accounts is a credit.
a.
True
b.
False
36. The normal balance of the dividends account is a debit.
a.
True
b.
False
37. The normal balance of an expense account is a credit.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
38. Expense accounts are increased by credits.
a.
True
b.
False
39. Revenue accounts are increased by credits.
a.
True
b.
False
40. Liability accounts are increased by debits.
a.
True
b.
False
41. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
42. Transactions are listed in the journal chronologically.
a.
True
b.
False
43. Journalizing is the process of entering amounts in the ledger.
a.
True
b.
False
44. The process of recording a transaction in the journal is called journalizing.
a.
True
b.
False
45. Transactions are initially entered into a record called a journal.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
46. The double-entry accounting system records each transaction twice.
a.
True
b.
False
47. The increase side of an account is also the side of the normal balance.
a.
True
b.
False
48. Journal entries include both debit and credit accounts for each transaction.
a.
True
b.
False
49. A transaction that is recorded in the journal is called a journal entry.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
50. Assets are increased with debits and decreased with credits.
a.
True
b.
False
51. Liabilities are increased with debits and decreased with credits.
a.
True
b.
False
52. Debits will increase unearned revenues and revenues.
a.
True
b.
False
53. All stockholders’ equity accounts record increases to the accounts with credits.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
54. Journalizing always eliminates fraudulent activity.
a.
True
b.
False
55. Journal entries can have more than two accounts as long as the debits equal the credits.
a.
True
b.
False
56. Normal account balances are on the increase side of the accounts.
a.
True
b.
False
57. The process of transferring the data from the journal to the ledger accounts is called posting.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
58. The post reference notation used in the ledger is the account number.
a.
True
b.
False
59. The post reference notation used in the journal is the page number.
a.
True
b.
False
60. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger.
a.
True
b.
False
61. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial
statements.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
62. The process of transferring the debits and credits from the journal entries to the accounts is known as posting.
a.
True
b.
False
63. Postings made to standard account forms show a new balance after each entry.
a.
True
b.
False
64. A trial balance determines the complete accuracy of the numbers.
a.
True
b.
False
65. Even when a trial balance is in balance, there may be errors in the individual accounts.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
66. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and
balancing, and therefore should be equal.
a.
True
b.
False
67. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.
a.
True
b.
False
68. If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were
made.
a.
True
b.
False
69. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
70. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide.
a.
True
b.
False
71. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause the trial balance to be out
of balance.
a.
True
b.
False
72. The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is
called a transposition.
a.
True
b.
False
Chapter 2 – Analyzing Transactions
73. Accounts
a.
do not reflect money amounts
b.
are not used by entities that manufacture products
c.
are records of increases and decreases in individual accounting equation elements
d.
are only used by large entities with many transactions
74. Accounts are classified in the ledger
a.
chronologically
b.
alphabetically
c.
in accordance with their appearance in the financial statements
d.
with the accounts used most often listed first
75. Which of the following accounts is a stockholders’ equity account?
a.
Cash
b.
Accounts Payable
c.
Prepaid Insurance
d.
Common Stock