Chapter 2: Analyzing Transactions
63.
The process of transferring the debits and credits from the journal entries to the accounts is known as posting.
a.
True
b.
False
64.
Postings made to standard account forms show a new balance after each entry.
a.
True
b.
False
65.
A group of related accounts that make up a complete unit is called a trial balance.
a.
True
b.
False
Chapter 2: Analyzing Transactions
66.
A trial balance determines the accuracy of the numbers.
a.
True
b.
False
67.
Even when a trial balance is in balance, there may be errors in the individual accounts.
a.
True
b.
False
68.
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
Chapter 2: Analyzing Transactions
69.
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
70.
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
71.
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
72.
The erroneous arrangement of digits, such as writing $45 as $54, is called a slide.
a.
True
b.
False
73.
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
74.
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
75.
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 financial statement items
d.
are only used by large entities with many transactions
76.
Accounts are classified in the ledger
a.
chronologically
b.
alphabetically
c.
in accordance with their appearance in the financial statements
d.
so that accounts used most often are listed first
77.
Which of the following accounts is an owner’s equity account?
a.
Cash
b.
Accounts Payable
c.
Prepaid Insurance
d.
Ross Morris, Capital
Chapter 2: Analyzing Transactions
78.
The gross increases in owner’s equity attributable to business activities are called
a.
assets
b.
liabilities
c.
revenues
d.
expenses
79.
A chart of accounts is
a.
the same as a balance sheet
b.
usually a listing of accounts in alphabetical order
c.
usually a listing of accounts in financial statement order
d.
used in place of a ledger
80.
The debit side of an account
a.
depends on whether the account is an asset, liability, or owner’s equity
b.
can be either side of the account depending on how the accountant set up the system
c.
is the right side of the account
d.
is the left side of the account
Chapter 2: Analyzing Transactions
81.
An account is said to have a debit balance if
a.
the amount of the debits exceeds the amount of the credits
b.
there are more entries on the debit side than on the credit side
c.
there are more entries on the credit side than on the debit side
d.
the first entry of the accounting period was posted on the debit side
82.
Which side of the account increases the cash account?
a.
credit
b.
neither a debit or a credit
c.
debit
d.
either a debit or a credit
83.
Which statement(s) concerning cash is (are) true?
a.
cash will always have more debits than credits
b.
cash will never have a credit balance
c.
cash is increased by debiting
d.
all of the above
Chapter 2: Analyzing Transactions
84.
Which of the following is true about T accounts?
a.
The left side of a T account is called the debit side.
b.
The left side of a T account is called the credit side.
c.
The right side of a T account is called the debit side.
d.
Transactions are first recorded in T accounts and then posted to the journal.
85.
A cash payment is recorded in the cash account as
a.
neither a debit or a credit
b.
a credit
c.
a debit
d.
either a debit or a credit
86.
The balance of an account is determined by
a.
adding all of the debits to all of the credits
b.
always subtracting the debits from the credits
c.
always subtracting the credits from the debits
d.
adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum
Chapter 2: Analyzing Transactions
87.
A debit may signify a(n)
a.
decrease in asset accounts
b.
decrease in liability accounts
c.
increase in the capital account
d.
decrease in the drawing account
88.
A list of the accounts used by a business is called the
a.
journal
b.
chart of accounts
c.
T chart
d.
debit listing
89.
In the chart of accounts, the balance sheet accounts are normally listed in which order?
a.
liabilities, assets, owner’s equity
b.
assets, liabilities, owner’s equity
c.
owner’s equity, assets, liabilities
d.
assets, owner’s equity, liabilities
Chapter 2: Analyzing Transactions
90.
In which order are the accounts listed in the chart of accounts?
a.
assets, expenses, liabilities, owner’s equity, revenues
b.
owner’s equity, assets, liabilities, revenues, expenses
c.
assets, liabilities, owner’s equity, revenues, expenses
d.
assets, liabilities, revenues, expenses, owner’s equity
91.
Which are the parts of the T account?
a.
title, date, total
b.
date, debit side, credit side
c.
title, debit side, credit side
d.
title, debit side, total
92.
The chart of accounts is designed to
a.
alphabetize the accounts to make reading easier for financial statement users
b.
organize accounts in order of dollar amount to simplify the accounting information for users
c.
summarize the transactions and determine ending account balances
d.
meet the information needs of a company’s managers and other users of its financial statements
Chapter 2: Analyzing Transactions
93.
Which group of accounts is comprised of only assets?
a.
Cash, Accounts Payable, Buildings
b.
Accounts Receivable, Revenue, Cash
c.
Prepaid Expenses, Buildings, Patents
d.
Unearned Revenues, Prepaid Expenses, Cash
94.
Of the following, which is true about assets?
a.
Assets include both physical and intangible items.
b.
Assets include only physical items.
c.
Assets are the personal property of the owner of the company.
d.
Assets are the result of selling products or services to customers.
95.
Which of the following is not considered to be a liability?
a.
Wages Payable
b.
Accounts Receivable
c.
Unearned Revenues
d.
Accounts Payable
Chapter 2: Analyzing Transactions
96.
Which of the following statements is not true about liabilities?
a.
Liabilities are debts owed to outsiders.
b.
Account titles of liabilities often include the term “payable.”
c.
Cash received before a service is performed creates a liability.
d.
Liabilities do not include wages owed to employees of the company.
97.
The owner’s equity will be reduced by all of the following except
a.
revenues
b.
expenses
c.
withdrawals
d.
all of these
98.
Expenses can result from
a.
increasing owner’s equity
b.
consuming services
c.
using up liabilities
d.
purchasing assets
Chapter 2: Analyzing Transactions
99.
In the chart of accounts, each account number has two digits. The first digit indicates the major account group
to
which the account belongs. Which of the following correctly identifies the major account groups typically
represented by the numbers 1 through 5?
a.
1Assets, 2Liabilities, 3Owner’s Equity, 4Expenses, 5Revenues
b.
1Assets, 2Liabilities, 3Owner’s Equity, 4Revenues, 5Expenses
c.
1Assets, 2Owner’s Equity, 3Revenues, 4Expenses, 5Drawing
d.
1Owner’s Equity, 2Drawing, 3Revenues, 4Expenses
100.
The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances.
Accounts Payable
$1,500
Fees Earned
$3,600
Accounts Receivable
1,800
Insurance Expense
1,300
Prepaid Insurance
2,000
Land
3,000
Cash
3,200
Wages Expense
1,400
Drawing
1,200
Capital
8,800
The total of all the assets is
a. $10,000
b. $8,000
c. $9,700
d. $9,800
Chapter 2: Analyzing Transactions
101.
The balance of an account is determined by
a.
adding all of the debits to all of the credits
b.
always subtracting the debits from the credits
c.
always subtracting the credits from the debits
d.
adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum
102.
Which of the following types of accounts have a normal credit balance?
a.
assets and liabilities
b.
liabilities and expenses
c.
revenues and capital
d.
capital and drawing
103.
Which of the following groups of accounts have a normal debit balance?
a.
revenues, liabilities, and capital
b.
capital and assets
c.
liabilities and capital
d.
assets and expenses
Chapter 2: Analyzing Transactions
104.
Which one of the statements below is not a purpose for the journal?
a.
to show increases and decreases in accounts
b.
to show a chronological order by date
c.
to show a complete transaction in one place
d.
to help locate errors
105.
A credit may signify a
a.
decrease in assets
b.
decrease in liabilities
c.
decrease in capital
d.
decrease in revenue
106.
A debit signifies a decrease in
a.
assets
b.
expenses
c.
drawing
d.
revenues
Chapter 2: Analyzing Transactions
107.
Which of the following applications of the rules of debit and credit is true?
a.
decrease Prepaid Insurance with a credit and the normal balance is a credit
b.
increase Accounts Payable with a credit and the normal balance is a debit
c.
increase Equipment with a debit and the normal balance is a debit
d.
decrease Cash with a debit and the normal balance is a credit
108.
Which of the following describes the classification and normal balance of the fees earned account?
a.
asset, credit
b.
liability, credit
c.
owner’s equity, debit
d.
revenue, credit
109.
The classification and normal balance of the accounts payable account is
a.
an asset with a credit balance
b.
a liability with a credit balance
c.
owner’s equity with a credit balance
d.
revenue with a credit balance
Chapter 2: Analyzing Transactions
110.
The classification and normal balance of the drawing account is
a.
an expense with a credit balance
b.
an expense with a debit balance
c.
a liability with a credit balance
d.
owner’s equity with a debit balance
111.
Which of the following accounts are debited to record increases?
a.
assets and liabilities
b.
drawing and liabilities
c.
expenses and liabilities
d.
assets and expenses
112.
In which of the following types of accounts are increases recorded by credits?
a.
revenues and liabilities
b.
drawing and assets
c.
liabilities and drawing
d.
expenses and liabilities
Chapter 2: Analyzing Transactions
113.
In which of the following types of accounts are decreases recorded by debits?
a.
assets
b.
liabilities
c.
expenses
d.
drawing
114.
In which of the following types of accounts are decreases recorded by credits?
a.
liabilities
b.
owner’s equity
c.
assets
d.
revenues
115.
A credit balance in which of the following accounts would indicate a likely error?
a.
Fees Earned
b.
Salary Expense
c.
Janet James, Capital
d.
Accounts Payable
Chapter 2: Analyzing Transactions
116.
A debit balance in which of the following accounts would indicate a likely error?
a.
Salaries Expense
b.
Notes Payable
c.
Edgar Martin, Drawing
d.
Supplies
117.
Which of the following entries records the payment of an account payable?
a.
debit Cash; credit Accounts Payable
b.
debit Accounts Receivable; credit Cash
c.
debit Cash; credit Supplies Expense
d.
debit Accounts Payable; credit Cash
118.
Which of the following entries records the investment of cash by Taylor Thomas, owner of a proprietorship?
a.
debit Taylor Thomas, Capital; credit Accounts Receivable
b.
debit Cash; credit Taylor Thomas, Capital
c.
debit Taylor Thomas, Drawing; credit Cash
d.
debit Cash; credit Taylor Thomas, Drawing
Chapter 2: Analyzing Transactions
119.
Which of the following entries records the payment of a bill for your insurance premium?
a.
debit Prepaid Insurance; credit Cash
b.
debit Insurance Payable; credit Accounts Receivable
c.
debit Accounts Payable; credit Cash
d.
debit Cash; credit Prepaid Insurance
120.
Which of the following entries records the withdrawal of cash by Sally Anderson, owner of a proprietorship,
for
personal use?
a.
debit Sally Anderson, Capital; credit Cash
b.
debit Sally Anderson, Drawing; credit Cash
c.
debit Salaries Expense; credit Cash
d.
debit Salaries Expense; credit Salaries Payable
121.
Office supplies were sold by Janer’s Cleaning Service at cost to another repair shop, with cash received. Which of
the following entries for Janer’s Cleaning Service records this transaction?
a.
Office Supplies, debit; Cash, credit
b.
Office Supplies, debit; Accounts Payable, credit
c.
Cash, debit; Office Supplies, credit
d.
Accounts Payable, debit; Office Supplies, credit