Question 1

When a company provides services for which cash will not be received until some future date, the company should record the amount charged as accounts receivable.

Accepted Answer

A) True 
 B)False

Question 2

Jay's Limo Services, Inc. paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Accepted Answer

A)    Salaries Expense 300 Accounts Payable 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Accounts Payable } & & 300 \\hline\end{array} Salaries Expense  Accounts Payable ​300​300​​ 
B)    Cash 300 Salaries Expense 300\begin{array} { | l | r | r | } \hline 	ext { Cash } & 300 & \\hline 	ext { Salaries Expense } & & 300 \\hline \hline\end{array} Cash  Salaries Expense ​300​300​​ 
C)    Salaries Expense 300 Dividends 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Dividends } & & 300 \\hline\end{array} Salaries Expense  Dividends ​300​300​​ 
D)    Salaries Payable 300 Salaries Expense 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Payable } & 300 & \\hline 	ext { Salaries Expense } & & 300 \\hline\end{array} Salaries Payable  Salaries Expense ​300​300​​ 
E)    Salaries Expense 300 Cash 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Cash } & & 300 \\hline\end{array} Salaries Expense  Cash ​300​300​​F) B) and E)
G) C) and E)

Question 3

_____________________________ requires that each transaction affect, and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction.

Accepted Answer

Double-ent...

Question 4

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

Accepted Answer

A) True 
 B)False

Question 5

An asset created by prepayment of an insurance expense is:

Accepted Answer

A)  Recorded as a debit to Unearned Revenue.
B)  Recorded as a debit to Prepaid Insurance.
C)  Recorded as a credit to Unearned Revenue.
D)  Recorded as a credit to Prepaid Insurance.
E)  Not recorded in the accounting records until the insurance period expires.F) C) and E)
G) All of the above

Question 6

Cash paid to stockholders by the business of a corporation and used for personal expenses, should be treated as an expense of the business.

Accepted Answer

A) True 
 B)False

Question 7

Identify the accounts that would normally have balances in the credit column of a business's trial balance.

Accepted Answer

A)  Liabilities and expenses.
B)  Assets and revenues.
C)  Revenues and expenses.
D)  Revenues and liabilities.
E)  Dividends and liabilities.F) None of the above
G) A) and B)

Question 8

If a company is highly leveraged, this means that it has relatively high risk of not being able to repay its debt.

Accepted Answer

A) True 
 B)False

Question 9

A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

Accepted Answer

A) True 
 B)False

Question 10

A business uses a credit to record:

Accepted Answer

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 an equity account.F) A) and B)
G) B) and D)

Question 11

A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

Accepted Answer

A)  Account balance column.
B)  Debit column.
C)  Posting reference column.
D)  Credit column.
E)  Description column.F) D) and E)
G) A) and D)

Question 12

The numbering system used in a company's chart of accounts:

Accepted Answer

A)  Is the same for all companies.
B)  Is determined by generally accepted accounting principles.
C)  Depends on the source documents used in the accounting process.
D)  Typically begins with balance sheet accounts.
E)  Typically begins with income statement accounts.F) B) and D)
G) A) and C)

Question 13

What is a trial balance? What is its purpose?

Accepted Answer

The trial balance is a list of all of th...

Question 14

A business's source documents may include all of the following except:

Accepted Answer

A)  Sales tickets.
B)  Ledgers.
C)  Checks.
D)  Purchase orders.
E)  Bank statements.F) All of the above
G) A) and B)

Question 15

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n) :

Accepted Answer

A)  Account.
B)  Trial balance.
C)  Journal.
D)  T-account.
E)  Balance column account.F) C) and D)
G) D) and E)

Question 16

Credits always increase account balances.

Accepted Answer

A) True 
 B)False

Question 17

If Taylor Willow, the owner of Willow Hardware Inc., uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

Accepted Answer

A)  Debit Automobiles and credit Cash.
B)  Debit Cash and credit Salary Expense.
C)  Debit Cash and credit Dividends.
D)  Debit Dividends and credit Cash.
E)  Debit Cash and credit Automobiles.F) A) and C)
G) B) and D)

Question 18

Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?

Accepted Answer

A)    Salaries Expense 300 Accounts Payable 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Accounts Payable } & & 300 \\hline \hline\end{array} Salaries Expense  Accounts Payable ​300​300​​ 
B)    Cash 300 Salaries Expense 300\begin{array} { | l | r | r | } \hline 	ext { Cash } & 300 & \\hline 	ext { Salaries Expense } & & 300 \\hline\end{array} Cash  Salaries Expense ​300​300​​ 
C)    Salaries Expense 300 Dividends 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Dividends } & & 300 \\hline\end{array} Salaries Expense  Dividends ​300​300​​ 
D)    Salaries Payable 300 Salaries Expense 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Payable } & 300 & \\hline 	ext { Salaries Expense } & & 300 \\hline \hline\end{array} Salaries Payable  Salaries Expense ​300​300​​ 
E)    Salaries Expense 300 Cash 300\begin{array} { | l | r | r | } \hline 	ext { Salaries Expense } & 300 & \\hline 	ext { Cash } & & 300 \\hline\end{array} Salaries Expense  Cash ​300​300​​F) B) and D)
G) All of the above

Question 19

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

Accepted Answer

A) True 
 B)False

Question 20

A bookkeeper 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:

Accepted Answer

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 common stock account for $1,500.
E)  Debit another asset account for $1,500.F) A) and B)
G) B) and C)

Exam 2: Accounting for Business Transactions

A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

Correct AnswerverifiedShow Answer

Identify the accounts that would normally have balances in the credit column of a business's trial balance.

Correct AnswerverifiedShow Answer

A business's source documents may include all of the following except:

Correct AnswerverifiedShow Answer

An asset created by prepayment of an insurance expense is:

Correct AnswerverifiedShow Answer

Credits always increase account balances.

Correct AnswerverifiedShow Answer

_____________________________ requires that each transaction affect, and be recorded in, at least two accounts. It also means that total amounts debited must equal total amounts credited for each transaction.

Correct AnswerverifiedDouble-ent...View AnswerShow Answer

A bookkeeper 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:

Correct AnswerverifiedShow Answer

When a company provides services for which cash will not be received until some future date, the company should record the amount charged as accounts receivable.

Correct AnswerverifiedShow Answer

The numbering system used in a company's chart of accounts:

Correct AnswerverifiedShow Answer

Cash paid to stockholders by the business of a corporation and used for personal expenses, should be treated as an expense of the business.

Correct AnswerverifiedShow Answer

A business uses a credit to record:

Correct AnswerverifiedShow Answer

Jay's Limo Services, Inc. paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services, Inc. make to record this transaction?

Correct AnswerverifiedShow Answer

A transaction that decreases a liability and increases an asset must also affect one or more other accounts.

Correct AnswerverifiedShow Answer

If Taylor Willow, the owner of Willow Hardware Inc., uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

Correct AnswerverifiedShow Answer

What is a trial balance? What is its purpose?

Correct AnswerverifiedThe trial balance is a list of all of th...View AnswerShow Answer

If a company is highly leveraged, this means that it has relatively high risk of not being able to repay its debt.

Correct AnswerverifiedShow Answer

A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

Correct AnswerverifiedShow Answer

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

Correct AnswerverifiedShow Answer

Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?

Correct AnswerverifiedShow Answer

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n) :

Correct AnswerverifiedShow Answer

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Double-ent...
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The trial balance is a list of all of th...
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