Question 1

A list of accounts and their account numbers is called the chart of accounts.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following items has no effect on retained earnings?

Accepted Answer

A)   expenses
B)   dividends declared
C)   revenues
D)   hiring a new employeeE) A) and B)
F) A) and C)

Question 3

Which one of the following represents the expanded basic accounting equation?

Accepted Answer

A)   Assets = Liabilities + Common Shares + Retained Earnings + Revenues - Expenses - Dividends Declared.
B)   Assets + Liabilities = Dividends Declared + Expenses + Common Shares + Revenues.
C)   Assets - Liabilities - Dividends Declared = Common Shares + Revenues - Expenses.
D)   Assets = Revenues + Expenses - Liabilities.E) A) and B)
F) A) and C)

Question 4

The normal balance of any account is the

Accepted Answer

A)   left side.
B)   right side.
C)   side which increases the account.
D)   side which decreases the account.E) A) and C)
F) B) and D)

Question 5

The normal balance of a liability account is a debit.

Accepted Answer

A) True 
 B)False

Question 6

If services are performed on credit, then

Accepted Answer

A)   assets will decrease.
B)   liabilities will increase.
C)   shareholders' equity will increase.
D)   liabilities will decrease.E) B) and D)
F) C) and D)

Question 7

An expense

Accepted Answer

A)   decreases assets and liabilities.
B)   decreases shareholders' equity.
C)   has no effect on shareholders' equity.
D)   increases assets and decreases shareholder' equity.E) C) and D)
F) A) and D)

Question 8

The payment of a liability

Accepted Answer

A)   decreases assets and shareholders' equity.
B)   increases assets and decreases liabilities.
C)   decreases assets and increases liabilities.
D)   decreases assets and liabilities.E) B) and D)
F) C) and D)

Question 9

If a company has overdrawn its bank balance, then

Accepted Answer

A)   the cash account will show a debit balance.
B)   the cash account will show a credit balance.
C)   the cash account debits will exceed the cash account credits.
D)   this cannot be detected by observing the balance of the cash account.E) A) and B)
F) None of the above

Question 10

A compound journal entry affects more than two accounts.

Accepted Answer

A) True 
 B)False

Question 11

The purchase of an asset for cash

Accepted Answer

A)   increases assets and shareholders' equity.
B)   increases assets and liabilities.
C)   decreases assets and increases liabilities.
D)   has no effect on total assets.E) A) and B)
F) A) and C)

Question 12

The usual sequence of steps in the recording process is to

Accepted Answer

A)   analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.
B)   analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal.
C)   analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal.
D)   analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.E) A) and D)
F) A) and C)

Question 13

The normal balance of the Dividends Declared account is a debit.

Accepted Answer

A) True 
 B)False

Question 14

Collection of an account receivable will increase total assets.

Accepted Answer

A) True 
 B)False

Question 15

Accounting systems should record

Accepted Answer

A)   all economic events.
B)   events that result in a change in assets, liabilities, or shareholders' equity items.
C)   only events that involve cash.
D)   only events that include revenues, expenses, and cash.E) B) and D)
F) None of the above

Question 16

The sequence of steps in the transaction recording process is

Accepted Answer

A)   journal  →\rightarrow→  analyze  →\rightarrow→ ledger.
B)   analyze  →\rightarrow→ journal  →\rightarrow→  ledger.
C)   journal  →\rightarrow→  ledger  →\rightarrow→  analyze.
D)   ledger  →\rightarrow→  journal →\rightarrow→  analyze. E) A) and B)
F) All of the above

Question 17

An individual accounting record of increases and decreases in a specific asset, liability, or shareholders' equity item is called a(n)

Accepted Answer

A)   single-entry accounting system.
B)   accounting transaction.
C)   account.
D)   normal balance.E) All of the above
F) B) and C)

Question 18

For the basic accounting equation to stay in balance, each transaction recorded must

Accepted Answer

A)   affect two or fewer accounts.
B)   affect two or more accounts.
C)   always affect exactly two accounts.
D)   affect the same number of asset and liability accounts.E) C) and D)
F) A) and D)

Question 19

Prepaid expenses are recorded as

Accepted Answer

A)   expenses on the income statement.
B)   assets on the statement of financial position.
C)   revenues on the income statement.
D)   liabilities on the statement of financial position.E) A) and B)
F) C) and D)

Question 20

The right side of an account is

Accepted Answer

A)   always used to record increases.
B)   the credit side.
C)   the debit side.
D)   always used to record decreases.E) B) and D)
F) A) and D)

Exam 3: The Accounting Information System

The payment of a liability

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A compound journal entry affects more than two accounts.

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The usual sequence of steps in the recording process is to

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For the basic accounting equation to stay in balance, each transaction recorded must

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The right side of an account is

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The purchase of an asset for cash

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Prepaid expenses are recorded as

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The normal balance of any account is the

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The normal balance of the Dividends Declared account is a debit.

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If a company has overdrawn its bank balance, then

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Which of the following items has no effect on retained earnings?

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Collection of an account receivable will increase total assets.

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An expense

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Which one of the following represents the expanded basic accounting equation?

Correct AnswerverifiedShow Answer

An individual accounting record of increases and decreases in a specific asset, liability, or shareholders' equity item is called a(n)

Correct AnswerverifiedShow Answer

A list of accounts and their account numbers is called the chart of accounts.

Correct AnswerverifiedShow Answer

The sequence of steps in the transaction recording process is

Correct AnswerverifiedShow Answer

The normal balance of a liability account is a debit.

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If services are performed on credit, then

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Accounting systems should record

Correct AnswerverifiedShow Answer

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