Chapter 2 Practice Materials.doc

Chapter 2Analyzing Transactions F 85Chapter 2Analyzing TransactionsMULTIPLE CHOICE1.Accountsa.do not reflect money amountsb.are not used by entities that manufacture productsc.are records of increases and decreases in individual financial statement itemsd.are only used by large entities with many transactionsANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement2.A group of related accounts that comprise a complete unit is called aa.journalb.liabilityc.ledgerd.transactionANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement3.Accounts are classified in the ledgera.chronologicallyb.alphabeticallyc.in accordance with their appearance in the financial statementsd.so that accounts used most often are listed firstANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement4.Revenue should be recognized whena.cash is receivedb.the service is performedc.the customer places an orderd.the customer charges an orderANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement5.Which of the following accounts is an owners equity account?a.Cashb.Accounts Payablec.Prepaid Insuranced.Julia Davis, CapitalANS:DDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement6.The gross increases in owners equity attributable to business activities are incomeANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement7.A chart of accounts isa.the same as a balance sheetb.usually a listing of accounts in alphabetical orderc.usually a listing of accounts in financial statement orderd.used in place of a ledgerANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement8.The debit side of an accounta.depends on whether the account is an asset, liability or owners equityb.can be either side of the account depending on how the accountant set up the systemc.is the right side of the accountd.is the left side of the accountANS:DDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement9.An account is said to have a debit balance ifa.the amount of the debits exceeds the amount of the creditsb.there are more entries on the debit side than on the credit sidec.its normal balance is debit without regard to the amounts or number of entries on the debit sided.the first entry of the accounting period was posted on the debit sideANS:ADIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement10.Which statement(s) concerning cash is (are) true?a.cash will always have more debits than creditsb.cash will never have a credit balancec.cash is increased by debitingd.all of the aboveANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement11.A debit may signify a(n)a.decrease in asset accountsb.decrease in liability accountsc.increase in the capital accountd.decrease in the drawing accountANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement12.Which of the following types of accounts have a normal credit balance?a.assets and liabilitiesb.liabilities and expensesc.revenues and liabilitiesd.capital and drawingANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement13.Which of the following groups of accounts have a normal debit balance?a.revenues, liabilities, capitalb.capital, assetsc.liabilities, expensesd.assets, expensesANS:DDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement14.Which one of the statements below is not a purpose for the journal?a.to show increases and decreases in accountsb.to show a chronological order by datec.to show a complete transaction in one placed.to help locate errorsANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement15.A credit signifies a decrease ina.drawingb.liabilitiesc.capitald.revenueANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement16.A credit may signify aa.decrease in assetsb.decrease in liabilitiesc.decrease in capitald.decrease in revenueANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement17.A debit signifies a decrease ina.assetsb.expensesc.drawingd.revenuesANS:DDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement18.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 creditb.increase Accounts Payable with a credit and the normal balance is a debitc.increase Supplies Expense with a debit and the normal balance is a debitd.decrease Cash with a debit and the normal balance is a creditANS:CDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement19.Which of the following describes the classification and normal balance of the fees earned account?a.asset, creditb.liability, creditc.owners equity, debitd.revenue, creditANS:DDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement20.The classification and normal balance of the accounts payable account isa.an asset with a credit balanceb.a liability with a credit balancec.owners equity with a credit balanced.revenue with a credit balanceANS:BDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement21.The classification and normal balance of the drawing account isa.an expense with a credit balanceb.an expense with a debit balancec.a liability with a credit balanced.owners equity with a debit balanceANS:DDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement22.The classification and normal balance of the supplies expense account is a(n)a.asset with a debit balanceb.asset with a credit balancec.expense with a debit balanced.liability with a credit balanceANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement23.In which of the following types of accounts are increases recorded by debits?a.assets, liabilitiesb.drawing, liabilitiesc.expenses, liabilitiesd.assets, expensesANS:DDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement24.In which of the following types of accounts are increases recorded by credits?a.revenues, liabilitiesb.drawing, assetsc.liabilities, drawingd.expenses, liabilitiesANS:ADIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement25.In which of the following types of accounts are decreases recorded by debits?a.assetsb.revenuesc.expensesd.drawingANS:BDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement26.In which of the following types of accounts are decreases recorded by credits?a.liabilitiesb.owners capitalc.drawingd.revenuesANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement27.A credit balance in which of the following accounts would indicate a likely error?a.Fees Earnedb.Salary Expensec.Peter Penn, Capitald.Accounts PayableANS:BDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement28.A debit balance in which of the following accounts would indicate a likely error?a.Salaries Expenseb.Notes Payablec.N. McGee, Drawingd.SuppliesANS:BDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement29.Randomly listed below are the steps in the accounting cycle:(1)prepare the financial statements(2)post the journal entries to the ledger(3)record journal entries(4)prepare a trial balanceWhat is the proper order of these steps?a.(3), (2), (4), (1)b.(2), (3), (4), (1)c.(3), (2), (1), (4)d.(4), (3), (2), (1)ANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement30.Which of the following entries records the payment of an account payable?a.debit Cash; credit Accounts Payableb.debit Accounts Receivable; credit Cashc.debit Cash; credit Supplies Expensed.debit Accounts Payable; credit CashANS:DDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement31.Which of the following entries records the investment of cash by Tito, owner of a proprietorship?a.debit Tito, Capital; credit Accounts Receivableb.debit Cash; credit Tito, Capitalc.debit Tito, Drawing; credit Cashd.debit Cash; credit Tito, DrawingANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement32.Which of the following entries records the receipt of a utility bill from the water company?a.debit Utilities Expense; credit Accounts Payableb.debit Utilities Payable; credit Accounts Receivablec.debit Accounts Payable; credit Cashd.debit Accounts Payable; credit Utilities PayableANS:ADIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement33.Which of the following entries records the withdrawal of cash by Joe, owner of a proprietorship, for personal use?a.debit Joe, Capital; credit Cashb.debit Joe, Drawing; credit Cashc.debit Salaries Expense; credit Cashd.debit Salaries Expense; credit Salaries PayableANS:BDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement34.Office supplies were sold by Js Appliance Repair at cost to another repair shop, with cash received. Which of the following entries for Js Appliance Repair records this transaction?a.Office Supplies, debit; Cash, creditb.Office Supplies, debit; Accounts Payable, creditc.Cash, debit; Office Supplies, creditd.Accounts Payable, debit; Office Supplies, creditANS:CDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement35.Office supplies purchased by Js Appliance Repair on account were returned. Which of the following entries for Js Appliance Repair records this transaction?a.Cash, debit; Office Supplies, creditb.Office Supplies, debit; Accounts Receivable, creditc.Accounts Payable, debit; Office Supplies, creditd.Office Supplies, debit; Accounts Payable, creditANS:CDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement36.Cash was paid by Js Appliance Repair to creditors on account. Which of the following entries for Js records this transaction?a.Cash, debit; Js, Capital, creditb.Accounts Payable, debit; Cash, creditc.Accounts Receivable, debit; Cash, creditd.Accounts Payable, debit; Account Receivable, creditANS:BDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement37.The process of initially recording a business transaction is calleda.trial balancingb.postingc.journalizingd.balancingANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement38.Which of the following entries records the acquisition of office supplies on account?a.Office Supplies, debit; Cash, creditb.Cash, debit; Office Supplies, creditc.Office Supplies, debit; Accounts Payable, creditd.Accounts Receivable, debit; Office Supplies, credit ANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement39.Which of the following entries records the acquisition of equipment on account?a.Equipment, debit; Accounts Payable, creditb.Equipment, debit; Cash, creditc.Accounts Payable, debit; Equipment, creditd.Accounts Payable, debit; Notes Payable, creditANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement40.Which of the following entries records the payment of rent for the current month?a.Cash, debit; Rent Expense, creditb.Rent Expense, debit; Cash, creditc.Rent Expense, debit; Accounts Receivable, creditd.Accounts Payable, debit; Rent Expense, creditANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement41.Which of the following entries records the receipt of cash from patients on account?a.Accounts Payable, debit; Fees Earned, creditb.Accounts Receivable, debit; Fees Earned, creditc.Accounts Receivable, debit; Cash, creditd.Cash, debit; Accounts Receivable, creditANS:DDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement42.Which of the following entries records the billing of patients for services performed?a.Accounts Receivable, debit; Fees Earned, creditb.Accounts Payable, debit; Cash, creditc.Fees Earned, debit; Accounts Receivable, creditd.Fees Earned, debit; Cash, creditANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement43.Which of the following entries records the collection of cash from cash customers?a.Fees Earned, debit; Cash, creditb.Fees Earned, debit; Accounts Receivable, creditc.Cash, debit; Fees Earned, creditd.Accounts Receivable, debit; Fees Earned, creditANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement44.Which of the following entries records the receipt of cash for two months rent? The cash was received in advance of providing the service.a.Prepaid Rent, debit; Rent Revenue, credit.b.Cash, debit; Unearned Rent, credit.c.Cash, debit; Prepaid Rent, credit.d.Cash, debit; Rent Expense credit.ANS:BDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement45.A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper shoulda.make no entry until the cash is receivedb.Cash, debit; Accounts Receivable, creditc.Cash, debit; Fees Earned, creditd.Accounts Receivable, debit; Fees Earned, creditANS:DDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement46.Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger meansa.all of the information from the journal was correctly transferred to the ledgerb.all accounts have their correct balances in the ledgerc.only the journal is accurate; the ledger may be incorrectd.only that the debit dollar amounts equal the credit dollar amountsANS:DDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement47.Which of the following is true about a T-Account?a.Left hand side of the T-Account is called a debit.b.Left hand side of the T-Accounts is called a creditc.Right hand side of the T-Account is called a debitd.None are true.ANS:ADIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement48.Which of the following abbreviations are correct?a.Debit “Dr”, Credit “Cd”b.Debit “Db”, Credit “Cr”c.Debit “Db”, Credit “Cd”d.Debit “Dr”, Credit “Cr”ANS:DDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement49.When amounts of a transaction are entered on the left side of an account, they are said to bea.creditedb.summarizedc.totaledd.debitedANS:DDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement50.When amounts of a transactions are entered in an account on the right hand side, they are said to bea.creditedb.debitedc.addedd.subtractedANS:ADIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement51.Which side of the account increases a cash account?a.creditb.neither a debit or a creditc.debitd.either a debit or a creditANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement52.A cash payment is recorded on the cash account as a a.neither a debit or a creditb.creditc.Debitd.either a debit or a creditANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement53.The balance of the account is determined bya.adding all of the debits to all of the credits.b.always subtracting the debits from the credits.c.always subtracting all of the credits from the debit. d.adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.ANS:DDIF:DifficultOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement54.A list of the accounts is calleda.ledgerb.chart of accountsc.T-Accountd.DebitANS:BDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement55.On the chart of accounts, the balance sheet accounts are normally listed in the following ordera.liabilities, assets, owners equityb.assets, liabilities, owners equityc.owners equity, assets, liabilitiesd.assets, owners equity, liabilitiesANS:BDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement56.In which order are the accounts listed in the chart of accounts?a.assets, expenses, liabilities, owners equity, revenuesb.owners equity, assets, liabilities, revenues, expensesc.assets, liabilities, owner equity, revenues, expensesd.assets, liabilities, revenues, expenses, owners equityANS:CDIF:EasyOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement57.Which are the parts of the T account?a.title, date, totalb.date, debit side, credit sidec.title, debit side, credit sided.title, debit side, totalANS:CDIF:ModerateOBJ:02-01NAT:AACSB Analytic | AICPA FN-Measurement58.Which of the following is not a correct rule of debits and credits? a.a