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Credits are used to record:
 
decreases in assets and owner's equity and increases in liabilities.
increases in assets, liabilities, and owner's equity
decreases in liabilities and increases in assets and owner's equity.
increases in liabilities and revenues
   
On a statement of owner's equity, beginning capital is $30,000, Net Income for the year is $11,000 and Drawing for the year is $6,000,
the ending capital amount would be:
 
$30,000.
$35,000
$47,000.
$25,000.
   
The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a:
 
debit to Accounts Payable and credit Cash
debit Cash and credit Supplies.
debit Accounts Receivable and credit Cash.
debit Supplies and credit Accounts Payable.
   
When the trial balance totals are not equal, the error may have been caused by recording a debit as a credit if the difference is divisible by:
 
3.
9.
2
5.
   
A business performed $8,000 of services. Their customer paid $3,000 of the amount right away but charged the remaining amount.
To record this transaction, the business would:
 
Debit Cash $3,000 and Debit Accounts Payable $5,000; Credit Fees Income $8,000
Debit Accounts Receivable $8,000 and; Credit Fees Income $8,000
Debit Cash $3,000; Credit Fees Income $3,000
Debit Cash $3,000 and Debit Accounts Receivable $5,000 and Credit Fees Income $8,000
   
A business purchases equipment costing $5,500. They pay $1,500 right away and charge the remaining amount.
To record this transaction, the business would:
 
Debit Equipment $4,000; Credit Accounts Payable $4,000
Debit Equipment $1,500; Credit Cash $1,500
Debit Equipment $5,500; Credit Cash $1,500 and Credit Accounts Payable $4,000
Debit Equipment $5,500; Credit Accounts Payable $5,500
   
The "Net Income" or "Net Loss" is transferred from the income statement to the
 
balance sheet.
chart of accounts.
statement of owner's equity
trial balance.
   
The account used to record increases in owner's equity from the sale of goods or services is:
 
the cash account.
the drawing account.
the capital account.
the fees income account
   
Which of the following accounts is not a permanent account?
 
Cash
Accounts Payable
Salaries Expense
Thomas Bernard, Capital
   
Which of the accounts below would ALL appear on the balance sheet.
 
Cash, Accounts Payable, Owner's Capital (ending balance)
Accounts Receivable, Accounts Payable, Fee Income
Utility Expense, Salary Expense, Cash
Owner's Capital (beginning), Owner's Drawing, Supplies Expense
   
Which of the following types of accounts normally have debit balances?
 
assets and revenue
assets, liabilities, and owner's equity
expenses and assets
liabilities and owner's equity
   
The normal balance of an account is the:
 
increase side of the account
decrease side of the account.
the left side of the account.
the right side of the account.
   
On a statement of owner’s equity, beginning capital is $152,000, Drawing for the year is $65,000, and the ending capital is $191,000.
What is the amount of Net Income for the year?
 
$104,000
$ 87,000
$ 26,000
$126,000
   
Which of the following would cause the Debit column and the Credit column of the Trial Balance to be unequal?
 
Placing the Fees Income balance in the Credit column
Placing the Prepaid Rent balance in the Credit column
Placing the Rent Expense balance in the Debit column
Placing the Office Equipment balance in the Debit column
   
The Net Income amount from the Income Statement is transferred to which of the following statements?
 
the profit and loss statement
the statement of owner's equity
the balance sheet
the trial balance
   
When charge customers pay cash to apply against their accounts, the amount is recorded:
 
on the left side of the Cash account and the right side of the Fees Income account.
on the left side of the Accounts Payable account and the right side of the Cash account.
on the left side of the Cash account and the right side of the Accounts Receivable account
on the left side of the Cash account and the left side of the Accounts Receivable account.
 
The financial statements and the auditor's report must be made available to stockholders of publicly owned corporations.
A) True
B) False
 
Anyone can invest in a closely held corporation.
A) True
B) False
 
The owners and managers of a business are the only users of the financial information.
A) True
B) False
 
A business partnership consists of two or more owners.
A) True
B) False
   
A business pays a creditor on account. The entry to record this transaction is:
 
Debit Accounts Payable; Credit Cash
Debit Accounts Receivable; Credit Accounts Payable
Debit Cash; Credit Accounts Payable
Debit Accounts Receivable; Credit to Cash
 
Managerial accountants usually do which of the following?


A) prepare and audit tax returns
B) investigate companies for possible violations of law
C) prepare internal reports for management
D) audit financial statements
   
Select the entry below to record the payment to employees for work performed during the pay period?
 
debit Cash and credit Salary Expense
debit Salary Expense and credit Cash
debit Salary Expense and credit Accounts Receivable
debit Cash, and credit Accounts Receivable
 
Identify which of the following are considered OUTSIDE users of financial accounting information
A) managers
B) banks
C) employees
D) owners
 
Public accounting firms provide three major types of services: auditing, tax accounting, and management advisory services.
A) True
B) False
   
If a trial balance is not in balance (the Debit and Credit columns are not equal), a logical first step is to
 
check each account balance calculation.
check each account balance in the general ledger to the trial balance number.
check the addition of each column
divide the difference by either 9 or 2.
   
When recording transactions in the T-accounts, the debits should equal the credits:
 
Sometimes.
Always
Never
Only for asset accounts.
   
The purpose of accounting is to provide financial information about an economic or social entity.


A) True
B) False
   
An accounting system is designed to accumulate and classify data about a company's financial activities and summarize them in the general journal.
A) True
B) False
   
Indicate whether each of the following types of accounts would normally have a debit balance or a credit balance:


a. asset account
b. liability account
c. owner's equity account
d. revenue account
e. expense account
 
a. debit
b. credit
c. credit
d. credit
e. debit
   
In a sole proprietorship, the owner is NOT responsible for the debts of the business if the company is unable to pay.


A) True
B) False
   
The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit financial statements to it at least one time each year.


A) True
B) False
   
An example of an economic entity is


A) a business.
B) a town.
C) a church.
D) a politician.
   
The form of a business organization that is not affected by the withdrawal or death of an owner and can continue indefinitely is the


A) sole proprietorship.
B) nonprofit organization.
C) corporation.
D) partnership.
   
The Financial Accounting Standards Board is responsible for
A) auditing financial statements.
B) making recommendations to the Securities and Exchange Commission.
C) developing generally accepted accounting principles.
D) establishing accounting systems for businesses.
   
Which of the following is NOT a type of information communicated by the financial statements?


A) whether or not the business is profitable
B) how long the business has been in operation
C) how much the business owes others
D) what types of assets business owns
   
The government agency that has final authority over the financial reporting of publicly owned corporations is the
A) Financial Accounting Standards Board.
B) Internal Revenue Service.
C) Federal Trade Commission.
D) Securities and Exchange Commission.
   
A business pays a creditor on account. The entry to record this transaction is:
 
Debit Accounts Payable
Credit Cash
   
When revenue is earned from charge account sales, the accountant:
 
Debit Accounts Receivable
Credit revenue account
   
Which of the following types of accounts normally have debit balances?
 
expenses and assets
   
What is the purpose of a chart of accounts?
 
To provide a classified list of the names and numbers of a firm's accounts.
   
In what order do accounts appear in the chart of accounts?
 
Order in which they appear on financial statements. Balance sheet accounts listed first, followed by income statement accounts.
   
Which of the following accounts have normal credit balances?
 
Fees Income and John Smith, Capital
   
Which of the following transactions increase owner's equity?
 
earning revenue
   
An accounting system that involves recording the effects of each transaction as debits and credits is:
 
the double-entry system
   
When a chart of accounts is created, number gaps are left within groups of accounts. Why are these number gaps necessary?
 
Additional accounts can be added when needed.
   
On a statement of owner's equity, beginning capital is $152,000, Drawing for the year is $65,000, and the ending capital is $191,000.
What is the amount of Net Income for the year?
 
$104,000
   
The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a:


Debit to Accounts Payable
Credit Cash
   
A business earns $4,000 from various charge account clients. To record this transaction, the business would:
 
Debit Accounts Receivable
Credit Fees Income
   
Select the entry below to record the payment to employees for work performed during the pay period?
 
Debit Salary Expense
Credit Cash
   
1. Haden invested 90,000 cash in the business.
2. Paid 30,000 in cash for equipment
3. Performed services for cash amounting to 9,000.
4. Paid 3,800 in cash for advertising expense.
5. Paid 3,000 in cash for supplies.

Dr           Cash 90,000
Cr            Haden Fry Capital 90,000

Dr           Equipment 30,000
Cr            Cash 30,000

Dr           Cash 9,000
Cr            Fees Income 9,000

Dr           Advertising Expense 3,800
Cr            Cash 3,800

Dr           Supplies 3,000
Cr            Cash 3,000
   
The normal balance of an account is
 
the INCREASE side of the account
   
The normal balance side for asset, liability, and owner's equity accounts is:
 
left, right, right respectively
   
Increases are recorded on which side of asset, liability, and owner's equity accounts?
 
Debit, credit, credit respectively
   
The sum of several entries on either side of an account that is entered in small pencil figures is a:
 
Footing
   
What is the increase side for Cash; Accounts Payable; and Trayton Eli, Capital?
 
left, right, right respectively
   
An error in which the digits of a number are switched, for example 571 is recorded as 517 is an example of a:
 
transposition.