Q&A Hero

Q: A credit entry: A. Increases asset and expense accounts and decreases liability, common stock, and revenue accounts. B. Is always a decrease in an account. C. Decreases asset and expense accounts and increases liability, common stock, and revenue accounts. D. Is recorded on the left side of a T-account. E. Is always an increase in an account.

Q: A debit is used to record: A. A decrease in an asset account. B. A decrease in an expense account. C. An increase in a revenue account. D. An increase in the balance of common stock. E. A decrease in the balance of retained earnings.

Q: Of the following accounts, the one that normally has a credit balance is: A. Cash B. Office Equipment C. Sales Salaries Payable D. Dividends E. Sales Salaries Expense

Q: An account balance is: A. The total of the credit side of the account. B. The total of the debit side of the account. C. The difference between the total debits and total credits for an account including the beginning balance. D. Assets = Liabilities + Equity E. Always a credit.

Q: Which of the following statements is correct? A. The left side of a T-account is the credit side. B. Debits decrease asset and expense accounts and increase liability, equity, and revenue accounts. C. The left side of a T-account is the debit side. D. Credits increase asset and expense accounts and decrease liability, equity, and revenue accounts. E. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction.

Q: A simple account form widely used in accounting to illustrate how debits and credits work is called a: A. Dividend account B. Common stock account C. Drawing account D. T-account E. Balance column sheet

Q: A credit is used to record: A. An increase in an expense account. B. An increase in an asset account. C. An increase in an unearned revenue account. D. A decrease in a revenue account. E. A decrease to retained earnings.

Q: Which of the following statements is incorrect? A. The normal balance of accounts receivable is a debit. B. The normal balance of dividends is a debit. C. The normal balance of unearned revenues is a credit. D. The normal balance of an expense account is a credit. E. The normal balance of common stock is a credit.

Q: The right side of a T-account is a(n): A. Debit B. Increase C. Credit D. Decrease E. Account balance

Q: A debit is: A. An increase in an account. B. The right-hand side of a T-account. C. A decrease in an account. D. The left-hand side of a T-account. E. An increase to a liability account.

Q: The general ledger of a business A. Is a collection of all accounts used in a company's information system. B. Must be kept in a computer file. C. Is also called the book of original entry. D. Is not affected by a company's size and diversity. E. Is one of the four financial statements.

Q: A list of all accounts used by a company and the identification number assigned to each account is called a: A. Ledger B. Journal C. Trial balance D. Chart of accounts E. General Journal

Q: Which of the following statements about the Cash account are true? A. Because most companies earn their fees in cash, the Cash account is categorized as revenue. B. For any given transaction, Accounts Receivable and Cash can be used interchangeably because both accounts are measured in terms of cash. C. The Cash account includes the value of any medium of exchange that a bank accepts for deposit. D. Cash is the same thing as Retained Earnings. E. Cash is a liability account.

Q: A ledger is: A. A record containing all accounts (with amounts) for a business. B. A journal in which transactions are first recorded. C. A collection of documents that describe transactions and events during the accounting process. D. A list of all accounts with their debit balances at a point in time. E. A list of all accounts a company uses and includes an identification number assigned to each account.

Q: A collection of all accounts (with account balances) used by a business is called a: A. Journal B. Book of original entry C. General Journal D. Balance column journal E. General Ledger

Q: A written promise to pay a definite sum of money on a specific future date is a(n): A. Unearned revenue B. Prepaid expense C. Credit account D. Note payable E. Account receivable

Q: Prepaid expenses are: A. Payments made for products and services that do not ever expire. B. Classified as liabilities on the balance sheet. C. Decreases in retained earnings. D. Assets that represent prepayments of future expenses. E. Promises of payments by customers.

Q: Unearned revenues are: A. Revenues that have been earned and received in cash. B. Revenues that have been earned but not yet collected in cash. C. Liabilities created when a customer pays in advance for products or services before the revenue is earned. D. Recorded as an asset in the accounting records. E. Increases to retained earnings.

Q: Which of the following statements is correct? A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense. B. Promises of future payment are called accounts payable. C. Increases and decreases in cash are always recorded in the retained earnings account. D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business. E. Liabilities include accounts receivable.

Q: The account used to record the transfers of assets from a business to its stockholders is: A. A revenue account B. The dividends account C. Common stock account D. An expense account E. A liability account

Q: An account used to record the owners' investments in the business is called: A. Dividends B. Common Stock C. Revenue D. Expense E. Liability

Q: A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n): A. Journal B. Posting C. Trial balance D. Account E. Chart of accounts

Q: For what reason do most sellers require customers to have their receipts in order to exchange or return purchased items? A. The receipt contains coded information that the seller needs to prepare and analyze the trial balance. B. Sellers wish to ensure that the sale in question was rung up on the register in the first place. C. This is a legal requirement mandated by a federal law. D. The receipt is serving as a promissory note. E. To create an environment in which customers do not want to return items.

Q: Source documents: A. Include the ledger. B. Are the origins of accounting information. C. Must be in electronic form. D. Are based on accounting entries. E. Include the chart of accounts.

Q: Source documents include all of the following except: A. Sales tickets B. Ledgers C. Checks D. Purchase orders E. Bank statements

Q: A sales invoice: A. Is a type of use document. B. Is a source document. C. Is not needed by buyers. D. Gives rise to an entry in the accounting process. E. Is not necessary in accounting.

Q: Which of the following list of events properly reflects the early steps taken in the accounting process? A. Record relevant transactions, post journal information to ledger accounts, analyze each transaction, and prepare and analyze the trial balance. B. Post journal information to ledger accounts, analyze each transaction, post journal information to ledger accounts, and prepare and analyze the trial balance. C. Prepare and analyze the trial balance, analyze each transaction, post journal information to ledger accounts, record relevant transactions. D. Analyze each transaction, post journal information to ledger accounts, record relevant transactions, and prepare and analyze the trial balance. E. Analyze each transaction, record relevant transactions, post journal information to ledger accounts, and prepare and analyze the trial balance.

Q: The accounting process begins with: A. Analysis of business transactions and events. B. Preparation of financial statements and other reports. C. Summarizing the recorded effects of business transactions. D. Presentation of financial information to decision-makers. E. Preparation of the trial balance.

Q: Another name for the balance sheet is the statement of financial position.

Q: Other names for the income statement are earnings statement, statement of operations, or profit and loss statement.

Q: The heading on each financial statement lists the three W's - Who (the name of the organization), What (the name of the statement), and Where (the organization's address)

Q: The balance sheet provides a link between beginning and ending income statements.

Q: If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash account is out of balance by $100.

Q: A trial balance that is in balance is proof that no errors were made in journalizing the transactions, posting to the ledger, and preparing the trial balance.

Q: The trial balance can serve as a replacement for the balance sheet, since debits must balance with credits.

Q: Generally, the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets, liabilities, equity, revenues, and expenses.

Q: IFRS requires that companies report four financial statements with explanatory notes: balance sheet; income statement; statement of changes in equity, and statement of cash flows.

Q: A trial balance that balances is not proof of complete accuracy in recording transactions.

Q: The journal is known as the book of final entry because financial statements are prepared from it.

Q: A journal gives a complete record of each transaction in one place and shows the debits and credits for each transaction.

Q: Transactions are first recorded in the ledger.

Q: Posting is the transfer of the information from each journal entry to the ledger.

Q: A compound journal entry affects no more than two accounts.

Q: Hamilton Industries has total liabilities of $105 million and total assets of $350 million. Its debt ratio is 333.3%.

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

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

Q: The debt ratio is calculated by dividing total assets by total liabilities.

Q: The higher the debt ratio, the higher risk of a company not being able to meet its obligations.

Q: The debt ratio reflects the risk of a company to both its owners and creditors.

Q: When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue.

Q: If a company provides services to a customer on credit, the service provider company should credit Accounts Receivable.

Q: If a company pays cash to purchase land, the journal entry to record this transaction will include a debit to Cash.

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

Q: If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.

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

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

Q: A debit entry is always favorable.

Q: Common Stock normally has a debit balance.

Q: Asset accounts normally have credit balances and expense accounts normally have debit balances.

Q: The dividends account normally has a credit balance since it is an equity account.

Q: Accounts are normally decreased by debits.

Q: Double-entry accounting requires that the impact of each transaction be recorded in at least two accounts.

Q: Debits increase both asset and expense accounts.

Q: In a double-entry accounting system, the total amount debited must always equal the-total amount credited.

Q: Debit means the right-hand side of any account.

Q: An account balance is the difference between the debits and credits for an account including any beginning balance.

Q: The chart of accounts is a list of all the accounts used by a company and a corresponding identification number.

Q: When a company provides services for which cash will not be received until some future date, the company should record unearned revenue for the amount charged to the customer.

Q: Cash dividends should be treated as an expense to the business.

Q: It is not necessary to keep separate accounts for all items of importance for business decisions.

Q: Land and buildings are generally recorded in the same ledger account.

Q: As prepaid expenses are used up, the costs of these assets become expenses.

Q: Dividends are a type of business expense.

Q: According to the seller, a customer's promise to pay is called an account payable.

Q: An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

Q: Items such as sales slips, invoices, checks, and purchase orders are source documents.

Q: Preparation of a trial balance is the first step in the analyzing and recording process.

Q: The first step in the analyzing and recording process is to analyze each transaction and event from source documents.

Q: An account format that is similar to a T-account in that it has columns for debits and credits but that is different in that it has columns for transaction date, explanation, and the account balance is the ___________________________________.

Q: A ___________________________ gives a complete record of each transaction in one place and shows debits and credits for each transaction.