question

Economic events that require recording in the financial statements are called accounting transactions.

answer

True

question

Revenue increases stockholders' equity and should be recorded whenever cash is received from customers.

answer

True

question

Collection on an account receivable will increase both cash and accounts receivable.

answer

False

question

The payment of a liability decreases both cash and accounts payable.

answer

True

question

If total assets are increased, there must be a corresponding increase in liabilities or a decrease in stockholders' equity.

answer

False

question

A new account is opened for each transaction entered into by a business firm.

answer

False

question

The recording process becomes more efficient and informative if all transactions are recorded in one account.

answer

False

question

For a T account, an account balance is the difference in total dollars between total debit amounts and total credit amounts.

answer

True

question

An account is often referred to as a T-account because of the way it is constructed.

answer

True

question

A debit to an account always indicates an increase in that account.

answer

False (only increase if an asset)

question

If a revenue account is credited, the revenue account is increased.

answer

True (positive credit side for revenue)

question

The normal balance of all accounts is a debit.

answer

False (normal balance = side of increase)

question

Debit and credit can be interpreted to mean "bad" and "good," respectively.

answer

False

question

A credit means that an account has been increased.

answer

False

question

A decrease in a liability account is recorded by a debit.

answer

True

question

An increase in an asset is recorded by a debit.

answer

True

question

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

answer

False

question

A credit balance in a liability account indicates that an error in recording has occurred.

answer

False

question

An account consists of two parts: (1) a left or debit side and (2) a right or credit side

answer

False

question

The normal balance of an asset is a credit.

answer

False

question

The normal balance of the dividend account is a credit.

answer

False

question

Assets are decreased with a credit.

answer

True

question

A debit means that an account has been decreased.

answer

False

question

A decrease in a liability is recorded by a debit.

answer

True

question

Liabilities are established with debits and decreased with credits.

answer

False

question

The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

answer

False (dividends are distribution of $ and not an expense)

question

Revenues are a subdivision of stockholders' equity.

answer

True

question

Under the double-entry system, revenues must always equal expenses.

answer

False

question

Source documents can provide evidence that a transaction has occurred.

answer

True (example: checks)

question

Prepaid expenses are assets.

answer

True

question

Wages payable is a type of expense.

answer

False (wages payable = a liability)

question

Dividends are classified as an expense.

answer

False

question

Unearned revenues are classified as liabilities on the balance sheet.

answer

True

question

Stockholders' equity is increased by:

answer

(B) revenues

question

If total liabilities increased by $5,000, then:

answer

(C) assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000

question

If total liabilities decreased by $4,000, then:

answer

(B) assets must have decreased by $4,000, or stockholder's equity must have increased by $4,000

question

Collection of a $600 Accounts Receivable:

answer

(A) increases an asset $600; decreases an asset $600

question

If an individual asset is increased, then

answer

(C) there could be an equal decrease in another asset

question

If services are rendered on account, then

answer

(C) stockholders' equity will increase

question

If services are rendered for cash, then

answer

(A) assets will increase

question

If expenses are paid in cash, then

answer

(D) assets will decrease

question

An investment by the stockholders in a business increases:

answer

(A) assets and stockholders' equity

question

The purchase of an asset for cash

answer

(D) leaves total assets unchanged

question

The purchase of an asset on credit

answer

(B) increases assets and liabilities

question

The payment of a liability

answer

(D) decreases assets and liabilities

question

The sale of an asset on credit for what it cost

answer

(C) leaves total assets unchanged

question

When collection is made on Accounts Receivable,

answer

(A) total assets will remain the same

question

A revenue generally

answer

(B) increases assets and stockholders' equity

question

A paid dividend

answer

(A) decreases assets and stockholders' equity

question

An expense

answer

(B) decreases stockholders' equity

question

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

answer

(C) Land purchase

question

If a company buys a $700 machine on credit, this transaction will affect the:

answer

(D) balance sheet only

question

A payment of a portion of Accounts Payable will:

answer

(C) not affect stockholders' equity

question

Powers Corporation received a cash advance of $500 from a customer. As a result of this event,

answer

(A) assets increased by $500

question

Courtney Company purchased equipment for $1,800 cash. As a result of this event,

answer

(C) assets remained unchanged

question

Comstock Company provided consulting services and billed the client $2,500. As a result of this event,

answer

(D) both b and c - assets increased by $2,500 and equity increased by $2,500

question

Budke Corporation paid dividends of $5,000. As a result of this event,

answer

(A) the dividends account was debited for $5,000

question

If a company pays dividends of $10,000,

answer

(D) both a and c - equity will be reduced by $10,000 and retained earnings will be reduced by $10,000

question

If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck,

answer

(C) assets will be increased by $40,000

question

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

answer

(D) No, revenue cannot be recognized until the work is performed

question

Is the purchase of equipment treated as an expense at the time of purchase? Why or why not?

answer

(C) No, the cost needs to be allocated to the years of expected use

question

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n):

answer

(A) purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance

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