Chapter 2: The Recording Process

Questions and Answers

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CHAPTER 2: The Recording Process

TRUE-FALSE STATEMENTS
1. A new account is opened for each transaction entered into by a business firm.
2. The recording process becomes more efficient and informative if all transactions are recorded in one
account.
3. When the volume of transactions is large, recording them in tabular form is more efficient than
using journals and ledgers.
4. An account is often referred to as a T-account because of the way it is constructed.
5. A debit to an account indicates an increase in that account.
6. If a revenue account is credited, the revenue account is increased.
7. The normal balance of all accounts is a debit.
8. Debit and credit can be interpreted to mean increase and decrease, respectively.
9. The double-entry system of accounting refers to the placement of a double line at the end of a
column of figures.
10. A credit balance in a liability account indicates that an error in recording has occurred.
11. The drawing account is a subdivision of the owner’s capital account and appears as an expense on
the income statement.
12. Revenues are a subdivision of owner’s capital.
13. Under the double-entry system, revenues must always equal expenses.
14. Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the
accounts.
15. Business documents can provide evidence that a transaction has occurred.
16. Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in
a journal.
17. Transactions are entered in the ledger accounts and then transferred to journals.
18. All business transactions must be entered first in the general ledger.
19. A simple journal entry requires only one debit to an account and one credit to an account.
20. A compound journal entry requires several debits to one account and several credits to one account.
21. Transactions are recorded in alphabetic order in a journal.
22. A journal is also known as a book of original entry.
23. The complete effect of a transaction on the accounts is disclosed in the journal.
24. The account titles used in journalizing transactions need not be identical to the account titles in the
ledger.
25. The chart of accounts is a special ledger used in accounting systems.
26. A general ledger should be arranged in the order in which accounts are presented in the financial
statements, beginning with the balance sheet accounts.
27. The number and types of accounts used by different business enterprises are the same if generally
accepted accounting principles are being followed by the enterprises.
28. Posting is the process of proving the equality of debits and credits in the trial balance.
30. A trial balance does not prove that all transactions have been recorded or that the ledger is correct.
31. The double-entry system is a logical method for recording transactions and results in equal amounts
for debits and credits for each transaction.
32. The normal balance of an expense is a credit.
33. The journal provides a chronological record of transactions.
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34. The ledger is merely a bookkeeping device and therefore does not provide much useful data for
management.
35. The chart of accounts is a listing of the accounts and the account numbers which identify their
location in the ledger.
36. The primary purpose of a trial balance is to prove the mathematical equality of the debits and
credits after posting.
37. The trial balance will not balance when incorrect account titles are used in journalizing or posting.

Answers to True-False Statements

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
1. F 7. F 13. F 19. T 25. F 31. T 37. F
2. F 8. F 14. F 20. F 26. T 32. F
3. F 9. F 15. T 21. F 27. F 33. T
4. T 10. F 16. T 22. T 28. F 34. F
5. F 11. F 17. F 23. T 35. T
6. T 12. T 18. F 24. F 30. T 36. T

MULTIPLE CHOICE QUESTIONS

1. An account consists of
a. one part. b. two parts.
c. three parts. d. four parts.

2. The left side of an account is

a. blank. b. a description of the account.
c. the debit side. d. the balance of the account.

3. Which one of the following is not a part of an account?

a. Credit side b. Trial balance
c. Debit side d. Title

4. An account is a part of the financial information system and is described by all except:
a. An account has a debit and credit side. b. An account is a source document.
c. An account may be part of a manual or a d. An account has a title.
computerized accounting system.

5. The right side of an account

a. is the correct side. b. reflects all transactions for the
accounting period.
c. shows all the balances of the accounts in d. is the credit side.
the system.

6. An account consists of
a. a title, a debit balance, and a credit balance. b. a title, a left side, and a debit balance.
c. a title, a debit side, and a credit side. d. a title, a right side, and a debit balance.
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7. A T-account is
a. a way of depicting the basic form of b. what the computer uses to organize
an account. bytes of information.
c. a special account used instead of a d. used for accounts that have both a
trial balance. debit and credit balance.

8. Credits
a. decrease both assets and liabilities. b. decrease assets and increase liabilities.
c. increase both assets and liabilities. d. increase assets and decrease liabilities.

9. A debit to an asset account indicates

a. an error. b. a credit was made to a liability account.
c. a decrease in the asset. d. an increase in the asset.

10. The normal balance of any account is the

a. left side. b. right side.
c. side which increases that account. d. side which decreases that account.

11. The double-entry system requires that each transaction must be recorded
a. in at least two different accounts. b. in two sets of books.
c. in a journal and in a ledger. d. first as a revenue and then as an expense.

12. A credit is not the normal balance for which account listed below?
a. Capital account b. Revenue account
c. Liability account d. Owner’s Drawings account

13. Which one of the following could represent the expanded basic accounting equation?
a. Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenue – Expenses.
b. Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenues.
c. Assets – Liabilities – Owner’s Drawings = Owner’s Capital + Revenues – Expenses.
d. Assets = Revenues + Expenses – Liabilities.

14. Which of the following correctly identifies normal balances of accounts?

a. Assets Debit b. Assets Debit
Liabilities Credit Liabilities Credit
Owner’s Capital Credit Owner’s Capital Credit
Revenues Debit Revenues Credit
Expenses Credit Expenses Credit
c. Assets Credit d. Assets Debit
Liabilities Debit Liabilities Credit
Owner’s Capital Debit Owner’s Capital Credit
Revenues Credit Revenues Credit
Expenses Debit Expenses Debit

15. The best interpretation of the word credit is the

a. offset side of an account. b. increase side of an account.
c. right side of an account. d. decrease side of an account.
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16. In recording an accounting transaction in a double-entry system

a. the number of debit accounts must b. there must always be entries made on both
equal the number of credit accounts. sides of the accounting equation.
c. the amount of the debits must equal d. there must only be two accounts affected
the amount of the credits. by any transaction.

17. Debits
a. decrease both assets and liabilities. b. decrease liabilities and increase assets.
c. increase both assets and liabilities. d. increase liabilities and decrease assets.

18. A debit is not the normal balance for which account listed below?
a. Owner’s Drawings b. Cash
c. Accounts Receivable d. Service Revenue

19. An accountant has debited an asset account for $1,400 and credited a liability account for $500. What
can be done to complete the recording of the transaction?
a. Nothing further must be done. b. Debit an owner’s equity account for $900.
c. Debit another asset account for $900. d. Credit a different asset account for $900.

20. An accountant has debited an asset account for $1,300 and credited a liability account for $600. Which
of the following would be an incorrect way to complete the recording of the transaction?
a. Credit an asset account for $700. b. Credit another liability account for $700.
c. Credit an owner’s equity account for $700. d. Debit an owner’s equity account for $700.

21. Which of the following is not true of the terms debit and credit?
a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase
and decrease.
c. They can be used to describe the balance d. They can be interpreted to mean left and
of an account. right.

22. An account will have a credit balance if the

a. credits exceed the debits. b. first transaction entered was a credit.
c. debits exceed the credits. d. last transaction entered was a credit.

23. For the basic accounting equation to stay in balance, each transaction recorded must
a. affect two or less accounts. b. affect two or more accounts.
c. always affect exactly two accounts. d. affect the same number of asset and
liability accounts.

24. Which of the following statements is true?

a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities.
c. Credits decrease assets and increase liabilities. d. Debits decrease liabilities and decrease assets.

25. Assets normally show

a. credit balances. b. debit balances.
c. debit and credit balances. d. debit or credit balances.
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26. An awareness of the normal balances of accounts would help you spot which of the following as an
error in recording?
a. A debit balance in the owner’s b. A credit balance in an expense account
drawings account
c. A credit balance in a liabilities account d. A credit balance in a revenue account

27. If a company has overdrawn its bank balance, then

a. its cash account will show a debit balance. b. its cash account will show a credit balance.
c. the cash account debits will exceed the d. it cannot be detected by observing the
cash account credits. balance of the cash account.

28. Which account below is not a subdivision of owner’s equity?

a. Owner’s Drawings b. Revenues
c. Expenses d. Liabilities

29. When an owner makes a withdrawal

a. it doesn’t have to be cash, it could be b. the owner’s drawings account will be
another asset. increased with a credit.
c. the owner’s capital account will be d. the owner’s drawings account will be
directly increased with a debit. decreased with a debit.

30. The owner’s drawings account

a. appears on the income statement along b. must show transactions every accounting
with the expenses of the business. period.
c. is increased with debits and decreased d. is not a proper subdivision of owner’s
with credits. equity.

31. Which of the following statements is not true?

a. Expenses increase owner’s equity. b. Expenses have normal debit balances.
c. Expenses decrease owner’s equity. d. Expenses are a negative factor in the
computation of net income.

32. A credit to a liability account

a. indicates an increase in the amount b. indicates a decrease in the amount
owed to creditors. owed to creditors.
c. is an error. d. must be accompanied by a debit to
an asset account.

33. In the first month of operations, the total of the debit entries to the cash account amounted to $1,400
and the total of the credit entries to the cash account amounted to $800. The cash account has a(n)
a. $800 credit balance. b. $1,400 debit balance.
c. $600 debit balance. d. $600 credit balance.

34. Phast Mail Service purchased equipment for $2,000. Phast paid $500 in cash and signed a note for the
balance. Phast debited the Equipment account, credited Cash and
a. nothing further must be done. b. debited the Capital account for $1,500.
c. credited another asset account for $500. d. credited a liability account for $1,500.
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35. Madrid Industries purchased supplies for $1,200. They paid $500 in cash and agreed to pay the balance
in 30 days. The journal entry to record this transaction would include a debit to an asset account for
$1,200, a credit to a liability account for $700. Which of the following would be the correct way to
complete the recording of the transaction?
a. Credit an asset account for $500. b. Credit another liability account for $500.
c. Credit the Capital account for $500. d. Debit the Capital account for $500.

36. On January 14, Maxine Industries purchased supplies of $900 on account. The entry to record the
purchase will include
a. a debit to Supplies and a credit to b. a debit to Supplies Expense and a
Accounts Payable. credit to Accounts Receivable.
c. a debit to Supplies and a credit to d. a debit to Accounts Receivable and a
Cash. credit to Supplies.

37. On June 1, 2016, Barcelona Inc. reported a cash balance of $11,000. During June, Barcelona made
deposits of $3,000 & made disbursements totalling $9,000. What is the cash balance at end of June?
a. $5,000 debit balance b. $14,000 debit balance
c. $5,000 credit balance d. $4,000 credit balance

38. At January 1, 2016, Croc Industries reported owner’s capital of $140,000. During 2016, Croc had a net
loss of $30,000 & owner drawings of $15,000. At December 31, 2016, the amount of owner’s capital is
a. $ 95,000. b. $110,000.
c. $125,000. d. $155,000.

39. Boise Co. pays its employees twice a month, on the 7th and the 21st. On June 21, Boise Co. paid
employee salaries of $6,000. This transaction would
a. increase owner’s equity by $6,000. b. decrease the balance in Salaries and Wages
Expense by $6,000.
c. decrease net income for the month by d. be recorded by a $6,000 debit to Salaries and
$6,000. Wages Payable and a $6,000 credit to
Salaries and Wages Expense.

40. In the first month of operations for Pendleton Industries, the total of the debit entries to the cash
account amounted to $33,000 ($13,000 investment by the owner and revenues of $20,000). The total
of the credit entries to the cash account amounted to $21,000 (purchase of equipment $8,000 and
payment of expenses $13,000). At the end of the month, the cash account has a(n)
a. $5,000 credit balance. b. $5,000 debit balance.
c. $12,000 debit balance. d. $12,000 credit balance.

41. Qwik Company showed the following balances at the end of its first year:
Cash $ 8,700
Prepaid insurance 9,400
Accounts receivable 7,000
Accounts payable 5,800
Notes payable 9,400
Owner’s Capital 2,300
Owner’s Drawings 1,400
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Revenues 44,000
Expenses 35,000
What did Qwik Company show as total credits on its trial balance?
a. $52,400 b. $61,500
c. $62,900 d. $70,900

42. Bertoli Company showed the following balances at the end of its first year:
Cash $ 4,000
Prepaid insurance 7,000
Accounts receivable 8,000
Accounts payable 4,000
Notes payable 7,000
Owner’s Capital 3,000
Owner’s Drawings 2,000
Revenues 32,000
Expenses 25,000
What did Bertoli Company show as total credits on its trial balance?
a. $14,000 b. $46,000
c. $44,000 d. $48,000

43. During February 2016, its first month of operations, the owner of Solcist Co. invested cash of $50,000.
Solcist had cash revenues of $16,000 and paid expenses of $21,000. Assuming no other transactions
impacted the cash account, what is the balance in Cash at February 29?
a. $5,000 credit b. $5,000 debit
c. $45,000 debit d. $55,000 debit

44. At January 31, 2016, the balance in Bigelow Inc.’s supplies account was $780. During February,
Bigelow purchased supplies of $900 and used supplies of $1,150. At the end of February, the balance in
the supplies account should be
a. $530 debit. b. $1,030 debit.
c. $530 credit. d. $830 debit.

45. At December 1, 2016, Dubois Company’s accounts receivable balance was $1,300. During December,
Dubois had credit sales of $7,400 and collected accounts receivable of $6,000. At December 31, 2016,
the accounts receivable balance is
a. $100 debit. b. $2,700 debit.
c. $100 credit. d. $2,700 credit.

46. At October 1, 2016, Medina Co. had an accounts payable balance of $50,000. During the month, the
company made purchases on account of $35,000 and made payments on account of $48,000. At
October 31, 2016, the accounts payable balance is
a. $37,000. b. $33,000.
c. $63,000. d. $133,000.

47. During 2016, its first year of operations, Aida’s Bakery had revenues of $65,000 and expenses of
$35,000. The business had owner’s drawings of $22,000. What is the amount of owner’s equity at
December 31, 2016?
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a. $0 b. $8,000 credit
c. $30,000 credit d. $22,000 debit

48. On July 7, 2016, Rancho Realty Co. performed cash services of $1,900. The entry to record this
transaction would include
a. a debit to Service Revenue of $1,900. b. a credit to Accounts Receivable of $1,900.
c. a debit to Cash of $1,900. d. a credit to Accounts Payable of $1,900.

49. At September 1, 2016, Hotel Suites Co. reported owner’s capital of $147,000. During the month, Hotel
Suites generated revenues of $48,000, incurred expenses of $26,000, purchased equipment for $5,000
and withdrew cash of $3,000. What is the amount of owner’s capital at September 30, 2016?
a. $161,000 b. $166,000
c. $169,000 d. $171,000

50. The final step in the recording process is to

a. analyze each transaction. b. enter the transaction in a journal.
c. prepare a trial balance. d. transfer journal information to ledger.

51. The usual sequence of steps in the transaction recording process is:
a. journal  analyze  ledger. b. analyze  journal  ledger.
c. journal  ledger  analyze. d. ledger  journal  analyze.

52. In recording business transactions, evidence that an accounting transaction has taken place is
obtained from
a. business documents. b. the Internal Revenue Service.
c. the public relations department. d. the SEC.

53. After a business transaction has been analyzed and entered in the book of original entry, the next step
in the recording process is to transfer the information to
a. the company’s bank. b. owner’s equity.
c. ledger accounts. d. financial statements.

54. The first step in the recording process is to

a. prepare financial statements. b. analyze each transaction for its effect
on the accounts.
c. post to a journal. d. prepare a trial balance.

55. Evidence that would not help with determining the effects of a transaction on the accounts would be
a(n)
a. cash register sales tape. b. bill.
c. advertising brochure. d. check.

56. After transaction information has been recorded in the journal, it is transferred to the
a. trial balance. b. income statement.
c. book of original entry. d. ledger.

57. The usual sequence of steps in the recording process is to analyze each transaction, enter the
transaction in the
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a. journal, and transfer the information to the b. ledger, and transfer the information
ledger accounts. to the journal.
c. book of accounts, and transfer the d. book of original entry, and transfer
information to the journal. the information to the journal.

58. The final step in the recording process is to transfer the journal information to the
a. trial balance. b. financial statements.
c. ledger. d. file cabinets.

59. The recording process occurs

a. once a year. b. once a month.
c. repeatedly during the accounting period. d. infrequently in a manual accounting system.

60. A compound journal entry involves

a. two accounts. b. three accounts.
c. three or more accounts. d. four or more accounts.

61. A journal provides

a. the balances for each account. b. information about a transaction in
several different places.
c. a list of all accounts used in the business. d. a chronological record of transactions.

62. When three or more accounts are required in one journal entry, the entry is referred to as a
a. compound entry. b. triple entry.
c. multiple entry. d. simple entry.

63. When two accounts are required in one journal entry, the entry is referred to as a
a. balanced entry. b. simple entry.
c. posting. d. nominal entry.

64. Another name for a journal is

a. listing. b. book of original entry.
c. book of accounts. d. book of source documents.

65. The standard format of a journal would not include

a. a reference column. b. an account title column.
c. a T-account. d. a date column.

66. Transactions in a journal are initially recorded in

a. account number order. b. dollar amount order.
c. alphabetical order. d. chronological order.

67. A journal is not useful for

a. disclosing in one place the complete b. preparing financial statements.
effect of a transaction.
c. providing a record of transactions. d. locating and preventing errors.

68. A complete journal entry does not show

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a. the date of the transaction. b. the new balance in the accounts

affected by the transaction.
c. a brief explanation of the transaction. d. the accounts and amounts to be
debited and credited.

69. The name given to entering transaction data in the journal is

a. chronicling. b. listing.
c. posting. d. journalizing.

70. The standard form of a journal entry has the

a. debit account entered first and indented. b. credit account entered first and indented.
c. debit account entered first at the extreme d. credit account entered first at the extreme
left margin. left margin.

71. When journalizing, the reference column is

a. left blank. b. used to reference the source document.
c. used to reference the journal page. d. used to reference the financial statements.

72. On June 1, 2016 Ben Casey buys a copier machine for his business and finances this purchase with cash
and a note. When journalizing this transaction, he will
a. use two journal entries. b. make a compound entry.
c. make a simple entry. d. list the credit entries first, which is proper
form for this type of transaction.

73. Which of the following journal entries is recorded correctly and in the standard format?
a. Salaries and Wages Expense ................................................. 500
Cash ................................................................................. 2,500
Advertising Expense . ............................................................. 2,000

b. Salaries and Wages Expense . ................................................ 500

Advertising Expense . ............................................................. 2,000
Cash ................................................................................. 2,500

c. Cash ....................................................................................... 2,500

Salaries and Wages Expense ........................................... 500
Advertising Expense ........................................................ 2,000

d. Salaries and Wages Expense ................................................. 500

Advertising Expense .............................................................. 2,000
Cash . ................................................................................ 2,500

74. The ledger should be arranged in

a. alphabetical order. b. chronological order.
c. dollar amount order. d. None of these choices are correct.

75. The entire group of accounts maintained by a company is called the

a. chart of accounts. b. general journal.
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c. general ledger. d. trial balance.

76. An accounting record of the balances of all assets, liabilities, and owner’s equity accounts is called a
a. compound entry. b. general journal.
c. general ledger. d. chart of accounts.

77. The usual ordering of accounts in the general ledger is

a. assets, liabilities, owner’s capital, b. assets, liabilities, drawings, owner’s
drawings, revenues, and expenses. capital, expenses, and revenues.
c. liabilities, assets, owner’s capital, d. owner’s capital, assets, liabilities,
revenues, expenses, and drawings. drawings, expenses, and revenues.

78. Management could determine the amounts due from customers by examining which ledger account?
a. Service Revenue b. Accounts Payable
c. Accounts Receivable d. Supplies

79. The ledger accounts should be arranged in

a. chronological order. b. alphabetical order.
c. financial statement order. d. order of appearance in the journal.

80. A three column form of account is so named because it has columns for
a. debit, credit, and account name. b. debit, credit, and reference.
c. debit, credit, and balance. d. debit, credit, and date.

81. On August 13, 2016, Accounting Services Co. purchased office equipment for $1,700 and office
supplies of $300 on account. Which of the following journal entries is recorded correctly and in the
standard format?
a. Equipment .......................................................................... 1,700
Account Payable .............................................................. 2,000
Supplies ............................................................................. 300

b. Equipment. .......................................................................... 1,700

Supplies .......................................................................... 300
Accounts Payable ............................................................. 2,000

c. Accounts Payable ................................................................... 2,000

Equipment........................................................................ 1,700
Supplies .......................................................................... 300

d. Equipment .......................................................................... 1,700

Supplies ............................................................................. 300
Accounts Payable. ............................................................ 2,000

82. Able2 Company received a cash advance of $800 from a customer. As a result of this event,
a. assets increased by $800. b. owner’s equity increased by $800.
c. liabilities decreased by $800. d. assets and owner’s equity both
increased by $800.
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83. Camper Van Company purchased equipment for $2,300 cash. As a result of this event,
a. owner’s equity decreased by $2,300. b. total assets increased by $2,300.
c. total assets remained unchanged. d. owner’s equity decreased and total
assets increased by $2,300.

84. Beethoven Company provided consulting services and billed the client $3,600. As a result of this event,
a. assets remained unchanged. b. assets increased by $3,600.
c. owner’s equity increased by $3,600. d. assets and owner’s equity both increased by
$3,600.

85. The first step in posting involves

a. entering in the appropriate ledger b. writing in the journal the account
account the date, journal page, and number to which the debit amount
debit amount shown in the journal. was posted.
c. writing in the journal the account d. entering in the appropriate ledger
number to which the credit amount account the date, journal page, and
was posted. credit amount shown in the journal.

86. A chart of accounts usually starts with

a. asset accounts. b. expense accounts.
c. liability accounts. d. revenue accounts.

87. The procedure of transferring journal entries to the ledger accounts is called
a. journalizing. b. analyzing.
c. reporting. d. posting.

88. A chart of accounts for a business firm

a. is a graph. b. indicates the amount of profit or loss
for the period.
c. lists the accounts and account numbers d. shows the balance of each account in
that identify their location in the ledger. the general ledger.

89. Posting
a. should be performed in account number b. accumulates the effects of journalized
order. transactions in the individual accounts.
c. involves transferring all debits and credits d. is accomplished by examining ledger accounts
on a journal page to the trial balance. and seeing which ones need updating.

90. The explanation column of the general ledger

a. is completed without exception. b. is nonexistent.
c. is used infrequently. d. shows account titles.

91. A numbering system for a chart of accounts

a. is prescribed by GAAP. b. is uniform for all businesses.
c. usually starts with income statement d. usually starts with balance sheet
accounts. accounts.

92. The first step in designing a computerized accounting system is the creation of the
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a. general ledger. b. general journal.

c. trial balance. d. chart of accounts.

93. The steps in preparing a trial balance include all of the following except
a. listing the account titles and their balances. b. totaling the debit and credit columns.
c. proving the equality of the two columns. d. transferring journal amounts to ledger
accounts.

94. A trial balance may balance even when each of the following occurs except when
a. a transaction is not journalized. b. a journal entry is posted twice.
c. incorrect accounts are used in journalizing. d. a transposition error is made.

95. A list of accounts and their balances at a given time is called a(n)
a. journal. b. posting.
c. trial balance. d. income statement.

96. If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
a. no errors have been made. b. no errors can be discovered.
c. that all accounts reflect correct balances. d. the mathematical equality of the accounting
equation.

97. A trial balance is a listing of

a. transactions in a journal. b. the chart of accounts.
c. general ledger accounts and balances. d. the totals from the journal pages.

98. Customarily, a trial balance is prepared

a. at the end of each day. b. after each journal entry is posted.
c. at the end of an accounting period. d. only at the inception of the business.

99. A trial balance would only help in detecting which one of the following errors?
a. A transaction that is not journalized b. A journal entry that is posted twice
c. Offsetting errors are made in d. A transposition error when transferring the
recording the transaction debit side of journal entry to the ledger

100. An account is an individual accounting record of increases and decreases in specific

a. liabilities. b. assets.
c. expenses. d. assets, liabilities, and owner’s equity items.

101. A debit is not the normal balance for which of the following?
a. Asset account b. Owner’s Drawings account
c. Expense account d. Owner’s Capital account

102. Which of the following rules is incorrect?

a. Credits decrease the drawings account. b. Debits increase the owner’s capital account.
c. Credits increase revenue accounts. d. Debits decrease liability accounts.

103. Which of the following statements is false?

a. Revenues increase owner’s equity. b. Revenues have normal credit balances.
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c. Revenues are a positive factor in the d. Revenues are increased by debits.

computation of net income.

104. Which of the following is the correct sequence of steps in the recording process?
a. Posting, journalizing, analyzing b. Journalizing, analyzing, posting
c. Analyzing, posting, journalizing d. Analyzing, journalizing, posting

105. Which of the following is false about a journal?

a. It discloses in one place the complete b. It provides a chronological record of
effects of a transaction. transactions.
c. It helps to prevent or locate errors d. It keeps in one place all the
because debit and credit amounts for information about changes in specific
each entry can be readily compared. account balances.

106. Haselhof Company purchases equipment for $2,400 and supplies for $700 from Behrman Co. for
$3,100 cash. The entry for this transaction will include a
a. debit to Equipment $2,400 and a debit to b. credit to Cash for Behrman.
Supplies Expense $700 for Behrman.
c. credit to Accounts Payable for Haselhof. d. debit to Equipment $2,400 and a
debit to Supplies $700 for Haselhof.

107. Sara Bernheat withdraws $700 cash from her business for personal use. The entry for this
transaction will include a debit of $700 to
a. Owner’s Drawings. b. Owner’s Capital.
c. Owner’s Salaries Expense. d. Salaries and Wages Expense.

108. On October 3, Ken Steele, a carpenter, received a cash payment for services previously billed to a
client. Ken paid his telephone bill, and he also bought equipment on credit. For the three transactions,
at least one of the entries will include a
a. credit to Owner’s Capital. b. credit to Notes Payable.
c. debit to Accounts Receivable. d. credit to Accounts Payable.

109. Posting of journal entries should be done in

a. account number order. b. alphabetical order.
c. chronological order. d. dollar amount order.

110. The chart of accounts is a

a. list of accounts and their balances at b. device used to prove the
a given time. mathematical accuracy of the ledger.
c. listing of the accounts and the d. required step in the recording
account numbers which identify their process.
location in the ledger.

111. Which of the following is incorrect regarding a trial balance?

a. It proves that the debits equal the b. It proves that the company has
credits after posting. recorded all transactions.
c. A trial balance uncovers errors in d. A trial balance is useful in the
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journalizing and posting. preparation of financial statements.

112. A trial balance will not balance if

a. a journal entry is posted twice. b. a wrong amount is used in journalizing.
c. incorrect account titles are used in d. a journal entry is only partially posted.
journalizing.

Answers to Multiple Choice Questions

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
1. c 19. d 37. a 55. c 73. d 91. d 109. c
2. c 20. d 38. a 56. d 74. d 92. d 110. c
3. b 21. b 39. c 57. a 75. c 93. d 111. b
4. b 22. a 40. c 58. c 76. c 94. d 112. d
5. d 23. b 41. b 59. c 77. a 95. c
6. c 24. c 42. b 60. c 78. c 96. d
7. a 25. b 43. c 61. d 79. c 97. c
8. b 26. b 44. a 62. a 80. c 98. c
9. d 27. b 45. b 63. b 81. d 99. d
10. c 28. d 46. a 64. b 82. a 100. d
11. a 29. a 47. b 65. c 83. c 101. d
12. d 30. c 48. c 66. d 84. d 102. b
13. b 31. a 49. b 67. b 85. a 103. d
14. d 32. a 50. d 68. b 86. a 104. d
15. c 33. c 51. b 69. d 87. d 105. d
16. c 34. d 52. a 70. c 88. c 106. d
17. b 35. a 53. c 71. a 89. b 107. a
18. d 36. a 54. b 72. b 90. c 108. d