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Exam 2: Analyzing and Recording Transactions

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Question 1

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The right side of a T-account is a(n) :

A) Increase.
B) Account balance.
C) Decrease.
D) Debit.
E) Credit.

F) A) and B)
G) C) and D)

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Question 2

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A transaction that credits an asset account and credits a liability account must also affect one or more other accounts.

A) True
B) False

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Question 3

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

Which of the following is not a step in the accounting process?

A business uses a credit to record:

A column in journals and ledger accounts that is used to cross reference journal and ledger entries is the:

For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account. $\begin{array} { | l | l | l | } \hline \text { Account Title } & \text { Account Type } & \begin{array} { l } \text { Normal Balance } \\\text { (Debit or Credit) }\end{array} \\\hline \text { a. Prepaid Insurance } & & \\\hline \text { b. Accounts Payable } & & \\\hline \text { c. J. Jason, Capital } & & \\\hline \text { d. Utilities Expense } & & \\\hline \text { e. Land } & & \\\hline \text { f. Services Revenue } & & \\\hline \text { g. Notes Receivable } & & \\\hline \text { h. Advertising Expense } & & \\\hline\end{array}$ $\begin{array} { | l | l | l | } \hline \text { i. Unearned Revenue } & \quad\quad&\quad\quad \\\hline \text { j. Service Revenue } & & \\\hline\end{array}$

Debit means increase and credit means decrease for all accounts.

Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or equity (OE) by placing initials (R,E,A,L or OE) in the blanks.

The balance sheet reports the financial position of a company at a point in time.

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

Figgaro Company's accounts and their balances, as of the end of August, are included below. All accounts have normal balances: $\begin{array}{|l|c|l|c|}\hline \text { Accounts receivable } & \$ 36,000 & \text { Cash. } & \$ 27,00 \\\hline \text { Equipm ent ........... } & 59,000 & \text { Advertising expense. } & 5,000 \\\hline \text { Service revenues earned. } & 75,000 & \text { Accounts payable......... } & 31,000 \\\hline \text { Rent expense................ } & 3,600 & \text { J. Figgaro, Withdrawals.. } & 24,000 \\\hline \text { Office supplies......... } & 1,500 & \text { Salaries expense............ } & 30,000 \\\hline \text { Notes payable. } & 22,000 & \text { J. Figgaro, Capital. } & 58,100 \\\hline\end{array}$ a. Calculate net income. b. Determine the amount of owner's equity to be shown on the August 31 balance sheet.

The journal is known as a book of original entry.

A business's general journal provides a place for recording all of the following except:

If Taylor Willow, the owner of Willow Hardware proprietorship, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

The purchase of land and buildings will generally be recorded in the same ledger account.

The ordering of accounts in a trial balance typically follows their identification number from the chart of accounts, that is, assets first, then liabilities, then owner's capital and withdrawals, followed by revenues and expenses.

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

Unearned revenue is classified as a(an)__________ on a business's balance sheet.

The__________ is found by determining the difference between total debits and total credits for an account, including any beginning balance.