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Accounting Ch. 3

When preparing the trial balance, the total debits should equal the total credits.
TRUE
Credits increase Liabilities, Owner’s Equity, and Revenue.
TRUE
Increases in assets and expenses are both recorded with debits.
TRUE
Increases in assets and revenue are both recorded with debits.
FALSE
When an owner invests assets in a business, the capital account is debited
FALSE
If the total of the amounts on the debit side of an account is greater than the total on the credit side, the balance is recorded on the debit side.
TRUE
Utilities Expense would be debited when a company receives a bill for utilities that it will pay later.
TRUE
Debit entries increase asset, drawing, expense and liability accounts
FALSE
The normal balance side of a liability account is the debit side.
FALSE
Increases in owner’s equity are recorded with credits.
TRUE
Revenue is a subdivision of owner’s equity.
TRUE
An increase in an expense results in an increase in owner’s equity.
FALSE
Increases in the owner’s drawing account are recorded with debits.
TRUE
After transactions for the period have been recorded, a trial balance is prepared to verify the equality of total debits and credits.
TRUE
A business transaction affects at least two accounts.
TRUE
The modern system of accounting is called the double-entry system because a debit to one account is balanced by a credit to another account
TRUE
Financial statements are prepared after the trial balance is prepared.
TRUE
Another name for permanent accounts is real accounts.
TRUE
Another name for temporary accounts is real accounts.
FALSE
When developing a chart of accounts, the highest block of numbers is assigned to asset accounts
FALSE
An account whose balance is transferred to another account at the end of an accounting period is a temporary account.
TRUE
An account with a balance that carries over from one accounting period to another is a nominal account.
FALSE
Separate written records called ____________________ are kept for each asset and liability and for the owner’s equity of a business.
ACCOUNTS
Accountants use the term ____________________ when referring to the right side of an account.
CREDIT
A decrease in a liability is recorded on the ____________________ side of the account.
DEBIT
Revenue and expense accounts are called nominal or ____________________ accounts.
TEMPORARY
Expense accounts are increased by ____________________ the accounts.
DEBITING
When equipment is purchased for cash, the accountant enters an amount on the left side of the ____________________ account.
EQUIPMENT
A(n) ____________________ account is used to record increases in owner’s equity from the sale of goods or services.
REVENUE
The difference between the debit and credit side of an account is called the account ___________________.
BALANCE
A column of figures is added and the total is entered in small pencil figures called a(n) ___________________.
FOOTING
The increase side of an account represents the ____________________ balance of the account.
NORMAL
A statement prepared to test the accuracy of total debits and credits after transactions have been recorded is called a(n) ___________________.
TRIAL BALANCE
A special type of owner’s equity account set up to record withdrawals of assets by the owner for personal use is called a(n) ____________________ account.
DRAWING
The error that occurs when the number $5.00 is written as $50.00 is called a(n) ____________________ error.
SLIDE
The error that occurs when the number $272.00 is written as $27.20 is called a(n) ____________________ error.
SLIDE
An entry on the right side of an account is called a(n) ___________________.
CREDIT
An entry on the left side of an account is called a(n) ___________________.
DEBIT
Rent Revenue is increased by _________________ the account.
CREDITING
Another name for the profit and loss statement is the ____________________.
INCOME STATEMENT
The account Moriah Paige, _______________ would appear on both the Statement of Owner’s Equity and the Balance Sheet.
CAPITAL
The order in which financial statements are prepared is determined by the fact that information from one is needed to prepare the next. Which statement is prepared last? ____________________.
BALANCE SHEET
In a Chart of Accounts, each category of accounts is given a __________ of numbers with gaps so that additional accounts can be added when needed.
SERIES
The classification and normal balance of the accounts receivable account is:
an asset with a debit balance
The classification and normal balance of the salaries expense account is:
an expense with a debit balance
A business earns $4,000 from various charge account clients. To record this transaction, the business would:
Debit Accounts Receivable; Credit Revenue
Select the entry below that records paying employees for work performed during the pay period?
debit Salary Expense and credit Cash
A business receives a bill for utilities but decides to pay it next month. The business would record the receipt of the bill by:
Debiting Utilities Expense; Crediting Accounts Payable
A business purchases equipment costing $4,000. They pay $1,500 right away and charge the remaining amount. To record this transaction, the business would:
Debit Equipment $4,000; Credit Cash $1,500 and Credit Accounts Payable $2,500
A business performed $6,000 of services. Their customer paid $1,000 of the amount owed right away but charged the remaining amount. To record this transaction, the business would:
Debit Cash $1,000 and Debit Accounts Receivable $5,000; Credit Fee Income $6,000
Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business?
debit Ty Knott, Drawing, and credit Cash
The ending capital balance appears on which of the following statement(s
Statement of owner’s equity and balance sheet
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
$35,000.
A business purchases supplies on account. The entry to record this transaction is:
Debit Supplies; Credit Accounts Payable
Debits are used to record
increases in assets.
Which of the following represents the proper sequence for preparing the financial statements?
income statement, statement of owner’s equity, balance sheet
Which of the following is not one of the formal financial statements that is made available to all users of the financial statements.
Trial Balance
A business pays a creditor on account. The entry to record this transaction is
Debit Accounts Payable; Credit Cash
Credits are used to record
increases in liabilities and owner’s equity.
Debits are used to record increases in
assets and expenses.
A firm paid cash to apply against a debt. To record this transaction, the accountant would
debit Accounts Payable and credit Cash.
When revenue is earned from charge-account sales, the accountant
debits Accounts Receivable and credits a revenue account.
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 Accounts Receivable account.
The total of the figures on the left side of a Cash account is $25,800. The total of the figures on the right side is $14,100. The balance of this account
is $11,700 and would be recorded on the left side of the account.
The account used to record increases in owner’s equity from the sale of goods or services is
the revenue account.
Which of the following types of accounts normally have debit balances?
expenses and assets
Which of the following groups contain only accounts that normally have credit balances?
Fees Income and John Smith, Capital
If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by
9
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
2
increase owner’s equity?
revenue
If assets are numbered from 100-199, which of the following accounts would not be given a number in the 100 series?
Accounts Payable
accounts is not a permanent account?
Salaries Expense
The “Net Income” or “Net Loss” is transferred from the income statement to the
statement of owner’s equity.
The normal balance of an account is the
increase side of the account.
Identify the accounts below that would ALL appear on the balance sheet
Cash, Accounts Payable, Owner’s Capital (ending balance)
If a trial balance is not in balance (the Debit and Credit columns are not equal), a logical first step is to
check the addition of each column.
The Net Income amount from the Income Statement is transferred to which of the following statements?
the statement of owner’s equity
The ending balance of the capital account appears as a separate line item on what two statements?
the statement of owner’s equity and the balance sheet
Which of the following accounts is NOT a nominal account?
Office Supplies
An accounting system that involves recording the effects of each transaction as debits and credits is
the double-entry system.
does NOT describe a transposition?
It causes the difference between the debit total and the credit total to be divisible by 2.
would result in an error when preparing the Trial Balance?
Placing the balance in Prepaid Rent in the Credit column
would cause the Trial Balance to be out of balance?
Placing the Accounts Receivable balance in the Credit column
Which of the following would cause the Debit column and the Credit column of the Trial Balance to be unequal?
Placing the Prepaid Rent balance in the Credit column

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