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Define Creditor
One to whom money is owed
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What is the Fundamental accounting equation?
Assets = Liabilities + Owner's Equity
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Define Expenses
The costs that relate to earning revenue (the cost of doing business); examples are wages, rent, interest, and advertising
They may be paid in cash immediately or at a future time
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Define Accounts
The categories under Assets, Liabilities, and Owner's Equity headings
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Define Owner's Equity
The owner's right to or investment in the business
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Define Accounts Receivable
An account used to record the amounts due from (legal claims against) charge customers
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Define Assets
Cash, properties, and other things of value owned by an economic unit or a business entity
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Define Cash
Money in coins or notes, as distinct from checks, money orders, or credit
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Define Business Entity
A business enterprise, separate and distinct from the persons who supply the assets it uses
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Indicate whether the following changes in account would be a Debit or Credit
To increase Assets
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To increase Drawing
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To increase Expenses
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Liabilities
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Capital
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Revenue
Debit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Assets
Credit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Drawing
Credit
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Indicate whether the following changes in account would be a Debit or Credit
To decrease Expenses
Credit
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Indicate whether the following changes in account would be a Debit or Credit
To increase Liabilities
Credit
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Indicate whether the following changes in account would be a Debit or Credit
To increase Capital
Credit
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Indicate whether the following changes in account would be a Debit or Credit
To increase Revenue
Credit
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The purchase of an Asset, like Equipment, on account will:
A) increase total assets and increase total liabilities
B) have no effect on total assets or liabilities
C) increase total liabilities and decrease total assets
D) increase total assets and increase owner's equity
E) increase total assets and decrease owner's equity
A) increase total assets and increase total liabilities
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Amounts owed by a business are referred to as:
Liabilities
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When an owner deposits cash in an account in the name of the business, it is an increase to:
Cash & Capital
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If an owner invests her computer and printer in the business, there is an increase to:
A) Cash and Capital
B) Computer Equipment and Drawing
C) Cash and Drawing
D) Computer Equipment and Capital
E) Computer Equipment and Cash
D) Computer Equipment and Capital
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The owner of a business invested $5,000 in the business
What are the effects in the fundamental accounting equation?
A) Assets increase $5,000; liabilities decrease $5,000; owner's equity increases $5,000.
B) Assets increase $5,000; liabilities, no effect; owner's equity increases $5,000.
C) Assets increase $5,000; liabilities increase $5,000; owner's equity, no effect.
D) Assets increase $5,000; liabilities no effect; owner's equity decreases $5,000.
B) Assets increase $5,000; liabilities, no effect; owner's equity increases $5,000.
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The purchase of an asset for cash will:
A) increase total assets and increase total liabilities
B) have no effect on total assets or liabilities
C) increase total liabilities and decrease total assets
D) increase total assets and increase owner's equity
E) increase total assets and decrease owner's equity
B) have no effect on total assets or liabilities
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The normal balance of an account is on the:
Plus side
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When a T-account has several items on both sides, the balance of the account is written:
A) on the side with the larger total
B) on the side with the greatest number of items
C) on the side with the least number of items
D) on the side with the smaller total
A) on the side with the larger total
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A debit may signify a decrease in:
A) a liability account
B) an asset account
C) a revenue account
D) a liability and a revenue account
E) an asset and a revenue account
D) a liability and a revenue account
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A credit may result in:
A) an increase in a liability account
B) an increase in a revenue account
C) a decrease in an asset account
D) an increase in the Capital account
E) all of these
E) all of these
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Which of the following classifications of accounts has/have a normal credit balance?
A) assets
B) expenses
C) drawing
D) revenues and liabilities
D) revenues and liabilities
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Which of the following is an asset account?
A) Sales
B) Office Equipment
C) Supplies Expense
D) Insurance Expense
B) Office Equipment
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If a $47 cash purchase of supplies is recorded as a $57 debit to Supplies and a $57 credit to Cash, the result will be that:
A) the trial balance will be out of balance
B) Supplies will be overstated and Cash will be understated
C) the Supplies account will be overstated
D) the Cash account will be understated
B) Supplies will be overstated and Cash will be understated
Explanation: The supplies account will be $10 too high while the Cash account will be recorded too low at $10.
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A book of original entry is known as a:
Journal
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An accountant wanting to know the balance of a particular account would refer to the:
A) ledger
B) cart of accounts
C) book of original entry
D) source document
E) journal
A) ledger
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The process of subtotaling both sides of an account and recording the amount on that side is known as:
Footing
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If the number of an account is 211, this probably means that the account is:
A) an account in the Revenues section
B) an account in the Liabilities section
C) an account in the Owner's Equity section
D) an account in the Assets section
B) an account in the Liabilities section
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The first step in the posting process is:
A) recording the explanation in the journal
B) recording the date in the ledger account
C) recording the ledger account number in the journal
D) recording the journal page number in the ledger account
B) recording the date in the ledger account
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The proof that the debits and credits in the ledger are equal is called:
A) the trial balance
B) the statement of owner's equity
C) the income statement
D) the journal
A) the trial balance
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A cash payment of $130 on account was recorded as a $310 debit to Accounts Payable and a $310 credit to Cash
The necessary correcting entry is:
A) debit Accounts Receivable, $180; credit Cash, $180
B) debit Accounts Payable, $180; credit Cash, $180
C) debit Cash, $180; credit Accounts Payable, $180
D) debit Cash, $180; credit Accounts Receivable, $180
C) debit Cash, $180; credit Accounts Payable, $180
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True or False?
Capital represents the owner's investment, or equity, in a business
True
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True or False?
Asset are things of value owned by a business entity
True
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True or False?
Liabilities represent accounts owned to creditors
True
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True or False?
In the Fundamental Accounting Equation, assets are added to liabilities
False
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True or False?
The only way that the Fundamental Accounting Equation can stay in balance is by adding or subtracting equal amounts from both sides of the equation
False
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True or False?
The left side is always the debit side
True
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True or False?
In any transaction, the total dollar amount of debits must equal the total dollar amount of credits
True
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True or False?
If equipment is bought by paying $200 as a down payment and the remaining $400 in 30 days, total liabilities are increased by $200
True
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True or False?
A trial balance checks the equality of debits and credits
True
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True or False?
The first step in the posting process is to write the amount of the transaction in the ledger account
False
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True or False?
The general ledger is a collection of all the accounts
True
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True or False?
A ledger account contains a complete record of the transaction activity in the account
True
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True or False?
One type of ledger account form has a two-balance-column arrangement
True
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True or False?
The account number is recorded in the Post Ref column of the general journal when the transaction is first recorded in the journal
False
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