2.1-41 Consider the following transactions: I. Owners invested $8,000 cash to begin the business II. Provided services for cash, $6,000 III. Provided services on account, $4,000 IV. Paid cash for expenses, $7,500
How much net income did the business have? A. $2,500 B. $3,000 C. $4,000
D. $6,000 Answer: A
LO: 2-1
Diff: 2
EOC: E2-16
2.2-1 An account with a normal balance of a debit indicates that the account is a liability account.
Answer: False LO: 2-2 Diff: 1 EOC: S2-9 2.2-2 An account with a normal credit balance is most often a liability or stockholders’ equity account.
Answer: True LO: 2-2 Diff: 1 EOC: QC 2 2.2-3 Liabilities and revenues are decreased by credits.
Answer: False LO: 2-2 Diff: 2
EOC: P2-51A
2.2-4 Assets, owners’ equity and dividends are all increased by debits.
Answer: False LO: 2-2 Diff: 2 EOC: E2-17
2.2-5 Revenues and expenses are specialized owners’ equity accounts, all having debit balances.
Answer: False LO: 2-2 Diff: 1 EOC: E2-21 2.2-6 Dividends and expenses are specialized owners’ equity accounts that are increased by debits.
Answer: True LO: 2-2 Diff: 2 EOC: E2-17 2.2-7 Every business transaction involves at least one debit and one credit part of the transaction.
Answer: True LO: 2-2 Diff: 2 EOC: S2-5
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2.2-8 All business transactions involve an increase in at least one account and a decrease in at least one other account.
Answer: False LO: 2-2 Diff: 2 EOC: S2-5. 2.2-9 The left side of a T-account is always the:
A. increase side. B. decrease side. C. debit side.
D. credit side. Answer: C
LO: 2-2
Diff: 1
EOC: S2-7
2.2-10 Which of the following statements regarding accounts is TRUE? A. An asset is increased by a debit and decreased by a credit. B. Dividends are decreased by debits and increased by credits. C. A liability is increased by a debit and decreased by a credit.
D. Revenue is increased by a debit; an expense is increased by a credit. Answer: A
LO: 2-2
Diff: 3
EOC: QC 1
2.2-11 Which accounts are increased by debits? A. Assets and owners’ equity B. Expenses and owners’ equity C. Assets, expenses and dividends
D. Assets, expenses and owners’ equity Answer: C
LO: 2-2
Diff: 2
EOC: E2-23
2.2-12 An account is increased by a debit and has a normal balance of a debit. This account is a(n) A. expense account. B. liability account. C. asset account.
D. both an expense account and an asset account. Answer: D
LO: 2-2
Diff: 3
EOC: E2-25
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2.2-13 A business purchases a truck by signing a note payable to the seller. This transaction would include a: A. credit to Truck. B. debit to Note Payable. C. credit to Note Payable.
D. debit to Prepaid Maintenance. Answer: C
LO: 2-2
Diff: 2
EOC: P2-53A
2.2-14 The accounting transaction to record a loan would include a credit to:
A. Cash. B. Notes Payable.
C. Utilities Expense.
D. Accounts Receivable. Answer: B
LO: 2-2
Diff: 2
EOC: P2-53A
2.2-15 The entry to record $1,000 received from a customer for services previously rendered would be: A. Cash 1,000 Accounts Receivable 1,000 B.
Cash 1,000 Service Revenue 1,000 C. Service Revenue 1,000 Accounts Receivable 1,000 D. Dividends 1,000
Cash 1,000 Answer: A
LO: 2-2
Diff: 2 EOC: P2-53A
2.3-1 Debits are always recorded (journalized) before credits.
Answer: True LO: 2-3 Diff: 2 EOC: S2-5
2.3-2 A journal shows a chronological listing of the accounting activities of a business—because business
transactions occur in this manner.
Answer: True LO: 2-3 Diff: 1 EOC: P2-51A
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2.3-3 Posting accounting transactions avoids the necessity of journalizing transactions, and the use of T- accounts.
Answer: False LO: 2-3 Diff: 1 EOC: QC 11 2.3-4 The ledger provides a good indication of how much cash is available for the business to use at any one
point in time.
Answer: True LO: 2-3 Diff: 2 EOC: S2-12 2.3-5 The accounting records are considered to be correct if the total debits of the trial balance equal the total
credits on the Post Closing Trial Balance.
Answer: False LO: 2-3 Diff: 2 EOC: E2-22 2.3-6 A trial balance is a list of all accounts and their balances for a period of time.
Answer: False LO: 2-4 Diff: 1 EOC: P2-49A
2.3-7 A trial balance is an optional financial statement that reports the financial position of the company as of a
given day in time.
Answer: False LO: 2-4 Diff: 2 EOC: E2-21 2.3-8 Accounting transactions are initially recorded in the:
A. T-account. B. ledger.
C. journal. D. poster. Answer: C
LO: 2-3
Diff: 2
EOC: QC 11
2.3-9 A chronological record (or history) of an entity’s transactions is called a:
A. T-account. B. ledger.
C. journal. D. poster. Answer: C
LO: 2-3
Diff: 1
EOC: E2-18
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2.3-10 What is one of the first steps in the journalizing process?
A. Enter the transaction in the journal. B. Post the transaction to the ledger.
C. Determine what accounts will be affected and whether to debit or credit them.
D. Identify the transaction from source documents and other information. Answer: D
LO: 2-3
Diff: 2
EOC: E2-18
2.3-11 Which of the following items would NOT be included in the journal entry for a transaction? A. The source documents initiating the transaction B. The date the accounting transaction was entered C. The titles of the accounts debited
D. The dollar amount credited Answer: A
LO: 2-3
Diff: 1
EOC: S2-5
2.3-12 The proper order for the accounting process is: A. posting, transacting, closing and journalizing. B. transacting, posting, journalizing and closing. C. transacting, journalizing, posting and closing.
D. posting, closing, transacting and journalizing. Answer: C
LO: 2-3
Diff: 2
EOC: QC 11
2.3-13 The process of transferring information from the journal to the ledger is known as: A. converting.
B. bookkeeping. C. posting.
D. ledgerizing. Answer: C
LO: 2-3
Diff: 1
EOC: P2-51A
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