Financial Accounting Tools for Business Decision Making, 7th Edition By Kimmel -Test Bank
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Sample Test
CHAPTER
3
THE
ACCOUNTING INFORMATION SYSTEM
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOM’S TAXONOMY
|
Item |
LO |
BT |
Item |
LO |
BT |
Item |
LO |
BT |
Item |
LO |
BT |
Item |
LO |
BT |
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True-False Statements
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1. |
1 |
K |
12. |
3 |
K |
23. |
3 |
K |
34. |
4 |
K |
45. |
6 |
K |
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2. |
1 |
C |
13. |
3 |
K |
24. |
3 |
K |
35. |
5 |
K |
46. |
6 |
K |
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3. |
1 |
C |
14. |
3 |
K |
25. |
3 |
K |
36. |
5 |
K |
47. |
7 |
K |
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4. |
1 |
C |
15. |
3 |
K |
26. |
3 |
K |
37. |
5 |
K |
48. |
7 |
K |
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5. |
1 |
C |
16. |
3 |
K |
27. |
3 |
K |
38. |
5 |
K |
49. |
8 |
K |
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6. |
2 |
K |
17. |
3 |
K |
28. |
3 |
K |
39. |
5 |
K |
50. |
8 |
C |
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7. |
2 |
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18. |
3 |
K |
29. |
3 |
K |
40. |
6 |
K |
51. |
8 |
K |
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8. |
2 |
K |
19. |
3 |
K |
30. |
4 |
K |
41. |
6 |
K |
52. |
8 |
C |
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9. |
2 |
K |
20. |
3 |
K |
31. |
4 |
K |
42. |
6 |
K |
53. |
9 |
K |
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10. |
2 |
K |
21. |
3 |
K |
32. |
4 |
K |
43. |
6 |
K |
54. |
9 |
K |
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11. |
3 |
K |
22. |
3 |
K |
33. |
4 |
K |
44. |
6 |
K |
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Multiple Choice Questions
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55. |
1 |
C |
89. |
2 |
K |
123. |
3 |
C |
157. |
4 |
K |
191. |
6 |
K |
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56. |
1 |
C |
90. |
2 |
K |
124. |
3 |
C |
158. |
4 |
K |
192. |
5 |
K |
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57. |
1 |
C |
91. |
2 |
K |
125. |
3 |
C |
159. |
4 |
K |
193. |
6 |
K |
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58. |
1 |
C |
92. |
2 |
K |
126. |
3 |
K |
160. |
4 |
K |
194. |
6 |
K |
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59. |
1 |
C |
93. |
2 |
K |
127. |
3 |
C |
161. |
4 |
K |
195. |
6 |
K |
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60. |
1 |
C |
94. |
2 |
K |
128. |
3 |
C |
162. |
4 |
K |
196. |
6 |
C |
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61. |
1 |
C |
95. |
3 |
K |
129. |
3 |
K |
163. |
4 |
K |
197. |
7 |
K |
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62. |
1 |
C |
96. |
3 |
K |
130. |
3 |
C |
164. |
4 |
K |
198. |
6 |
K |
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63. |
1 |
C |
97. |
3 |
K |
131. |
3 |
K |
165. |
4 |
K |
199. |
7 |
K |
|
|
64. |
1 |
C |
98. |
3 |
K |
132. |
3 |
K |
166. |
4 |
K |
200. |
7 |
K |
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|
65. |
1 |
C |
99. |
3 |
K |
133. |
3 |
K |
167. |
4 |
C |
201. |
7 |
K |
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|
66. |
1 |
C |
100. |
3 |
K |
134. |
3 |
K |
168. |
5 |
C |
202. |
7 |
K |
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67. |
1 |
C |
101. |
3 |
K |
135. |
3 |
C |
169. |
5 |
K |
203. |
7 |
K |
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|
68. |
1 |
C |
102. |
3 |
K |
136. |
3 |
C |
170. |
5 |
K |
204. |
8 |
K |
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69. |
1 |
C |
103. |
3 |
K |
137. |
3 |
C |
171. |
5 |
K |
205. |
7 |
AP |
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70. |
1 |
C |
104. |
3 |
K |
138. |
3 |
K |
172. |
5 |
K |
206. |
7 |
AP |
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71. |
1 |
C |
105. |
3 |
K |
139. |
3 |
K |
173. |
5 |
K |
207. |
8 |
K |
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72. |
1 |
C |
106. |
3 |
K |
140. |
3 |
C |
174. |
5 |
K |
208. |
8 |
C |
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73. |
1 |
C |
107. |
3 |
K |
141. |
3 |
AP |
175. |
5 |
K |
209. |
8 |
C |
|
|
74. |
1 |
C |
108. |
3 |
K |
142. |
3 |
AP |
176. |
5 |
C |
210. |
8 |
K |
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|
75. |
1 |
C |
109. |
3 |
C |
143. |
3 |
AP |
177. |
5 |
AP |
211. |
8 |
K |
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|
76. |
1 |
C |
110. |
3 |
K |
144. |
3 |
AP |
178. |
5 |
AP |
212. |
8 |
C |
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77. |
1 |
C |
111. |
3 |
C |
145. |
3 |
AP |
179. |
5 |
AP |
213. |
8 |
K |
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78. |
1 |
C |
112. |
3 |
C |
146. |
3 |
C |
180. |
5 |
C |
214. |
8 |
K |
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79. |
1 |
C |
113. |
3 |
C |
147. |
3 |
C |
181. |
5 |
AP |
215. |
8 |
C |
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80. |
1 |
C |
114. |
3 |
K |
148. |
3 |
C |
182. |
5 |
AP |
216. |
8 |
AN |
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81. |
1 |
C |
115. |
3 |
K |
149. |
3 |
C |
183. |
8 |
K |
217. |
9 |
K |
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82. |
1 |
C |
116. |
3 |
C |
150. |
3 |
K |
184. |
6 |
K |
218. |
9 |
K |
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83. |
1 |
C |
117. |
3 |
C |
151. |
3 |
K |
185. |
6 |
K |
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84. |
1 |
AP |
118. |
3 |
K |
152. |
3 |
C |
186. |
6 |
K |
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85. |
1 |
AP |
119. |
3 |
K |
153. |
3 |
C |
187. |
6 |
K |
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86. |
1 |
C |
120. |
3 |
K |
154. |
3 |
C |
188. |
6 |
K |
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|
87. |
2 |
K |
121. |
3 |
K |
155. |
3 |
C |
189. |
6 |
K |
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|
88. |
2 |
K |
122. |
3 |
C |
156. |
3 |
C |
190. |
6 |
K |
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Brief Exercises
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219. |
1 |
C |
221. |
3 |
K |
223. |
5 |
AP |
225. |
5 |
C |
227. |
7 |
AP |
|
220. |
2 |
C |
222. |
3 |
K |
224. |
8 |
AP |
226. |
1 |
C |
228. |
8 |
AP |
Exercises
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229. |
1 |
C |
235. |
1 |
AP |
241. |
3 |
K |
247. |
5 |
AP |
253. |
8 |
AP |
|
230. |
3 |
K |
236. |
1 |
AP |
242. |
3 |
K |
248. |
5 |
AP |
254. |
8 |
AN |
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231. |
1 |
C |
237. |
1,5,7 |
AP |
243. |
3 |
K |
249. |
5,7 |
AP |
255. |
8 |
AN |
|
232. |
1 |
AP |
238. |
3 |
K |
244. |
3 |
C |
250. |
5,8 |
AP |
256. |
8 |
AN |
|
233. |
1 |
AP |
239. |
3 |
K |
245. |
3 |
K |
251. |
7,8 |
AP |
257 |
8 |
AP |
|
234. |
1 |
AP |
240. |
3 |
C |
246. |
5 |
AP |
252. |
7,8 |
AP |
258. |
8 |
AP |
Completion Statements
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|
259. |
2 |
K |
261. |
3 |
K |
263. |
4 |
K |
265. |
5 |
K |
267. |
6 |
K |
|
260. |
3 |
K |
262. |
3 |
K |
264. |
5 |
K |
266. |
7 |
K |
268. |
8 |
K |
Matching
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|
269. |
1-8 |
K |
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Short Answer Essay
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|
270. |
1,4 |
K |
272. |
4, 5 |
C |
274. |
3 |
C |
276. |
5 |
C |
278. |
2 |
E |
|
271. |
3 |
K |
273. |
2, 3 |
C |
275. |
3 |
K |
277. |
8 |
C |
279. |
8 |
AN |
SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
|
Learning Objective 1 |
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|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
1. |
TF |
58. |
MC |
66. |
MC |
74. |
MC |
82. |
MC |
231. |
Ex |
|
2. |
TF |
59. |
MC |
67. |
MC |
75. |
MC |
83. |
MC |
232. |
Ex |
|
3. |
TF |
60. |
MC |
68. |
MC |
76. |
MC |
84. |
MC |
233. |
Ex |
|
4. |
TF |
61. |
MC |
69. |
MC |
77. |
MC |
85. |
MC |
234. |
Ex |
|
5. |
TF |
62. |
MC |
70. |
MC |
78. |
MC |
86. |
MC |
235. |
Ex |
|
55. |
MC |
63. |
MC |
71. |
MC |
79. |
MC |
219. |
BE |
236. |
Ex |
|
56. |
MC |
64. |
MC |
72. |
MC |
80. |
MC |
226. |
BE |
237. |
Ex |
|
57. |
MC |
65. |
MC |
73. |
MC |
81. |
MC |
229. |
Ex |
269. |
Ma |
|
Learning Objective 2 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
6. |
TF |
9. |
TF |
88. |
MC |
91. |
MC |
94. |
MC |
269. |
Ma |
|
7. |
TF |
10. |
TF |
89. |
MC |
92. |
MC |
220. |
BE |
273. |
SA |
|
8. |
TF |
87. |
MC |
90. |
MC |
93. |
MC |
259. |
CS |
278. |
SA |
|
Learning Objective 3 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
11. |
TF |
28. |
TF |
110. |
MC |
127. |
MC |
144. |
MC |
239. |
Ex |
|
12. |
TF |
29. |
TF |
111. |
MC |
128. |
MC |
145. |
MC |
240. |
Ex |
|
13. |
TF |
95. |
MC |
112. |
MC |
129. |
MC |
146. |
MC |
241. |
Ex |
|
14. |
TF |
96. |
MC |
113. |
MC |
130. |
MC |
147. |
MC |
242. |
Ex |
|
15. |
TF |
97. |
MC |
114. |
MC |
131. |
MC |
148. |
MC |
243. |
Ex |
|
16. |
TF |
98. |
MC |
115. |
MC |
132. |
MC |
149. |
MC |
244. |
Ex |
|
17. |
TF |
99. |
MC |
116. |
MC |
133. |
MC |
150. |
MC |
245. |
Ex |
|
18. |
TF |
100. |
MC |
117. |
MC |
134. |
MC |
151. |
MC |
260. |
CS |
|
19. |
TF |
101. |
MC |
118. |
MC |
135. |
MC |
152. |
MC |
261. |
CS |
|
20. |
TF |
102. |
MC |
119. |
MC |
136. |
MC |
153. |
MC |
262. |
CS |
|
21. |
TF |
103. |
MC |
120. |
MC |
137. |
MC |
154. |
MC |
269. |
Ma |
|
22. |
TF |
104. |
MC |
121. |
MC |
138. |
MC |
155. |
MC |
271. |
SA |
|
23. |
TF |
105. |
MC |
122. |
MC |
139. |
MC |
156. |
MC |
273. |
SA |
|
24. |
TF |
106. |
MC |
123. |
MC |
140. |
MC |
221. |
BE |
274. |
SA |
|
25. |
TF |
107. |
MC |
124. |
MC |
141. |
MC |
222. |
BE |
275. |
SA |
|
26. |
TF |
108. |
MC |
125. |
MC |
142. |
MC |
230. |
Ex |
|
|
|
27. |
TF |
109. |
MC |
126. |
MC |
143. |
MC |
238. |
Ex |
|
|
|
Learning Objective 4 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
30. |
TF |
34. |
TF |
160. |
MC |
164. |
MC |
263. |
CS |
|
|
|
31. |
TF |
157. |
MC |
161. |
MC |
165. |
MC |
269. |
Ma |
|
|
|
32. |
TF |
158. |
MC |
162. |
MC |
166. |
MC |
270. |
SA |
|
|
|
33. |
TF |
159. |
MC |
163. |
MC |
167. |
MC |
272. |
SA |
|
|
|
Learning Objective 5 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
35. |
TF |
169. |
MC |
175. |
MC |
181. |
MC |
246. |
Ex |
265. |
CS |
|
36. |
TF |
170. |
MC |
176. |
MC |
182. |
MC |
247. |
Ex |
269. |
Ma |
|
37. |
TF |
171. |
MC |
177. |
MC |
192. |
MC |
248. |
Ex |
272. |
SA |
|
38. |
TF |
172. |
MC |
178. |
MC |
223. |
BE |
249. |
Ex |
276. |
SA |
|
39. |
TF |
173. |
MC |
179. |
MC |
225. |
BE |
250. |
Ex |
|
|
|
168. |
MC |
174. |
MC |
180. |
MC |
237. |
Ex |
264. |
CS |
|
|
|
Learning Objective 6 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
40. |
TF |
44. |
TF |
185. |
MC |
189. |
MC |
194. |
MC |
267. |
CS |
|
41. |
TF |
45. |
TF |
186. |
MC |
190. |
MC |
195. |
MC |
269. |
Ma |
|
42. |
TF |
46. |
TF |
187. |
MC |
191. |
MC |
196. |
MC |
|
|
|
43. |
TF |
184. |
MC |
188. |
MC |
193. |
MC |
198. |
MC |
|
|
|
Learning Objective 7 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
47. |
TF |
199. |
MC |
202. |
MC |
206. |
MC |
249. |
Ex |
266. |
CS |
|
48. |
TF |
200. |
MC |
203. |
MC |
227. |
BE |
251. |
Ex |
269. |
Ma |
|
197. |
MC |
201. |
MC |
205. |
MC |
237. |
Ex |
252. |
Ex |
|
|
|
Learning Objective 8 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
49. |
TF |
204. |
MC |
211. |
MC |
216. |
MC |
253. |
Ex |
258. |
Ex |
|
50. |
TF |
207. |
MC |
212. |
MC |
224. |
BE |
254. |
Ex |
268. |
CS |
|
51. |
TF |
208. |
MC |
213. |
MC |
228. |
BE |
255. |
Ex |
269. |
Ma |
|
52. |
TF |
209. |
MC |
214. |
MC |
250. |
Ex |
256. |
Ex |
277. |
SA |
|
183. |
MC |
210. |
MC |
215. |
MC |
252. |
Ex |
257. |
Ex |
279. |
SA |
|
Learning Objective 9 |
|||||||||||
|
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
Item |
Type |
|
53. |
TF |
54. |
TF |
217. |
MC |
218. |
MC |
|
|
|
|
Note: TF =
True-False
C = Completion
MC = Multiple Choice
Ex = Exercise
Ma =
Matching
SA = Short Answer Essay
CHAPTER LEARNING OBJECTIVES
1. Analyze
the effect of business transactions on the basic accounting equation. Each
business transaction must have a dual effect on the accounting equation. For
example, if an individual asset is increased, there must be a corresponding (a)
decrease in another asset, or (b) increase in a specific liability, or (c)
increase in stockholders’ equity.
2. Explain
what an account is and how it helps in the recording process. An
account is an individual accounting record of increases and decreases in
specific asset, liability, and stockholders’ equity items.
3. Define
debits and credits and explain how they are used to record business
transactions. The terms debit and credit are synonymous with left and
right. Assets, dividends, and expenses are increased by debits and decreased by
credits. Liabilities, common stock, retained earnings, and revenues are
increased by credits and decreased by debits.
4. Identify
the basic steps in the recording process. The
basic steps in the recording process are (a) analyze each transaction in terms
of its effect on the accounts, (b) enter the transaction information in a
journal, and (c) transfer the journal information to the appropriate accounts
in the ledger.
5. Explain
what a journal is and how it helps in the recording process. The
initial accounting record of a transaction is entered in a journal before the
data are entered in the accounts. A journal (a) discloses in one place the
complete effect of a transaction, (b) provides a chronological record of
transactions, and (c) prevents or locates errors because the debit and credit
amounts for each entry can be readily compared.
6. Explain
what a ledger is and how it helps in the recording process. The
entire group of accounts maintained by a company is referred to collectively as
a ledger. The ledger provides the balance in each of the accounts as well as
keeps track of changes in these balances.
7. Explain
what posting is and how it helps in the recording process. Posting
is the procedure of transferring journal entries to the ledger accounts. This
phase of the recording process accumulates the effects of journalized
transactions in the individual accounts.
8. Explain
the purposes of a trial balance. A trial balance is a
list of accounts and their balances at a given time. The primary purpose of the
trial balance is to prove the mathematical equality of debits and credits after
posting. A trial balance also uncovers errors in journalizing and posting and
is useful in preparing financial statements.
9. Classify
cash activities as operating, investing, or financing. Operating
activities are the types of activities the company performs to generate
profits. Investing activities relate to the purchase or sale of long-lived
assets used in operating the business, or to the purchase or sale of investment
securities (stock and bonds of other companies). Financing activities are
borrowing money, issuing shares of stock, and paying dividends.
TRUE-FALSE STATEMENTS
1. Economic
events that require recording in the financial statements are called accounting
transactions.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
2. Revenue
increases stockholders’ equity and should be recorded whenever cash is received
from customers.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
3. Collection
on an account receivable will increase both cash and accounts receivable.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
4. The
payment of a liability decreases both cash and accounts payable.
Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
5. If
total assets are increased, there must be a corresponding increase in
liabilities or a decrease in stockholders’ equity.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
6. A new
account is opened for each transaction entered into by a business firm.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
7. The
recording process becomes more efficient and informative if all transactions
are recorded in one account.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
8. An
account consists of two parts: (1) a left or debit side and (2) a right or
credit side.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
9. For a
T account, an account balance is the difference in total dollars between total
debit amounts and total credit amounts.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
10. An
account is often referred to as a T-account because of the way it is
constructed.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
11. A
debit to an account always indicates an increase in that account.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
12. If a
revenue account is credited, the revenue account is increased.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
13. The
normal balance of all accounts is a debit.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
14. Debit
and credit can be interpreted to mean “bad” and “good”, respectively.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
15. A
credit means that an account has been increased.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
16. A
decrease in a liability account is recorded by a debit.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
17. An
increase in an asset is recorded by a debit.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
18. The
double-entry system of accounting refers to the placement of a double line at
the end of a column of figures.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
19. A
credit balance in a liability account indicates that an error in recording has
occurred.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
20. The
normal balance of an asset is a credit.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
21. The
normal balance of the dividend account is a credit.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
22. Assets
are decreased with a credit.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
23. A
debit means that an account has been decreased.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
24. A
decrease in a liability is recorded by a debit.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
25. An
increase in an asset is recorded by a debit.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
26. Liabilities
are increased with debits and decreased with credits.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
27. The
dividends account is a subdivision of the retained earnings account and appears
as an expense on the income statement.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
28. Revenues
are a subdivision of stockholders’ equity.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
29. Under
the double-entry system, revenues must always equal expenses.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
30. Transactions
are entered in the ledger first and then they are analyzed in terms of their
effect on the accounts.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
31. Source
documents can provide evidence that a transaction has occurred.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
32. Each transaction
must be analyzed in terms of its effect on the accounts before it can be
recorded in a journal.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
33. Transactions
are entered in the ledger accounts and then transferred to journals.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
34. All
business transactions must be entered first in the general ledger.
Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
35. Transactions
are recorded in alphabetical order in a journal.
Ans: F, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
36. The
journal is a chronological record of all transactions.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
37. A
journal is an accounting record in which transactions are initially recorded.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
38. The
complete effect of a transaction on the accounts is disclosed in the journal.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
39. The
account titles used in journalizing transactions need not be identical to the
account titles in the ledger.
Ans: F, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
40. The
chart of accounts is a special ledger used in accounting systems.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
41. A
general ledger should be arranged in financial statement order beginning with
the balance sheet accounts.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
42. The
entire group of accounts maintained by a company is referred to collectively as
the journal.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
43. Prepaid
expenses are assets.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
44. Salaries
and wages payable is a type of expense.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
45. Dividends
are classified as an expense.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
46. Unearned
Service Revenue is classified as a liability on the balance sheet.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
47. Posting
is the process of proving the equality of debits and credits in the trial
balance.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
48. Entering
transactions into the journal is called posting.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
49. A
trial balance is prepared at the beginning of an accounting period.
Ans: F, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
50. A
trial balance does not prove that all transactions have been recorded or that
the ledger is correct.
Ans: T, LO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
51. In a
trial balance, all debits are listed before all credits.
Ans: F, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
52. When
the columns of the trial balance equal each other, it means that no errors have
occurred in the recording and posting the transactions.
Ans: F, LO: 8, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
53. Operating
activities are the types of activities the company performs to generate
profits.
Ans: T, LO: 9, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
54. Financing
activities include the purchase or sale of long-lived assets or the purchase or
sale of investment securities.
Ans: F, LO: 9, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
Answers to True-False Statements
1. T
10.
T
19.
F
28. T
37.
T
46. T
2. F 11.
F
20.
F
29. F
38.
T
47. F
3. F
12.
T
21.
F
30. F
39.
F
48. F
4. T
13.
F
22.
T
31. T
40.
F
49. F
5. F
14.
F
23.
F
32. T
41.
T
50. T
6. F
15.
F
24.
T
33. F
42.
F
51. F
7. F
16.
T
25. T
34.
F
43.
T
52. F
8. F
17.
T
26.
F
35. F
44.
F
53. T
9. T
18.
F
27.
F
36. T
45.
F
54. F
MULTIPLE CHOICE QUESTIONS
55. If
total liabilities decreased by $4,000, then
56. stockholders’
equity must have decreased by $4,000.
57. assets
must have decreased by $4,000, or stockholders’ equity must have increased by
$4,000.
58. assets
and stockholders’ equity each increased by $2,000.
59. assets
must have increased by $4,000.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
56. Collection
of a $600 Accounts Receivable
57. increases
an asset $600; decreases an asset $600.
58. increases
an asset $600; decreases a liability $600.
59. decreases
a liability $600; increases stockholders’ equity $600.
60. decreases
an asset $600; decreases a liability $600.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
57. If an
individual asset is increased, then
58. there
could be an equal decrease in a specific liability.
59. there
could be an equal decrease in stockholders’ equity.
60. there
could be an equal decrease in another asset.
61. None
of these answer choices are correct.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
58. If
services are rendered on account, then
59. assets
will decrease.
60. liabilities
will increase.
61. stockholders’
equity will increase.
62. liabilities
will decrease.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
59. If
services are rendered for cash, then
60. assets
will increase.
61. liabilities
will increase.
62. stockholders’
equity will decrease.
63. liabilities
will decrease.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
60. If
expenses are paid in cash, then
61. assets
will increase.
62. liabilities
will decrease.
63. stockholders’
equity will increase.
64. assets
will decrease.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
61. An
investment by the stockholders in a business increases
62. assets
and stockholders’ equity.
63. assets
and liabilities.
64. liabilities
and stockholders’ equity.
65. assets
only.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
62. The
purchase of an asset for cash
63. increases
assets and stockholders’ equity.
64. increases
assets and liabilities.
65. decreases
assets and increases liabilities.
66. leaves
total assets unchanged.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
63. The
purchase of an asset on credit
64. increases
assets and stockholders’ equity.
65. increases
assets and liabilities.
66. decreases
assets and increases liabilities.
67. leaves
total assets unchanged.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
64. The
payment of a liability
65. decreases
assets and stockholders’ equity.
66. increases
assets and decreases liabilities.
67. decreases
assets and increases liabilities.
68. decreases
assets and liabilities.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
65. The
sale of an asset on credit for what it cost
66. increases
assets and liabilities.
67. decreases
assets and liabilities.
68. leaves
total assets unchanged.
69. decreases
assets and increases liabilities.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
66. When
collection is made on Accounts Receivable,
67. total
assets will remain the same.
68. stockholders
equity will increase.
69. total
assets will increase.
70. total
assets will decrease.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
67. A
revenue generally
68. increases
assets and liabilities.
69. increases
assets and stockholders’ equity.
70. increases
assets and decreases stockholders’ equity.
71. leaves
total assets unchanged.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
68. A
paid dividend
69. decreases
assets and stockholders’ equity.
70. increases
assets and stockholders’ equity.
71. increases
assets and decreases stockholders’ equity.
72. decreases
assets and increases stockholders’ equity.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
69. Receiving
payment of a portion of an accounts receivable will
70. not
affect total assets.
71. increase
liabilities.
72. increase
stockholders’ equity.
73. decrease
net income.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
70. An
expense
71. decreases
assets and liabilities.
72. decreases
stockholders’ equity.
73. leaves
stockholders’ equity unchanged.
74. is
basically the same as a liability.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
71. Which
of the following items has no effect on retained earnings?
72. Expense
73. Dividends
74. Land
purchase
75. Revenue
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
72. If a
company buys a $700 machine on credit, this transaction will affect the
73. income
statement and retained earnings statement only.
74. income
statement only.
75. income
statement, retained earnings statement, and balance sheet.
76. balance
sheet only.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
73. A
payment of a portion of an accounts payable will
74. not
affect total assets.
75. increase
liabilities.
76. not
affect stockholders’ equity.
77. decrease
net income.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
74. Powers
Corporation received a cash advance of $500 from a customer. As a result of
this event,
75. assets
increased by $500.
76. equity
increased by $500.
77. liabilities
decreased by $500.
78. Both
assets and equity increased by $500.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
75. Courtney
Company purchased equipment for $1,800 cash. As a result of this event,
76. equity
decreased by $1,800.
77. assets
increased by $1,800.
78. total
assets remained unchanged.
79. Both
assets and equity decreased by $1,800.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
76. Comstock
Company provided consulting services and billed the client $2,500. As a result
of this event
77. assets
remained unchanged.
78. assets
increased by $2,500.
79. equity
increased by $2,500
80. Both
assets and equity increased by $2,500.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
77. Budke
Corporation paid dividends of $5,000. As a result of this event, the
78. Dividends
account was increased by $5,000.
79. Dividends
account was decreased by $5,000.
80. Cash
account was increased by $5,000.
81. Cash
was increased and the Dividends account was decreased by $5,000.
Ans: A, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
78. If a
company pays dividends of $10,000,
79. stockholders’
equity will be reduced by $10,000.
80. net
income will be reduced by $10,000.
81. retained
earnings will be reduced by $10,000.
82. Both
retained earnings and stockholders’ equity will be reduced by $10,000.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
79. If a
company issues common stock for $40,000 and uses $30,000 of the cash to
purchase a truck,
80. assets
will be increased by $10,000.
81. equity
will be reduced by $40,000.
82. assets
will be increased by $40,000.
83. assets
will be unchanged.
Ans: C, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
80. Are
advanced receipts from customers treated as revenue at the time of receipt? Why
or why not?
81. Yes,
they are treated as revenue at the time of receipt because the company has
access to the cash.
82. No,
the amount of revenue cannot be adequately determined until the company
completes the work.
83. Yes,
The intent of the company is to perform the work and the customer is confident
that the services will be completed.
84. No,
revenue cannot be recognized until the work is performed.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
81. The
receipt of cash in advance from a customer
82. increases
assets and stockholders’ equity.
83. increases
assets and decreases stockholders’ equity.
84. increases
assets and liabilities.
85. none
of these answer choices are correct.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
82. On
March 1, 2014, Freeze Company hires a new employee who will start to work on
March 6. The employee will be paid on the last day of each month. Should a
journal entry be made on March 6? Why or why not?
83. Yes,
the company is now obligated to pay the employee, thus that event must be
recorded.
84. No,
hiring an employee is an important event; however it is not an economic event
that should be recorded.
85. Yes,
failure to record the event would cause the financial statements to be
misleading.
86. No,
the financial position of the company has been changed, however, the dollar
amount of the transaction is not yet known.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
83. Howard
Company had a transaction that caused a $5,000 increase in both assets and
total liabilities. This transaction could have been a(n)
84. purchase
of office equipment for $12,000, paying $7,000 cash and issuing a note payable
for the balance.
85. investment
of $5,000 cash in the business by the stockholders.
86. purchase
of office equipment for $5,000 cash.
87. repayment
of a $5,000 bank loan.
Ans: A, LO: 1, Bloom: C, Difficulty: Medium, Min: 2, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA
PC: Problem Solving, IMA: FSA
84. Jamal
Company began the year with $84,000 in its Common Stock account and a debit balance
in Retained Earnings of $36,000. During the year, the company earned net income
of $18,000 and declared and paid $6,000 of dividends. In addition, the company
sold additional common stock amounting to $22,000. Based on this information,
what should the transaction analysis show for the ending total of all
stockholders’ equity accounts?
85. $154,000
86. $166,000
87. $82,000
88. $110,000
Ans: C, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
Solution: $84,000 + ($36,000) + $18,000 – $6,000 + $22,000 =
$82,000
85. Crawford
Company started the year with $30,000 in its Common Stock account and a credit
balance in Retained Earnings of $22,000. During the year, the company earned
net income of $24,000 and declared and paid $10,000 of dividends. In addition,
the company sold additional common stock amounting to $14,000. As a result, the
amount of its retained earnings at the end of the year would be
86. $80,000.
87. $36,000.
88. $66,000.
89. $50,000.
Ans: B, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB:
Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA
PC: Problem Solving, IMA: Reporting
Solution: $22,000 + $24,000 – $10,000 = $36,000
86. All
of the following are characteristics of every accounting information
system except it
is a system
87. that
collects transaction data.
88. that
processes transaction data.
89. that communicates
financial information to decision makers.
90. of
data storage hardware for the chart of accounts.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Leverage Technology, AICPA FN: Leverage Technology, AICPA PC: None,
IMA: Business Applications
87. The
left side of an account is
88. blank.
89. a
description of the account.
90. the
debit side.
91. the
balance of the account.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
88. Which
one of the following is not a
part of an account?
89. Credit
side
90. Trial
balance
91. Debit
side
92. Title
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
89. An
account is a part of the financial information system and is described by each
one of the following except
90. an
account has a debit and credit side.
91. an
account is a source document.
92. an
account consists of three parts.
93. an
account has a title.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
90. The
right side of an account
91. is
the correct side.
92. reflects
all transactions for the accounting period.
93. shows
all the balances of the accounts in the system.
94. is
the credit side.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None, IMA:
FSA
91. An
account consists of
92. a
title, a debit balance, and a credit balance.
93. a
title, a left side, and a debit balance.
94. a
title, a debit side, and a credit side.
95. a
title, a right side, and a debit balance.
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
92. A
T-account is
93. a way
of depicting the basic form of an account.
94. a
special account used instead of a journal.
95. a
special account used instead of a trial balance.
96. used
for accounts that have both a debit and credit balance.
Ans: A, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
93. Which
statement about an account is true?
94. In
its simplest form, an account consists of two parts.
95. An
account is an individual accounting record of increases and decreases in
specific asset, liability, and stockholders’ equity items.
96. There
are separate account for specific assets and liabilities but only one account
for stockholders’ equity items.
97. The
left side of an account is the credit or decrease side.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
94. In
its simplest form, an account consists of all of the following except
95. right
(credit) side.
96. account
title.
97. left
side.
98. explanation
column.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
95. A
debit to an asset account indicates a(n)
96. error.
97. credit
was made to a liability account.
98. decrease
in the asset.
99. increase
in the asset.
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
96. Debits
97. increase
both assets and liabilities.
98. decrease
both assets and liabilities.
99. increase
assets and decrease liabilities.
100.
decrease assets and increase liabilities.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
97. The
normal balance of any account is the
98. left
side.
99. right
side.
100.
side which increases that account.
101.
side which decreases that account.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
98. The
double-entry system requires that each transaction must be recorded
99. in at
least two different accounts.
100.
in two sets of books.
101.
in a journal and in a ledger.
102.
first as a revenue and then as an expense.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
99. A
credit is not the
normal balance for which account listed below?
100.
Common Stock account
101.
Revenue account
102.
Liability account
103.
Dividends account
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
100.
The classification and normal balance of the Dividends account
is
101.
revenue with a credit balance.
102.
an expense with a debit balance.
103.
a liability with a credit balance.
104.
stockholders’ equity with a debit balance.
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
101.
Which of the following describes the classification and normal
balance of the Retained Earnings account?
102.
Asset, debit
103.
Stockholders’ equity, credit
104.
Revenues, credit
105.
Expense, debit
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
102.
Which of the following describes the classification and normal
balance of the Unearned Rent Revenue account?
103.
Asset, debit
104.
Liability, credit
105.
Revenues, credit
106.
Expense, debit
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
103.
A revenue account
104.
is increased by debits.
105.
is decreased by credits.
106.
has a normal balance of a debit.
107.
is increased by credits.
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
104.
Which one of the following represents the expanded basic accounting
equation?
105.
Assets = Liabilities + Common Stock + Dividends – Revenue –
Expenses
106.
Assets + Dividends + Expenses = Liabilities + Common Stock +
Revenues
107.
Assets – Liabilities – Dividends = Common Stock + Revenues –
Expenses
108.
Assets = Revenues + Expenses – Liabilities
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
105.
Which of the following correctly identifies normal balances of
accounts?
106.
Assets Debit
Liabilities
Credit
Common
Stock
Credit
Revenues
Debit
Expenses
Credit
1. Assets
Debit
Liabilities
Credit
Common
Stock
Credit
Revenues
Credit
Expenses
Credit
1. Assets
Credit
Liabilities
Debit
Common
Stock
Debit
Revenues
Credit
Expenses
Debit
1. Assets
Debit
Liabilities
Credit
Common
Stock
Credit
Revenues
Credit
Expenses
Debit
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
106.
Which accounts normally have debit balances?
107.
Assets, expenses, and revenues
108.
Assets, expense, and retained earnings
109.
Assets, liabilities, and dividends
110.
Assets, expenses, and dividends
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
107.
Which accounts normally have credit balances?
108.
Revenues, liabilities, and dividends
109.
Revenues, liabilities, and assets
110.
Revenues, liabilities, and retained earnings
111.
Revenues, liabilities, and expenses
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
108.
The best interpretation of the word “credit” is the
109.
offset side of an account.
110.
increase side of an account.
111.
right side of an account.
112.
decrease side of an account.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
109.
In recording an accounting transaction in a double-entry system
110.
the number of debit accounts must equal the number of credit
accounts.
111.
there must always be entries made on both sides of the
accounting equation.
112.
the amount of the debits must equal the amount of the credits.
113.
there must only be two accounts affected by any transaction.
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
110.
A debit is not the
normal balance for which account listed below?
111.
Dividends
112.
Cash
113.
Accounts Receivable
114.
Service Revenue
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
111.
An accountant has debited an asset account for $1,000 and
credited a liability account for $500. What can be done to complete the
recording of the transaction?
112.
Nothing further must be done.
113.
Debit a stockholders’ equity account for $500.
114.
Debit another asset account for $500.
115.
Credit a different asset account for $500.
Ans: D, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
112.
An accountant has debited an asset account for $800 and credited
a liability account for $700. Which of the following would be an incorrect way
to complete the recording of the transaction?
113.
Credit an asset account for $100.
114.
Credit another liability account for $100.
115.
Credit a stockholders’ equity account for $100.
116.
Debit a stockholders’ equity account for $100.
Ans: D, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
113.
An accountant has debited an asset account for $900 and credited
a liability account for $600. What can be done to complete the recording of the
transaction?
a Debit a stockholders’ equity account for
$300.
300.
Debit another asset account for $300.
301.
Credit a different asset account for $300.
302.
Nothing further must be done.
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
114.
Which of the following accounts is increased with a debit?
115.
Dividends
116.
Service Revenue
117.
Interest Payable
118.
Common Stock
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
115.
Which of the following accounts is increased with a credit?
116.
Supplies Expense
117.
Supplies
118.
Sales Revenue
119.
Dividends
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
116.
Which pair of accounts follows the rules of debit and credit in
relation to increases and decreases in the same manner?
117.
Dividends Payable and Rent Expense
118.
Utilities Expense and Notes Payable
119.
Prepaid Insurance and Advertising Expense
120.
Service Revenue and Equipment
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
117.
Which of the following accounts follows the rules of debit and
credit in relation to increases and decreases in the opposite manner?
118.
Prepaid Insurance and Dividends
119.
Dividends and Interest Revenue
120.
Interest Payable and Common Stock
121.
Advertising Expense and Land
Ans: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
118.
Which of the following is not true of the terms debit and credit?
119.
They can be abbreviated as Dr. and Cr.
120.
They can be interpreted to mean increase and decrease.
121.
They can be used to describe the balance of an account.
122.
They can be interpreted to mean left and right.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
119.
An account will have a credit balance if the
120.
credits exceed the debits.
121.
first transaction entered was a credit.
122.
debits exceed the credits.
123.
last transaction entered was a credit.
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
120.
For the basic accounting equation to stay in balance, each transaction
recorded must
121.
affect two or less accounts.
122.
affect two or more accounts.
123.
always affect exactly two accounts.
124.
affect the same number of asset and liability accounts.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
121.
Which of the following statements is true?
122.
Debits increase assets and increase liabilities.
123.
Credits decrease assets and decrease liabilities.
124.
Credits decrease assets and increase liabilities.
125.
Debits increase liabilities and decrease assets.
Ans: C, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
122.
Which pair of the listed accounts follows the rules of debits
and credits in relation to increases and decreases in the same manner?
123.
Salaries and Wages Expense and Notes Payable
124.
Common Stock and Rent Expense
125.
Prepaid Rent and Advertising Expense
126.
Service Revenue and Equipment
Ans: C, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
123.
Which pair of the listed accounts follows the rules of debits
and credits in relation to increases and decreases in the opposite manner?
124.
Salaries and Wages Expense and Notes Payable
125.
Common Stock and Unearned Rent Revenue
126.
Prepaid Rent and Advertising Expense
127.
Service Revenue and Notes Payable
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
124.
A company that receives money in advance of performing a service
125.
debits Cash and credits Unearned Service Revenue.
126.
debits Unearned Service Revenue and credits Accounts Payable
127.
debits Cash and credits Prepaid Insurance.
128.
debits Cash and credits Accounts Receivable.
Ans: A, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
125.
When a company performs a service but has not yet received
payment, it
126.
debits Service Revenue and credits Accounts Receivable.
127.
debits Accounts Receivable and credits Service Revenue.
128.
debits Service Revenue and credits Accounts Payable.
129.
makes no entry until cash is received.
Ans: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: None,
IMA: FSA
126.
Assets normally show
127.
credit balances.
128.
debit balances.
129.
debit and credit balances.
130.
debit or credit balances.
Ans: B, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
127.
An awareness of the normal balances of accounts would help you
spot which of the following as an error in recording?
128.
A debit balance in the Dividends account
129.
A credit balance in an expense account
130.
A credit balance in a liabilities account
131.
A credit balance in a revenue account
Ans: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
128.
If a company has overdrawn its bank balance, then
129.
its Cash account will show a debit balance.
130.
its Cash account will show a credit balance.
131.
the Cash account debits will exceed the cash account credits.
132.
it cannot be detected by observing the balance of the Cash
account.
Ans: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
129.
Which account below is not a subdivision of stockholders’
equity?
130.
Dividends
131.
Revenues
132.
Expenses
133.
Liabilities
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None,
AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,
IMA: Reporting
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