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Exam 2: Accounting for Business Transactions

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Question 41

Multiple Choice

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

A) The transaction date.
B) The names of the accounts involved.
C) The amount of each debit and credit.
D) An explanation of the transaction.
E) The balance in each account.

F) B) and C)
G) D) and E)

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Question 42

Multiple Choice

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The chronological record of each complete transaction that has occurred is called the:

A) Account balance.
B) Ledger.
C) Journal.
D) Trial balance.
E) Cash account.

F) A) and D)
G) None of the above

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Question 43

Multiple Choice

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An account used to record the stockholders' investments in a business is called a(n) :

A credit entry:

Pippa's Paralegal Services, Inc. completed these transactions in February: a. Purchased office supplies on account, $300. b. Completed work for a client on credit, $500. c. Paid cash for the office supplies purchased in (a). d. Completed work for a client and received $800 cash. e. Received $500 cash for the work described in (b). f. Received $1,000 from a client for paralegal services to be performed in March. Prepare journal entries to record the above transactions. Explanations are not necessary.

Identify the statement below that is incorrect.

Which financial statement reports an organization's financial position at a single point in time?

A company's list of accounts and the identification numbers assigned to each account is called a:

At year-end, Henry Laundry Service, Inc. noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5. A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Henry was recorded as a debit to Common Stock and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. The revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash withdrawal by the stockholder was recorded as a $100 debit to Dividends and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required. $\begin{array} { |l|l|l|l|l|l|}\hline& \begin{array}{c}\text { Would } \\\text { the }\\\text { error } \\\text { cause } \\\text { the trial } \\\text { balance } \\\text { to be out } \\\text { of } \\\text { balance? } \\\end{array}&&\begin{array}{c}\text { Amount } \\\text { of } \\\text { Imbalance } \\\end{array}&\begin{array}{c}\text { Correcting } \\\text { Journal } \\\text { Entry } \\\text { Required } \\\end{array}\\\hline\text { Error } & \text { Yes } & \text { No }&& \text { Yes } & \text { No }\\\hline1\\\hline2\\\hline3\\\hline4\\\hline5\\\hline6\\\hline7\\\hline8\\\hline9\\\hline10\\\hline\end{array}$

ABC Company made a $2,500 payment on account, to satisfy a previously recorded account payable. Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.

If cash was incorrectly debited for $100 instead of correctly crediting it for $100, the cash account's balance will be overstated (too high).

Explain how accounts are used in recording information about a business's transactions.

If cash is received from customers in payment for products or services that have not yet been delivered to the customers, the business would record the cash receipt as:

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.

_______________ is the process of transferring journal entry information from the journal to the ledger.

Explain debits and credits and their role in the accounting system of a business.

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

A company's formal promise to pay (in the form of a promissory note) a future amount is a(n) :

For each of the following accounts, identify whether a debit or credit yields the indicated change. a. To increase Fees Earned b. To decrease Cash c. To decrease Unearned Revenue d. To increase Accounts Receivable e. To increase Common Stock f. To decrease Notes Payable g. To increase Prepaid Rent h. To increase Salaries Expense i. To increase Accounts Payable j. To decrease Prepaid Insurance

Debit means increase and credit means decrease for all accounts.