Question 1

Adjusting entries must be journalized and posted before closing entries may be prepared.

Accepted Answer

Adjusting entries are necessary to update the accounts to their correct balances before preparing the financial statements and closing entries, ensuring that the revenue recognition and matching principles are followed.

Question 2

An account is closed at year-end when an entry changes its balance to zero.

Accepted Answer

Closing an account at year-end involves making an entry that changes its balance to zero, transferring its balance to a permanent account to prepare the books for the next accounting period.

Question 3

The post-closing trial balance includes only balance sheet accounts.

Accepted Answer

The post-closing trial balance includes only balance sheet accounts because it is prepared after closing entries are made, which close out all temporary accounts (revenues, expenses, and dividends) to retained earnings, leaving only permanent accounts that appear on the balance sheet.

Question 4

The complete accounting cycle begins with the analysis of transactions and ends with the preparation of financial statements.

Accepted Answer

The complete accounting cycle begins with the analysis of transactions and ends with the closing of the books, which includes preparing financial statements and then closing entries to reset temporary account balances for the next accounting period.

Question 5

All accounts in the general ledger are closed at a company's fiscal year end in order to facilitate preparation of the financial statements and to ready the accounts for the activities of the next year.

Accepted Answer

Not all accounts in the general ledger are closed at a company's fiscal year end. Only temporary accounts (revenues, expenses, dividends) are closed to prepare for the new fiscal year. Permanent accounts (assets, liabilities, equity) carry their balances forward into the next fiscal year.

Question 6

The double-entry system of debits and credits means that:
A) Two pieces of information must be recorded for each transaction--the date and the dollar amount.
B) Debits will be recorded twice as often as credits.
C) At least two entries, a debit and a credit, must be made for each transaction.
D) Each debit and credit will be recorded two times, once in the general ledger and once in the trial balance.
E) None of the above

Accepted Answer

The double-entry system of accounting requires that for every financial transaction, there must be an equal and opposite entry in two different accounts. This means that if one account is debited, another account must be credited by the same amount, ensuring the accounting equation remains balanced. This system helps in detecting errors and ensuring the integrity of financial records.

Question 7

The term debit refers to:
A) The left side of an account
B) The right side of an account
C) The side of an account on which increases are recorded
D) Both A and C
E) None of the above

Accepted Answer

The answer of The term debit refers to:
A) The left...

Question 8

The term credit refers to:
A) The left side of an account
B) The right side of an account
C) The side of an account on which decreases are recorded
D) Both B and C
E) None of the above

Accepted Answer

Credits are recorded on the right side of an account in double-entry bookkeeping.

Question 9

The normal balance of an account is:
A) The debit side
B) The credit side
C) The side on which increases are recorded
D) The side on which decreases are recorded
E) None of the above

Accepted Answer

The normal balance of an account refers to the side (debit or credit) on which increases to the account are recorded, depending on the account type (asset, liability, equity, revenue, or expense).

Question 10

Which of the following accounts normally has a credit balance?
A) Accounts Receivable
B) Dividends
C) Notes Payable
D) Rent Expense
E) None of the above

Accepted Answer

Notes Payable is a liability account, and liability accounts normally have a credit balance.

Question 11

Which of the following accounts normally has a debit balance?
A) Accounts Payable
B) Common Stock
C) Dividends
D) Service Fees Earned
E) None of the above

Accepted Answer

Dividends typically have a debit balance because they represent a distribution of earnings to shareholders, reducing the equity of the company. Accounts Payable, Common Stock, and Service Fees Earned usually have a credit balance.

Question 12

Debits to which accounts result in an increased balance?
A) Assets and common stock
B) Revenues and assets
C) Common stock and expenses
D) Assets and expenses
E) Liabilities and expenses

Accepted Answer

Debits increase the balance of asset and expense accounts.

Question 13

In a double-entry accounting system:
A) All accounts have normal debit balances
B) A debit entry is recorded on the left side of an account
C) Liabilities, owner's common, and expense accounts all have normal credit balances
D) A credit entry records a decrease in an account
E) None of the above

Accepted Answer

In a double-entry accounting system, a debit entry is indeed recorded on the left side of an account. This is a fundamental principle of accounting, where each transaction is recorded in at least two accounts, with debits on the left and credits on the right.

Question 14

The Cash T-account has a beginning balance of $26,000. During the year, $122,000 was debited and $120,500 was credited to the account.
What is the ending balance of cash?
A) ($2,500)
B) $27,500
C) $18,500
D) Cannot be determined from the information given

Accepted Answer

The ending balance is calculated by adding the debits to the beginning balance and then subtracting the credits. Beginning balance ($26,000) + Debits ($122,000) - Credits ($120,500) = $27,500.

Question 15

If the beginning Cash account balance was $18,400, the ending balance was $10,200, and total cash received during the period was $44,000, what amount of cash was paid out during the period?
A) $52,200
B) $35,800
C) $ 1,800
D) $42,400
E) None of the above

Accepted Answer

To find the amount of cash paid out during the period, you can use the formula: Beginning Cash Balance + Cash Received - Cash Paid Out = Ending Cash Balance. Rearranging the formula to solve for Cash Paid Out gives: Cash Paid Out = Beginning Cash Balance + Cash Received - Ending Cash Balance. Plugging in the given values: $18,400 + $44,000 - $10,200 = $52,200.

Question 16

Which of the following journal entries will record the payment of a $850 accounts payable originally incurred for Office Supplies?
A) Debit Office Supplies; credit Cash
B) Debit Office Supplies; credit Accounts Payable
C) Debit Cash; credit Accounts Payable
D) Debit Accounts Payable; credit Cash

Accepted Answer

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The entry to record the payment of cash reduces the liability and reduces cash.
 11ee4a2a_6baa_03c2_98e8_1125ab74c607_TBCB1004_00

Question 17

A company bills customers for services rendered on account. Which of the following is one part of recording this transaction?
A) Debit Service Revenue
B) Credit Cash
C) Debit Accounts Receivable
D) Credit Unearned Revenue

Accepted Answer

When a company bills customers for services rendered on account, it means the company has provided services but has not yet received payment. Therefore, the company increases its Accounts Receivable (an asset account) to reflect the amount owed by the customer. This is done by debiting Accounts Receivable.

Question 18

Maxwell Industries recorded and paid $700 advertising for the current month. Which occurred?
A) Current assets increase
B) Current liabilities decrease
C) Net income decreases
D) Retained earnings increases

Accepted Answer

When a company records and pays for advertising, it is considered an expense. This expense reduces the company's net income for the period because expenses are subtracted from revenues to calculate net income.

Question 19

When invoices are sent to customers billing them for services that have been performed, the correct transaction analysis is:
A) Debit Accounts Receivable and credit Service Fees Earned
B) Debit Accounts Payable and credit Service Fees Earned
C) Debit Service Fees Earned and credit Accounts Receivable
D) Debit Cash and credit Service Fees Earned
E) Debit Accounts Receivable and credit Accounts Payable

Accepted Answer

When services are performed and invoiced to customers, the company recognizes revenue and creates an account receivable. Therefore, the correct entry is to debit Accounts Receivable (increasing assets) and credit Service Fees Earned (increasing revenue).

Question 20

Recording the collection of accounts receivable from customers involves:
A) Debiting Accounts Receivable and crediting Cash
B) Debiting Cash and crediting Service Fees Earned
C) Debiting Cash and crediting Accounts Payable
D) Debiting Cash and crediting Accounts Receivable
E) None of the above

Accepted Answer

When a company collects on accounts receivable, it is receiving cash from customers to whom it previously extended credit. This transaction increases the company's cash balance and decreases the accounts receivable balance. Therefore, the company debits Cash (to increase it) and credits Accounts Receivable (to decrease it).

Quiz 13: Appendix A: The Language of Accountants: Debits and Credits

Adjusting entries must be journalized and posted before closing entries may be prepared.

An account is closed at year-end when an entry changes its balance to zero.

The post-closing trial balance includes only balance sheet accounts.

The complete accounting cycle begins with the analysis of transactions and ends with the preparation of financial statements.

All accounts in the general ledger are closed at a company's fiscal year end in order to facilitate preparation of the financial statements and to ready the accounts for the activities of the next year.

The double-entry system of debits and credits means that:

The term debit refers to:

The term credit refers to:

The normal balance of an account is:

Which of the following accounts normally has a credit balance?

Which of the following accounts normally has a debit balance?

Debits to which accounts result in an increased balance?

In a double-entry accounting system:

The Cash T-account has a beginning balance of $26,000. During the year, $122,000 was debited and $120,500 was credited to the account. What is the ending balance of cash?

If the beginning Cash account balance was $18,400, the ending balance was $10,200, and total cash received during the period was $44,000, what amount of cash was paid out during the period?

Which of the following journal entries will record the payment of a $850 accounts payable originally incurred for Office Supplies?

A company bills customers for services rendered on account. Which of the following is one part of recording this transaction?

Maxwell Industries recorded and paid $700 advertising for the current month. Which occurred?

When invoices are sent to customers billing them for services that have been performed, the correct transaction analysis is:

Recording the collection of accounts receivable from customers involves: