Question 1

The Dividends account indicates an increase in common stock.

Accepted Answer

The Dividends account represents a distribution of profits to shareholders and thus indicates a decrease in retained earnings, not an increase in common stock.

Question 2

Which of the following is NOT a business transaction?
A)The company buys land for cash.
B)The company sells goods for cash.
C)The company hires a new president.
D)The company pays a dividend to its stockholders.

Accepted Answer

Hiring a new president is a personnel transaction, not a business transaction. A business transaction involves the exchange of goods or services for something of value, such as cash or credit. The other options involve such exchanges.

Question 3

Accrued Salaries Payable is a liability account.

Accepted Answer

Accrued Salaries Payable represents the amount of salaries owed by a company to its employees for work done but not yet paid. As it is a liability, it is recorded on the balance sheet as part of the company's obligations or debts.

Question 4

A company purchased Office Supplies for cash. This transaction increased assets and:
A)increased equity.
B)increased liabilities.
C)increased revenues.
D)decreased assets.

Accepted Answer

Purchasing office supplies for cash decreases one asset (cash) while increasing another asset (office supplies), resulting in no net increase in assets.

Question 5

A record of all the changes in a particular asset, liability, or stockholders' equity during a period is called a (n):
A)transaction.
B)trial balance.
C)journal
D)account.

Accepted Answer

The answer of A record of all the changes in...

Question 6

The debt created by a business when it makes a purchase on account is a(n):
A) account receivable.
B) revenue.
C) prepaid expense.
D) account payable.

Accepted Answer

When a business makes a purchase on account, it means they have bought goods or services on credit and owe payment to the supplier. Therefore, the debt created is known as an account payable. A is incorrect because an account receivable is created when the company sells its goods or services and is owed payment by the customer. B is incorrect because revenue refers to the inflow of money from sales or services provided by the business. C is incorrect because prepaid expense refers to payments made in advance for goods or services that will be received in the future.

Question 7

A company received cash in exchange for issuing stock. This transaction increased assets and:
A)increased expenses.
B)increased revenues.
C)increased liabilities.
D)increased equity.

Accepted Answer

Issuing stock increases equity as it represents ownership in the company. It does not affect expenses or revenues, and it only increases liabilities if the company issued stock in exchange for taking on a new debt obligation.

Question 8

Income statement data appears as revenues and expenses under Retained Earnings.

Accepted Answer

The answer of Income statement data appears as revenues and...

Question 9

Revenues are recorded when:
A)the company signs a contract.
B)work is begun on the job.
C)cash is received from the customer.
D)the work is completed on the job, whether or not the cash is received.

Accepted Answer

According to the revenue recognition principle, revenues should be recorded when the work is completed, regardless of when cash is received. Therefore, the correct choice is D, which states that revenues are recorded when the work is completed on the job, whether or not the cash is received. Choices A and B are incorrect because they do not necessarily indicate that the work is completed, and choice C is incorrect because cash receipt is not the determining factor for recognizing revenue.

Question 10

Transactions affecting Stockholders' Equity include:
A)sale of common stock and payment of expenses.
B)revenues and purchase of supplies on account.
C)purchase of land and a sale on account.
D)payment of a liability and payment of expenses.

Accepted Answer

The sale of common stock affects stockholders' equity because it increases the amount of capital contributed by the stockholders. Payment of expenses, on the other hand, reduces stockholders' equity by decreasing the company's assets. Revenues and purchase of supplies on account are transactions that affect assets and liabilities, but not stockholders' equity. Purchase of land and a sale on account are also transactions that affect assets and liabilities, but not stockholders' equity. Payment of a liability and payment of expenses have the same effect as payment of expenses alone, which reduces stockholders' equity.

Question 11

Any event that has a financial impact on the business and can be measured reliably is a(n):
A)income statement.
B)transaction.
C)asset.
D)journal.

Accepted Answer

A transaction is an event that has a financial impact on the business and can be measured reliably. An income statement is a financial statement that shows the revenues, expenses, and net income of a business over a specific period. An asset is a resource owned by a business that has monetary value and can be used to generate future economic benefits. A journal is a record of financial transactions in chronological order.

Question 12

A company performed services for a customer on account. This transaction increased assets and:
A)decreased equity.
B)increased liabilities.
C)increased expenses.
D)increased revenues

Accepted Answer

The transaction of performing services for a customer on account increased assets, specifically accounts receivable, and also increased revenues. It did not affect equity or liabilities, nor did it increase any expenses.

Question 13

The rules for recording accounting transactions do NOT include which of the following?
A)Every transaction's net amount on the left side of the equation must equal the net amount on the right side.
B)Both sides of the accounting equation must be affected.
C)Every transaction affects the financial statements of the business.
D)Total assets must always equal total liabilities plus total equity.

Accepted Answer

The answer of The rules for recording accounting transactions do...

Question 14

Which of the following is NOT an asset account?
A)Accounts Receivable
B)Prepaid Rent
C)Common Stock
D)All of these are asset accounts.

Accepted Answer

Common Stock is a equity account, not an asset account. Accounts Receivable and Prepaid Rent are both examples of asset accounts.

Question 15

A business transaction has occurred when:
A)an event affects the entity's financial position.
B)the event can be reliably measured.
C)the accountant determines that the event is important enough to be a business transaction.
D)both A and B occur.

Accepted Answer

A business transaction occurs when an event affects the entity's financial position and can be reliably measured. The accountant's determination of importance does not define whether a transaction has occurred, but rather whether it should be disclosed in the financial statements. Therefore, choice D is the correct answer.

Question 16

A company paid cash for employee wages. This transaction:
A)increased cash and increased expenses.
B)increased cash and decreased expenses.
C)decreased cash and increased expenses.
D)decreased cash and decreased revenues.

Accepted Answer

Paying cash for employee wages decreases the company's cash and increases its expenses, as wages are a cost of doing business.

Question 17

The purchase of office equipment for cash would increase both an asset and a liability account.

Accepted Answer

The purchase of office equipment for cash would increase an asset account (Office Equipment) and decrease a liability account (Cash), resulting in no change to the overall liability of the company. Therefore, there is no increase in a liability account.

Question 18

When a business makes a sale on account, the asset created is a(n):
A)revenue.
B)expense.
C)account receivable.
D)account payable.

Accepted Answer

A sale on account means that the customer will pay in the future, creating a debt owed to the business. This debt is called an accounts receivable, which is an asset on the business's balance sheet. Option A, revenue, is the income earned from the sale, but not the asset created. Option B, expense, is a cost incurred by the business, but not related to a sale on account. Option D, accounts payable, would be created if the business purchases something on credit from a supplier, not if it makes a sale on account to a customer.

Question 19

Goods purchased on account for future use in the business, such as Office Supplies, are called:
A)Accrued liabilities.
B)Prepaid expenses.
C)Revenues.
D)Expenses.

Accepted Answer

Goods purchased on account for future use in the business are classified as prepaid expenses. This is because the payment has been made in advance and the benefits of the goods will be realized in future periods.

Question 20

Prepaid expense accounts appear on:
A)the Income Statement.
B)the Balance Sheet.
C)the Statement of Retained Earnings and on the Income Statement.
D)both the Income Statement and Balance Sheet.

Accepted Answer

Prepaid expenses are assets that represent payments made in advance for goods and services that will be received later. As such, they appear on the balance sheet as assets. They are not included in the income statement until the expenses they represent are incurred. Therefore, they do not appear on the income statement.

Quiz 2: Transaction Analysis

The Dividends account indicates an increase in common stock.

Which of the following is NOT a business transaction?

Accrued Salaries Payable is a liability account.

A company purchased Office Supplies for cash. This transaction increased assets and:

A record of all the changes in a particular asset, liability, or stockholders' equity during a period is called a (n) :

The debt created by a business when it makes a purchase on account is a(n) :

A company received cash in exchange for issuing stock. This transaction increased assets and:

Income statement data appears as revenues and expenses under Retained Earnings.

Revenues are recorded when:

Transactions affecting Stockholders' Equity include:

Any event that has a financial impact on the business and can be measured reliably is a(n) :

A company performed services for a customer on account. This transaction increased assets and:

The rules for recording accounting transactions do NOT include which of the following?

Which of the following is NOT an asset account?

A business transaction has occurred when:

A company paid cash for employee wages. This transaction:

The purchase of office equipment for cash would increase both an asset and a liability account.

When a business makes a sale on account, the asset created is a(n) :

Goods purchased on account for future use in the business, such as Office Supplies, are called:

Prepaid expense accounts appear on: