BAT Chapter 2 Review

Which of the following statements about an account is true?

• The right side of an account is the credit or decrease side

• An account is an individual accounting record of increases and decreases in specific asset, liability, and owner's equity items

• There are separate accounts for specific assets and liabilities but only one account for owner's equity items

• The right side of an account is the debit or increase side

Credits:

• increase both assets and liabilities

• decrease both assets and liabilities

• increase assets and decrease liabilities

• decrease assets and increase liabilities

Accounts that normally have debit balances are:

• assets, expenses, and revenues

• assets, expenses, and owner's capital

• assets, liabilities, and drawings

• assets, expenses, and drawings

An expense account:

• is increased by debits

• has a normal balance of a credit

• is decreased by debits

• is increased by credits

What is the correct sequence of steps in the recording process?

• Analyze transactions; prepare trial balance

• Analyze transactions; enter transactions in journal; post transactions

• Enter transactions in a journal; post transactions; prepare a trial balance

• Enter transactions in a journal; post transactions; analyze transactions

Performing services for a customer on account should result in:

• a decrease in the liability account Accounts Payable and an increase in the revenue account Service Revenue

• an increase in the asset Cash and a decrease in the asset account Accounts Receivable

• an increase to the asset account Accounts Receivable and an increase to the liability account Unearned Revenue

• an increase to the asset account Accounts Receivable and an increase to the revenue account Service Revenue

The purchase of equipment on account should result in:

• a debit to Equipment and a credit to Accounts Payable

• a debit to Equipment Expense and a credit to Accounts Payable

• a debit to Equipment and a credit to Cash

• a debit to Accounts Receivable and a credit to Equipment

Which of these statements about a journal is false?

• It provide a chronological record of transactions

• It helps to locate errors because the debit and credit amounts for each entry can be easily compared

• It shows in one place the complete effect of a transaction

• It is not a book of original entry

A ledger:

• should show accounts in alphabetical order

• is a collection of the entire group of accounts maintained by a company

• is a book of original entry

• contains only asset and liability accounts

Posting:

• is normally done before journalizing

• transfers ledger transaction data to the journal

• is an optional step in the recording process

• transfers journal entries to ledger accounts