Chapter 2 FA

Which of the following statements about an account is true?

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

• b. An account is an individual accounting record of increases and decreases in specific asset, liability, and equity items.

• c. There are separate accounts for specific assets and liabilities but only one account for equity items.

• d. The left side of an account is the credit, or decrease, side.

Debits:

• a. increase both assets and liabilities

• b. decrease both assets and liabilities.

• c. increase assets and decrease liabilities.

• d. decrease assets and increase liabilities

A revenue account:

• a. is increased by debits.

• b. is decreased by credits.

• c. has a normal balance of a debit.

• d. is increased by credits.

Accounts that normally have debit balances are:

• a. assets, expenses, and revenues.

• b. assets, expenses, and share capital—ordinary.

• c. assets, liabilities, and dividends.

• d. assets, dividends, and expenses.

The expanded accounting equation is:

• a. Assets + Liabilities = Share Capital + Retained Earnings + Dividends + Revenues + Expenses.

• b. Assets = Liabilities + Share Capital + Retained Earnings + Dividends + Revenues – Expenses.

• c. Assets = Liabilities – Share Capital – Retained Earnings – Dividends – Revenues – Expenses.

• d. Assets = Liabilities + Share Capital + Retained Earnings + Revenues – Expenses – Dividends.

Which of the following is not part of the recording process?

• a. Analyzing transactions.

• b. Preparing an income statement.

• c. Entering transactions in a journal.

• d. Posting journal entries.

Which of the following statements about a journal is false?

• a. It is not a book of original entry.

• b. It provides a chronological record of transactions.

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

• d. It discloses in one place the complete effect of a transaction.

The purchase of supplies on account should result in:

• a. a debit to Supplies Expense and a credit to Cash.

• b. a debit to Supplies Expense and a credit to Accounts Payable.

• c. a debit to Supplies and a credit to Accounts Payable.

• d. a debit to Supplies and a credit to Accounts Receivable.

The order of the accounts in the ledger is:

• a. assets, revenues, expenses, liabilities, share capital—ordinary, dividends.

• b. assets, liabilities, share capital—ordinary, dividends, revenues, expenses.

• c. share capital—ordinary, assets, revenues, expenses, liabilities, dividends.

• d. revenues, assets, expenses, liabilities, share capital—ordinary, dividends.

A ledger:

• a. contains only asset and liability accounts.

• b. should show accounts in alphabetical order.

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

• d. is a book of original entry.