CHAPTER 2

What does the "trial balance" help to verify?

• The profitability of the business

• The equality of total debits and credits in the ledger

• The company's cash flow status

• The accuracy of financial statements

The collection of an accounts receivable

• Decreases assets and increases liabilities

• Increases assets and decreases assets

• Decreases assets and decreases owners’ equity

• Increases assets and increases owners’ equity

Which of the following is not a proper step in preparing a trial balance?

• List the accounts in alphabetical order

• Sum each column

• Compare the totals of each column

• List each ledger account that has a balance, listing debit balances and credit balances in the left and right columns, respectively

Posting is performed by transferring information from the

• Journal to the ledger

• Source documents to the ledger

• Ledger to the journal

• Source documents to the journal

In double-entry accounting, which of the following is true?

• Debits must always exceed credits

• Transactions are recorded only once

• Every transaction affects at least two accounts

• Only credits are recorded

Which of the following would not cause unbalance in the trial balance?

• An account with a debit balance being recorded as a credit

• A debit Utilities Expense being posted as a debit Rent Expense

• The balance of an account is incorrect

• An error in carrying the account balance into the trial balance

Owners' equity is affected by

• Payment of liability

• Collection of accounts receivable

• Purchase of an asset

• Payment of dividend

What does the recognition point in accounting?

• The date of the company's fiscal year-end

• The date when the financial statements are prepared

• The point when a transaction is identified for recording

• The time when the company decides to make a payment

Which of the following accounts is an asset?

• Prepaid Insurance

• Insurance Expense

• Insurance Payable

• Unearned Insurance Fees

Suhoza Company accepts an advance fee of $200 for services Suhoza is to provide next year. Suhoza's entry to record this transaction would include:

• Credit to Cash

• Debit to Accounts Receivable

• Credit to Unearned Revenue (debit Cash)

• Credit to Service Fees Earned