ACC202 Ch.2

What is an account in accounting?

• A summary of company transactions

• An individual record of increases and decreases in a specific asset, liability, or equity item

• A financial statement

• A method to compute profits

Which of the following statements about debits and credits is TRUE?

• A credit always increases an account

• A debit always decreases an account

• A credit increases liabilities and equity, while a debit increases assets

• Debits and credits always have the same effect on all accounts

Which of the following accounts normally has a credit balance?

• Equipment

• Salaries Expense

• Share Capital—Ordinary

• Cash

What is the normal balance of an asset account?

• Debit

• Credit

• Either debit or credit

• None of the above

Which of the following statements about dividends is correct?

• Dividends increase equity

• Dividends decrease retained earnings

• Dividends are recorded as an expense

• Dividends do not affect the accounting equation

Which of the following statements about revenues and expenses is TRUE?

• Revenue is increased by a debit entry

• Expenses increase equity

• Expenses have normal credit balances

• Revenue increases equity

The journal is referred to as:

• The final step in the recording process

• The book of original entry

• A trial balance summary

• A part of financial statements

What is the purpose of posting in the accounting process?

• To transfer balances from the trial balance to financial statements

• To transfer journal entries to ledger accounts

• To record transactions in the journal

• To close accounts at the end of the period

Which of the following is NOT a feature of journalizing transactions?

• Each transaction is recorded in chronological order

• Debit accounts are listed before credit accounts

• A brief explanation of the transaction is included

• Revenue and expenses are recorded in the trial balance first

What is the function of the chart of accounts?

• To summarize financial statements

• To provide a complete listing of all account titles used in a company

• To list only revenue and expense accounts

• To show the total assets of a company