| Question 1. | Question : | (TCO 2) The debt created by a business when it makes a purchase on account is a(n) |
| | Student Answer: | | revenue. | | | | prepaid expense. | | | | account receivable. | | | | account payable. | | | |
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| Question 2. | Question : | (TCO 2) Which of the following transactions will increase Stockholders’ Equity? |
| | Student Answer: | | The company pays a dividend to its shareholders. | | | | The company issues common stock to new shareholders. | | | | The president of the company buys a new personal automobile. | | | | The company makes a payment on account. | | | |
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| Question 3. | Question : | (TCO 2) When a company borrows cash from the bank |
| | Student Answer: | | total assets remain the same. | | | | liabilities are increased. | | | | retained earnings is decreased. | | | | total liabilities remain the same. | | | |
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| Question 4. | Question : | (TCO 2) Which of the following is a true statement regarding T-accounts? |
| | Student Answer: | | The transaction needs to be analyzed to determine which accounts are affected before entering amounts in the T-accounts. | | | | If a company pays cash, an amount would be entered on the left side of the T-account. | | | | T-accounts are only used to record complex transactions. | | | | To debit an asset, an amount is entered on the left side of the T-account and to debit a liability an amount is entered on the right side of the T-account. | | | |
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| Question 5. | Question : | (TCO 2) An important rule of debits and credits is |
| | Student Answer: | | credits increase a liability account. | | | | debits decrease an asset account | | | | revenues are increased by a debit. | | | | expenses are increased by a credit. | | | |
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| Question 6. | Question : | (TCO 2) The process of copying the information from the journal to the ledger is called |
| | Student Answer: | | posting. | | | | summarizing. | | | | journalizing. | | | | preparing the financial statements. | | I | |
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| Question 7. | Question : | (TCO 3) Under accrual accounting, the impact of a business transaction is recorded |
| | Student Answer: | | as it occurs. | | | | when cash is received or paid. | | | | at the end of the accounting period. | | | | only if the amount of the transaction is material. | | | |
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| Question 8. | Question : | (TCO 3) The revenue principle governs two things: |
| | Student Answer: | | when to record revenue and where to record this revenue. | | | | where to record revenue and the amount of revenue to record. | | | | when to record revenue and the amount of revenue to record. | | | | when to record revenue and in which journal to record the revenue. | | | |
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| Question 9. | Question : | (TCO 3) The balance sheet reports |
| | Student Answer: | | assets, liabilities and stockholders’ equity. | | | | the changes in retained earnings. | | | | assets, liabilities, revenues and expenses. | | | | revenues and expenses. | | | |
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| Question 10. | Question : | (TCO 3) To close the books of a company, you should |
| | Student Answer: | | debit each revenue account, credit each expense account, and debit the dividends account. | | | | credit each revenue account, debit each expense account, and debit the dividends account. | | | | debit each revenue account, credit each expense account, and credit the dividends account. | | | | debit each revenue account, debit each expense account, and credit the dividends account. | | | |
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