1) Which of the following entries would be used to record the billing of fees earned?
A) Debit Accounts Receivable and credit Rental Fees
B) Credit Cash and credit Rental Fees
C) Debit Cash and credit Rental Fees
D) Debit Cash and debit Rental Fees
2) If total liabilities are $1,000 and total assets are $8,000, owner's equity must be:
A) $7,000.
B) $3,000.
C) $10,000.
D) $13,000.
3) Which of the statements of the rules of debit and credit is true?
A) Decrease Accounts Receivable with a credit and the normal balance is a credit.
B) Increase Accounts Payable with a credit and the normal balance is a credit.
C) Increase Capital with a debit and the normal balance is a debit.
D) Decrease Cash with a debit and the normal balance is a debit.
4) How does the purchase of office equipment on account affect the accounting equation?
A) Assets increase; liabilities decrease
B) Assets increase; owner's equity increases
C) Assets increase; liabilities increase
D) Liabilities increase; owner's equity decreases
5) Which of the following entries records the investment of cash by John, owner of a sole proprietorship?
A) Debit John, Capital; credit Cash
B) Debit Cash; credit John, Withdrawals
C) Debit John, Withdrawals; credit Cash
D) Debit Cash; credit John, Capital
6) Mary invested cash in her new business. What effect will this have?
A) Increase an asset and increase a liability
B) Decrease an asset and increase a liability
C) Increase an asset and increase owner's equity
D) Increase an asset and decrease owner's equity
7) Dennis, owner of Dennis' Golf Center, withdrew $900 in cash from the business. Record the transaction by:
A) debiting Dennis, Withdrawals, $900; crediting Cash, $900.
B) debiting Accounts Receivable, $900; crediting Cash, $900.
C) debiting Expense, $900; crediting Cash, $900.
D) debiting Dennis, Withdrawals, $900; crediting Dennis, Capital, $900.
8) A business paid $5,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to:
A) increase one asset, decrease another asset.
B) increase an asset, increase a liability.
C) decrease an asset, decrease a liability.
D) increase an asset, increase owner's equity.
9) The entry to record Tom's payment of a home telephone bill is:
A) debit Telephone Expense; credit Accounts Payable.
B) debit Tom's Withdrawals; credit Cash.
C) debit Telephone Expense; credit Cash.
D) debit Tom's Withdrawals; credit Accounts Payable.
10) Strum Hardware has total assets of $50,000. What are the total assets if new equipment is purchased for $10,000 cash?
A) $45,000
B) $50,000
C) $55,000
D) $60,000
11) Extreme Home bought painting equipment on account for $2,100. The entry would include:
A) debit to Supplies Expense, $2,100; credit to Cash, $2,100.
B) debit to Equipment, $2,100; credit to Cash, $2,100.
C) debit to Equipment, $2,100; credit to Accounts Payable, $2,100.
D) debit to Supplies Expense, $2,100; credit to Accounts Payable, $2,100.
12) Harvest Moon Company has total assets of $15,000. If $3,000 cash is used to purchase a new computer, the total assets would be:
A) $15,000.
B) $13,000.
C) $17,000.
D) $2,000.
13) The owner of BobCats R Us paid his personal MasterCard bill using a company check. The correct entry to record the transaction is:
A) credit Cash; debit Capital.
B) credit Cash; debit Supplies Expense.
C) credit Cash; debit Withdrawals.
14) Katie's Vegetarian Restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?
A) Total assets are now $105,000.
B) Total assets are now $80,000.
C) Total assets are now $15,000.
D) Total assets are now $75,000.
15) Carrie flew to San Francisco on a business trip. The purchase price of the ticket was $422 and it was bought on account. The entry to record the transaction is:
A) debit Accounts Payable, $422; credit Travel Expense, $422.
B) debit Capital, $422; credit Accounts Payable, $422.
C) debit Travel Expense, $422; credit Accounts Payable, $422.
D) debit Travel Expense, $422; credit Cash, $422.
16) Logan's Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?
A) Total assets increase.
B) Total assets are unchanged.
C) Total liabilities decrease.
D) Total liabilities are unchanged.
17) The Accounts Receivable account has total debit postings of $1,900 and credit postings of $1100. The balance of the account is:
A) $800 debit.
B) $800 credit.
C) $2,600 credit.
D) $2,600 debit.
18) Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes:
A) Cash and Capital to decrease.
B) Office Equipment and Accounts Payable to increase.
C) Office Equipment to decrease and Accounts Payable to increase.
D) Accounts Payable to increase and Capital to decrease.
19) The Accounts Payable account has total debit postings of $900 and credit postings of $1,500. The balance is:
A) $2,200 debit.
B) $600 credit.
C) $2,200 credit.
D) $600 debit.
20) Eileen's Corner Shoppe purchases a new computer for cash. This causes:
A) Cash and Capital to increase.
B) Computer Equipment and Cash to increase.
C) Computer Equipment to increase and Cash to decrease.
D) Accounts Payable to increase and Capital to increase.
21) Office Supplies had a normal starting balance of $75. There were debit postings of $80 and credit postings of $60 during the month. The ending balance is:
A) $55 debit.
B) $55 credit.
C) $95 debit.
D) $95 credit.
22) Bob purchased a new computer for the company on account. The transaction will:
A) increase Computer; increase Capital.
B) decrease Cash; increase Accounts Payable.
C) decrease Cash; increase Computer.
D) increase Computer; increase Accounts Payable.
23) Accounts Receivable has a normal balance of $1,100. After collecting $800, the balance in the account is:
A) debit $300.
B) debit $1,900.
C) credit $300.
D) credit $1,900.
24) Katelyn purchased $11,000 of new electronic equipment for her DJ Company on account. The effect on the basic accounting equation was to:
A) decrease Cash $11,000 and increase Equipment $11,000.
B) increase Equipment $11,000 and increase Accounts Payable $11,000.
C) decrease Cash $11,000 and increase Accounts Payable $11,000.
D) increase Cash $11,000 and increase Equipment $11,000.
25) The beginning balance in Cash was $3,500. Additional cash of $2,000 was received. Checks were written totaling $2,500. The cash balance is:
A) $2,000.
B) $6,000.
C) $4,500.
D) $3,000.
26) The balance sheet contains:
A) liabilities, expenses and capital.
B) assets, liabilities and revenues.
C) expenses, assets and cash.
D) assets, liabilities and owner's equity.
27) A credit to an asset account was posted to the Capital account. This error would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) Capital to be understated.
D) Both A and C are correct.
28) Which of the following items is not listed on the balance sheet?
A) Accounts Payable
B) Accounts Receivable
C) Revenue
D) Equipment
29) A credit to a liability account was posted to an expense account. This error would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) expenses to be overstated.
D) None of the above are correct.
30) If total assets are $30,000 and total liabilities are $18,000, Capital must equal:
A) $12,000.
B) $28,000.
C) $8,000.
D) $20,000.
31) The purchase of equipment with both cash and on account was recorded as only a credit purchase. Due to this error:
A) assets would be understated.
B) liabilities would be overstated.
C) owner's equity would be overstated.
D) None of the above are correct.
32) A purchase of a vehicle for cash would have what affect on the accounting equation?
A) Total asset amount remains the same.
B) Total liabilities are overstated.
C) Total owner's equity is overstated.
D) Both A and B are correct.
33) The cash purchase of a truck was recorded as a purchase on credit. Due to this error:
A) assets were overstated.
B) liabilities were overstated.
C) answers A and B are both correct.
D) None of the above are correct.
34) Which of the following transactions would cause one asset to increase and another asset to decrease?
A) The owner invested cash in the business.
B) The business paid a creditor.
C) The business incurred an expense on credit.
D) The business bought supplies for cash.
35) Which of the following transactions would cause an asset to increase and the owner's equity to increase?
A) The owner invested cash in the business.
B) The business incurred an expense on credit.
C) The business bought supplies on account.
D) The owner withdrew cash from the business.
36) Which of the following would result if the owner invested cash in the business?
A) Cash would increase and Capital would decrease.
B) Cash would increase and Capital would increase.
C) Cash would decrease and Capital would increase.
D) An investment by the owner is not a business transaction.
37) Which of the following would result if the business purchased supplies on credit?
A) Supplies would increase and Cash would decrease.
B) Supplies would increase and Capital would increase.
C) Supplies would increase and Accounts Payable would increase.
D) The purchase of supplies is not a business transaction.
38) Which of the following would result if a business purchased Equipment paying a 40% down payment in cash?
A) Equipment would increase and Cash would decrease.
B) Accounts Payable would increase.
C) Since the equipment has not been paid in full, there is nothing to record.
D) Both A and B are correct.