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Exam 2: The Recording Process

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Question 61

Multiple Choice

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Which of the following statements is false?

A) Revenues increase stockholders' equity.
B) Revenues have normal credit balances.
C) Revenues are a positive factor in the computation of net income.
D) Revenues are increased by debits.

E) B) and D)
F) A) and B)

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Question 62

Multiple Choice

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Which account below is not a subdivision of retained earnings?

A) Dividends
B) Revenues
C) Expenses
D) Common stock

E) B) and C)
F) All of the above

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Question 63

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For each of the following transactions of Neon Garden, identify the account to be debited and the account to be credited. 1. Purchased 18-month insurance policy for cash. 2. Paid weekly payroll. 3. Purchased supplies on account. 4. Received utility bill to be paid at later date.

The first step in the recording process is to

A compound journal entry involves

The standard format of a journal would not include

A T-account is

A credit balance in a liability account indicates that an error in recording has occurred.

An account will have a credit balance if the

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions. 1. The company issues stock in exchange for $40,000 cash 2. Purchased $400 of supplies on credit. 3. Purchased equipment for $8,000, paying $2,000 in cash and signed a 30-day, $6,000, note payable. 4. Real estate commissions billed to clients amount to $4,000. 5. Paid $700 in cash for the current month's rent. 6. Paid $200 cash on account for supplies purchased in transaction 2. 7. Received a bill for $600 for advertising for the current month. 8. Paid $2,200 cash for office salaries and wages. 9. The company paid dividends of $1,500. 10. Received a check for $3,000 from a client in payment on account for commissions billed in transaction 4.

All business transactions must be entered first in the general ledger.

The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction.

On August 13, 2018, Swell Maps Enterprises purchased equipment for $1,300 and supplies of $200 on account. Which of the following journal entries is recorded correctly and in the standard format?

For each transaction given, enter in the tabulation given below a "D" for debit and a "C" for credit to reflect the increases and decreases of the assets, liabilities, and stockholders' equity accounts. In some cases there may be a "D" and a "C" in the same box. Transactions: 1. Invests cash in exchange for stock. 2. Pays insurance in advance for six months. 3. Pays secretary's salary. 4. Purchases supplies on account. 5. Pays electricity bill. 6. Borrows money from local bank. 7. Makes payment on account. 8. Receives cash due from customers. 9. Provides services on account. 10. The company pays a dividends.

The ledger is merely a bookkeeping device and therefore does not provide much useful data for management.

The trial balance of Red House Painters shown below does not balance. An examination of the ledger and journal reveals the following errors: 1. Each of the above listed accounts has a normal balance per the general ledger. 2. Cash of $270 received from a customer on account was debited to Cash $720 and credited to Accounts Receivable $720. 3. A dividend of $400 was posted as a credit to Dividends $400 and credit to Cash $400. 4. A debit of $300 was not posted to Salaries and Wages Expense. 5. The purchase of equipment on account for $700 was recorded as a debit to Maintenance and Repairs Expense and a credit to Accounts Payable for $700. 6. Services were performed on account for a customer, $510, for which Accounts Receivable was debited $510 and Service Revenue was credited $51. 7. A payment on account for $235 was credited to Cash for $235 and credited to Accounts Payable for $253. Instructions Prepare a correct trial balance.

For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders' Equity, Revenue, Expense), (b) the debit and credit effects, and (c) the normal account balance.

When three or more accounts are required in one journal entry, the entry is referred to as a

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

Business documents can provide evidence that a transaction has occurred.