Fundamental of Accounting

Sheet (4)
First year
Midterm ‫مزكرة مراجعة المتحان ال‬
Edited by/ Dr. magdy kamel
‫للتواصل على جروب الخاص كلمنى وتس اضيفك‬
Tel/ 01273949660

Chapter (1)
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Accounting is often called the language of business

There are three basic activities

It identifies, records and communicates the economic events of an organization

to interested users (internal users & external users)

‫يجب على الشركة ان تحدد االحداث االقتصادية ( العملية ) ثم تسجلها ثم تبلغها للمستخدمين المهتمين‬
)‫(سواء مستخدمين داخل الشركة او مستخدمين خارج الشركة‬
1- identify : to select economic events (transaction) relevant to its business

2- recording: recording those events, classify summarize economic events &

measured in dollors and cents

3. communication: prepare accounting reports

)‫ بحدد العملية المرتبطة بالمشروع (بحدد االحداث االقتصادى‬-1
‫ بسجل هذه االحداث وتلخيصها ويتم قياسها بالدوالر او السنت‬-2
‫ تعنى اعداد التقارير المحاسبية‬: ‫ االتصال‬-3
notes
 Bookkeeping usually involves only the recording of economic events.
 It is just one part of the accounting process

There are three types of firm

1. sole proprietorship: is owned by one person

2. partnership: owned by more than one owner

3. Corporation: Ownership divided into shares of stock, and Separate legal

organized under state corporation law.

Assumptions
1- monetary unit assumption )‫فرض الوحده النقدية (او فرض استقرار العملة‬
The assumption that unit of measure remains sufficiently constant over time is

2- economic entity assumption ‫فرض الوحده المستقلة‬

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  Requires that activities of the entity be kept separate and distinct from the
activities of its owner and all other economic.
3. going concern assumption ‫فرض االستمرارية‬
 Means that the existing entity will continue to operate in the future

4. Historical Cost Principle (or cost principle) ‫مبدا التكلفة‬

 dictates that companies record assets at their cost.

Companies prepare four financial statements from the summarized

accounting data:

Owner’s Statement
Income Balance
Equity of Cash
Statement Sheet
Statement Flows

Basic Accounting Equation

Accounting equation

Assets = Liability + owner's equity

Debit credit
Left side right side

Assets ‫االصول او ممتلكات المشروع‬

 assets are Resources a business owns ‫االصول هى ممتلكات المشروع‬
 the common characteristic possessed by all assets is the capacity to Provide
future services or benefits.

Liabilities ‫االلتزامات او ديون الشركة‬

 Liabilities are claims against assets

Owner's equity ‫حقوق الملكية‬

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  Is claims on total assets
 Revenue or owner's investment increase the owner's equity (credit)
 Expense or drawing : decrease the owner's equity (debit)

Journal entries

Assets Increase Debit ‫الحساب طبيعته لما يزيد‬

drawing
Expense Decrease credit

Capital Increase credit ‫الحساب طبيعته لما يزيد‬

Revenue
Owner's investment Decrease debit

Steps in the recording process

1. the journal :
 Book of original entry (General journal).
 Transactions recorded in chronological order.

Notes
Simple entry : two accounts, one debit and one credit
Compound entry : three or more accounts

2: post to ledger accounts by T- account

Posting : is the process of transferring amounts from the journal to the ledger
accounts
3) trial balance

Exercise (1)
Determine the missing items.
Assets = Liabilities + Owner’s Equity
 $75,000 $52,000 (a)
 (b) $28,000 $34,000
 $84,000 (c) $55,000

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 Solution
a. $23,000 b. $62,000 c. $29,000

Question (2)
the items listed below for the month of September.
adam, Capital, September 1 $42,000
Accounts payable ……………………… 7,000
Equipment ………………………………… 30,000
Service revenue ……………………….. 25,000
adams, Drawings ………………………. 6,000
Dental supplies expense ………….. 3,500
Cash …………………………………………. 6,000
Utilities expense ………………………. 700
Dental supplies …………………………. 2,800
Salaries expense ……………………… 9,000
Accounts receivable ………………… 14,000
Rent expense ………………………….. 2,000

instruction
Prepare an income statement, an owner's equity statement, and a balance sheet
Solution

Adam company
Income Statement
For the Month Ended September 30, 2008

Revenues
Service revenue .......................................................... $25,000

Expenses
 Salaries expense.................. $9,000
 Dental supplies expense ..... 3,500
 Rent expense ...................... 2,000
 Utilities expense ................. 700
Total expenses ............................... 15,200
Net income ................................................................. $ 9,800

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 Adam's company
Owner's Equity Statement
For the Month Ended September 30, 2008
adam, Capital, September 1 ............................. $42,000
Add: Net income....................................................... 9,800
51,800
Less: Drawings.................................................. (6,000)
adam , Capital, September 30 ...................... . $45,800

Question (1) true or false

(f) 1. Private accountants are accountants who are not employees of business enterprises
(F) 2. The cost and fair value of an asset are the same at the time of acquisition and in
all subsequent periods.
(T) 3. A partnership must have more than one owner.
(T) 4. The economic entity assumption requires that the activities of an entity be kept
separate and distinct from the activities of its owner and all other economic entities.
(T) 5. The monetary unit assumption states that transactions that can be measured in
terms of money should be recorded in the accounting records.
(F) 6. The monetary unit assumption requires that all dollar amounts be rounded to
the nearest dollar.
(F) 7. In order to possess future service potential, an asset must have physical substance.
(F) 8. Owners' claims to total business assets take precedence over the claims of
creditors because owners invest assets in the business and are liable for losses.
(F) 9. The basic accounting equation states that Assets = Liabilities.

(T) 10. At the time an asset is acquired, cost and fair value should be the same.

(T) 11. The basic accounting equation is in balance when the creditor and ownership
claims against the business equal the assets.

(T) 12. External transactions involve economic events between the company and some
other enterprise or party.

(T ) 13. In the owner's equity statement, revenues are listed first, followed by expenses,
and net income (or net loss)

(T) 14. The purchase of office equipment on credit increases total assets and total liabilities
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(T) 15. The primary purpose of the statement of cash flows is to provide information about
the cash receipts and cash payments of a company during a period.
(F) 16. Net income for the period is determined by subtracting total expenses and
drawings from total revenues

(F) 17. Management of a business enterprise is the major external user of information.

(T) 18. Financial statements are the major means of communicating accounting
information to interested parties.

(F) 19. Bookkeeping and accounting are one and the same because the bookkeeping
function includes the accounting process.

(F) 20. The hiring of a new company president is an economic event recorded by the
financial information system.

(T) 21. Accountants record both internal and external transactions

(F) 22. The study of accounting will be useful only if a student is interested in working for a
profit oriented business firm

(T) 23. Even though a partnership is not a separate legal entity, for accounting purposes
the partnership affairs should be kept separate from the personal activities of the
owners

(F) 24. Identifying is the process of keeping a chronological diary of events measured in
dollars and cents.

multi choose question

1. Which of the following is not a step in the accounting process

a. identification b. verification
c. recording d. communication

2. Which of the following statements about basic assumptions is correct?

(a) Basic assumptions are the same as accounting principles.
(b) The economic entity assumption states that there should be a particular unit of
accountability.
(c) The monetary unit assumption enables accounting to measure employee morale.
(d) Partnerships are not economic entities.

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3. Communication of economic events is the part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information

4. Which of the following events cannot be quantified into dollars and cents and recorded
as an accounting transaction?
a. The appointment of a new CPA firm to perform an audit.
b. The purchase of a new computer.
c. The sale of store equipment.
d. Payment of income taxes.

5. The accounting process involves all of the following except

a. identifying economic transactions that are relevant to the business.
b. communicating financial information to users by preparing financial reports.
c. recording nonquantifiable economic events.
d. analyzing and interpreting financial reports.

6. The accounting process is correctly sequenced as

a. identification, communication, recording.
b. recording, communication, identification.
c. identification, recording, communication.
d. communication, recording, identification.

7. Bookkeeping differs from accounting in that bookkeeping primarily involves which part
of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.

8. All of the following are services offered by public accountants except

a. budgeting. b. auditing.
c. tax planning. d. consulting.

9. Generally accepted accounting principles are

a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.

10. The cost principle requires that when assets are acquired, they be recorded at

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 a. appraisal value. b. exchange price paid.
c. selling price. d. list price.

11. The historical cost principle requires that when assets are acquired, they be recorded at
a. appraisal value. b. cost.
c. market price. d. book value.

12. The cost of an asset and its fair value are

a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its operations.
d. the same on the date of acquisition.

13. GAAP stands for

a. Generally Accepted Auditing Procedures.
b. Generally Accepted Accounting Principles.
c. Generally Accepted Auditing Principles.
d. Generally Accepted Accounting Procedures

14. A basic assumption of accounting that requires activities of an entity be kept separate
from the activities of its owner is referred to as the
a. stand alone concept. b. monetary unit assumption.
c. corporate form of ownership. d. economic entity assumption.

15. The XYZ Company has five plants nationwide that cost a total of $100 million. The
current fair value of the plants is $500 million. The plants will be recorded and reported as
assets at
a. $100 million. B. $600 million.
c. $400 million. d. $500 million.

16. The common characteristic possessed by all assets is

a. long life. b. great monetary value.
c. tangible nature. d. future economic benefit.

17. The basic accounting equation may be expressed as

a. Assets = Equities.
b. Assets – Liabilities = owner's Equity.
c. Assets = Liabilities + owner's Equity.
d. All of these answers are correct.

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18. If total liabilities increased by $15,000 and owner’s equity increased by $5,000 during a
period of time, then total assets must change by what amount and direction during
that same period?
a. $20,000 decrease
b. $20,000 increase
c. $25,000 increase
d. $30,000 increase

19. If total liabilities decreased by $15,000 and owner’s equity increased by $5,000 during a
period of time, then total assets must change by what amount and direction during that
same period?
a. $20,000 increase b. $10,000 decrease
c. $10,000 increase d. $15,000 decrease

20. As of June 30, 2020, habibo Company has assets of $100,000 and owner’s equity of
$5,000. What are the liabilities for habibo Company as of June 30, 2020?
a. $85,000 b. $90,000
c. $95,000 d. $100,000

21. Revenues are

a. the cost of assets consumed during the period.
b. gross increases in owner's equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.

22. Accounting is sometimes called the ''language of ………….. ''

a. wall street b. business
c. main street d. financial statement

23. external users of financial accounting information include all of the following except
…………….
a. lenders such as bankers
b. governmental agencies such as the IFR.
c. employees of a business.
d. potential investors

24. which of the following groups would have access to managerial accounting information?
a. bankers b. investors
c. competitors of the business d. managers

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25. All of the following are examples of managerial accounting activities except
a. preparing external financial statements in compliance with GAAP
b. deciding whether or not to use automation
c. making equipment repair or replacement decisions
d. deciding whether or not to use automation

chapter (2)
Example (1)

Transactions for Ed Peter Company for the month of October are presented
below.
1. Invested an additional $40,000 cash in the business.
2. Purchased land costing $28,000 for cash.
3. Purchased equipment costing $12,000 for $3,000 cash and the remainder on
credit.
4. Purchased supplies on account for $800.
5. Paid $1,000 for a one-year insurance policy.
6. Received $3,000 cash for services performed.
7. Paid wages to employees for $2,500.
8. Petry withdrew $1,000 cash from the business.

Required
1) prepare the journal entries
Solution
Journal entries
Date Account title and explanation Ref. Debit Credit
1 Cash 40,000
E. Peter, Capital 40,000
2 Land 28,000
Cash 28,000
3. Equipment 12,000
Cash 3,000
Accounts Payable 9,000
4 Supplies 800
Accounts Payable 800

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 5. Prepaid Insurance 1,000
Cash 1,000
6. Cash 3,000
Service Revenue 3,000
7. Wages Expense 2,500
Cash 2,500
8. E. Peter, Drawing 1,000
Cash 1,000

Example (2)
The ledger account balances for Jenkins Company are listed below.
Accounts Payable ………………….. $ 8,000
Accounts Receivable ………………… 7,000
Cash ………………………………………… 13,000
Jenkins, Capital ……………………….. 11,000
Jenkins, Drawing ………………………. 4,000
Repair Revenue ……………………….. 40,000
Salaries Expense ………………………. 25,000
Unearned Revenue …………………… 2,000
Utilities Expense ………………………. 12,000

Instructions
Prepare a trial balance in proper form for Jenkins at December 31, 2020.
Solution
JENKINS COMPANY
Trial Balance
December 31, 2020
Debit Credit
Cash $13,000
Accounts Receivable 7,000
Accounts Payable $ 8,000
2,000
Unearned Revenue 11,000
4,000
Jenkins, Capital 40,000
Jenkins, Drawing 25,000
Repair Revenue 12,000
Salaries Expense
Utilities Expense
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 61,000 61,000

(F) 1. A new account is opened for each transaction entered into by a business firm.

(F ) 2. The recording process becomes more efficient and informative if all transactions are
recorded in one account.

(F) 3. When the volume of transactions is large, recording them in tabular form is more
efficient than using journals and ledgers.

(T) 4. An account is often referred to as a T-account because of the way it is constructed.

(F) 5. A debit to an account indicates an increase in that account.

(T) 6. If a revenue account is credited, the revenue account is increased.

(F) 7. The normal balance of all accounts is a debit.

(F) 8. Debit and credit can be interpreted to mean increase and decrease, respectively.

(F) 9. The double-entry system of accounting refers to the placement of a double line at
the end of a column of figures.

(F) 10. A credit balance in a liability account indicates that an error in recording has
occurred

(T) 11. The double-entry system is a logical method for recording transactions and
results in equal debits and credits for each transaction.

(F) 12. The normal balance of an expense is a credit.

(T) 13. The journal provides a chronological record of transactions.

(F) 14. The ledger is merely a bookkeeping device and therefore does not provide much
useful data for management.

(T) 15. The chart of accounts is a listing of the accounts and the account numbers which
identify their location in the ledger.

(T) 16. The primary purpose of a trial balance is to prove the mathematical equality of
the debits and credits after posting.

(F) 17. The trial balance will not balance when incorrect account titles are used in
journalizing or posting.

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(T) 18. A trial balance does not prove that all transactions have been recorded or that the
ledger is correct.

(F) 19. The chart of accounts is a special ledger used in accounting systems

(T) 20. A general ledger should be arranged in the order in which accounts are presented
in the financial statements, beginning with the balance sheet accounts.

(T) 21. Each transaction must be analyzed in terms of its effect on the accounts before it
can be recorded in a journal.

(F) 22. Transactions are entered in the ledger accounts and then transferred to journals.

(F) 23. All business transactions must be entered first in the general ledger.

(T) 24. A simple journal entry requires only one debit to an account and one credit to an
account.

(F) 25. A compound journal entry requires several debits to one account and several
credits to one account.

(F) 26. Transactions are recorded in alphabetic order in a journal.

(T) 27. A journal is also known as a book of original entry.

(F) 28. The drawing account is a subdivision of the owner's capital account and appears as
an expense on the income statement.

(T) 29. Revenues are a subdivision of owner's capital.

(F) 30. Under the double-entry system, revenues must always equal expenses.

(F) 31. Transactions are entered in the ledger first and then they are analyzed in terms of
their effect on the accounts.

1. Which of following statements about an account is true?

a. In its simple form, an account consists of two parts. 
b. An account is an individual accounting record of increases and decreases in
specific asset, liability and owner's equity items. 
c. There are separate accounts for specific assets and liabilities but only one account
for owner's equity items. 
d. The left side of an account is the credit or decrease side.
2. A revenue account: 

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 a. is increased by debits 
b. is decrease by credits. 
c. has a normal balance of a debit. 
d. is increased by credits.

3. Accounts that normally have debit balance are: 

a. Assets, expense and revenues. 
b. Assets, expense and owner's capital. 
c. Assets, liabilities and owner's drawings. 
d. Assets, owner's drawing and expenses.

4. Which of the following statement is not part of the recording process? 

A Analyzing transactions. 
B Preparing a trial balance. 
C Entering transactions in a journal. 
D Posting transaction.

5. The purchase of supplies on account should result in:

a. debit to Supplies Expense and a credit to Cash.
b. debit to Supplies Expense and a credit to Accounts Payable.
c. debit to Supplies and a credit to Accounts Payable.
d. debit to Supplies and a credit to Accounts Receivable

6. A ledger: 
a. contains only asset and liability accounts; 
b. should show accounts in alphabetical order. 
c. is a collection of the entire group of accounts maintained by a company. 
d. is a book of original entry.

7. Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts

8. Before posting a payment of $5,000, the Accounts Payable of Senator Company had a
normal balance of $16,000. The balance after posting this transaction was:
a. $21,000.
b. $5,000.
c. $11,000.
d. Cannot be determined
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9. A trial balance will not balance if
a. a journal entry is posted twice. b. a wrong amount is used in journalizing.
c. incorrect account titles are used in journalizing.
d. a journal entry is only partially posted

10. A trial balance will not balance if:

a. correct journal entry is posted twice.
b. the purchase of supplies on account is debited to Supplies and credited to Cash.
c. a $100 cash drawing by the owner is debited to Owner's Drawings for $1,000 and
credited to Cash for $100.
d. a $450 payment on account is debited to Accounts Payable for $45 and credited
to Cash for $45.

11. The trial balance of El Hady Company had accounts with the following normal balances:
Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and
Wages Expense $40,000, Rent Expense $10,000, Owner's Capital $42,000; Owner's Drawings
$15,000; Equipment $61,000. In preparing a trial balance, the total in the debit column is:
a. $131,000.
b. $216,000.
c. $91,000.
d. $116,000.

12. At January 1, 2020, El badry Industries reported owner’s equity of $130,000. During
2020, Burton had a net loss of $30,000 and owner drawings of $20,000. At December 31,
2020, the amount of owner’s equity is
a. $130,000.
b. $140,000.
c. $100,000.
d. $80,000.

13. AL Hasan Company showed the following balances at the end of its first year:
Cash $ 7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Al Hasan, Capital 1,400

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 Al Hasan, Drawing 700
Revenues 21,000
Expenses 17,500
What did Al Hasan Company show as total credits on its trial balance?
a. $30,100 b. $29,400
c. $28,700 d. $30,800

14. Cerner Company showed the following balances at the end of its first year:
Cash $ 5,000
Prepaid insurance 500
Accounts receivable 2,500
Accounts payable 2,000
Notes payable 3,000
Cerner, Capital 1,000
Cerner, Drawing 500
Revenues 15,000
Expenses 12,500
What did Cerner Company show as total credits on its trial balance?
a. $21,500 b. $21,000
c. $20,500 d. $22,000

15. In the first month of operations for S. Omran Industries, the total of the debit entries
to the cash account amounted to $8,000 ($4,000 investment by the owner and revenues of
$4,000). The total of the credit entries to the cash account amounted to $5,000 (purchase
of equipment $2,000 and payment of expenses $3,000). At the end of the month, the cash
account has a(n)
a. $2,000 credit balance.
b. $2,000 debit balance.
c. $3,000 debit balance.
d. $3,000 credit balance
16. At December 1, 2020, Marco Company’s accounts receivable balance was $1,200. During
December, Marco had credit revenues of $5,000 and collected accounts receivable of
$4,000. At December 31, 2020, the accounts receivable balance is
a. $1,200 debit.
b. $2,200 debit.
c. $6,200 debit.
d. $2,200 credit.

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17. At October 1, 2020, Deet Industries had an accounts payable balance of $30,000. During
the month, the company made purchases on account of $25,000 and made payments on
account of $40,000. At October 31, 2020, the accounts payable balance is
a. $30,000.
b. $10,000.
c. $15,000.
d. $40,000.

18. The usual sequence of steps in the transaction recording process is:
a. journal , analyze , ledger.
b. analyze , journal , ledger.
c. journal , ledger , analyze.
d. ledger , journal , analyze.

19. Another name for journal is

a. listing. b. book of original entry.
c. book of accounts. d. book of source documents

20. Collection of a $500 Accounts Receivable

a. increases an asset $500; decreases an asset $500.
b. increases an asset $500; decreases a liability $500.
c. decreases a liability $500; increases owner's equity $500.
d. decreases an asset $500; decreases a liability $500

21. The Ryder’s Uptown Grill received a bill of $400 from the Erml Advertising Agency. The
owner, John Ryder, is postponing payment of the bill until a later date. The effect on
specific items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in J. Ryder, Capital.
c. an increase in Accounts Payable and a decrease in J. Ryder, Capital.
d. a decrease in Accounts Payable and an increase in J. Ryder, Capital.

22. James Company purchases $600 of equipment from Mundelein Inc. for cash. The effect
on the components of the basic accounting equation of James Company is
a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities

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23. At October 1, Bennington Enterprises reported owner’s equity of $35,000. During
October, the owner made additional investments of $2,000 and the company earned net
income of $6,000. If owner’s equity at October 31 totals $40,000, what amount of owner
drawings were made during the month?
a. $0
b. $3,000
c. $4,000
d. $5,000

24. At October 1, Bennington Enterprises reported owner’s equity of $35,000. During

October, the owner made additional investments of $5,000 and the company posted a net
loss of $3,000. If owner’s equity at October 31 totals $35,000, what amount of owner
drawings were made during the month?
a. $0
b. $2,000
c. $3,000
d. $5,000

25. Ironton Company’s owner’s equity at the beginning of August 2020 was $300,000.
During the month, the company earned net income of $60,000 and owner’s drawings were
$20,000. At the end of August 2020, what is the balance in owner’s equity?
a. $260,000
b. $300,000
c. $340,000
d. $380,000

26. On January 1, 2020, Jackson Company reported owner’s equity of $470,000. During the
year, the owner withdrew cash of $20,000. At December 31, 2020, the balance in owner’s
equity was $500,000. What amount of net income or net loss would the company report for
2020?
a. Net income of $30,000 b. Net loss of $50,000
c. Net income of $10,000 d. Net income of $50,000

27. The balance sheet is frequently referred to as

a. an operating statement. b. the statement of financial position.
c. the statement of cash flows. d. the statement of owner's equity

28. A balance sheet shows

a. revenues, liabilities, and owner's equity.
b. expenses, drawings, and owner's equity.

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 c. revenues, expenses, and drawings.
d. assets, liabilities, and owner's equity.

29. An income statement

a. summarizes the changes in owner's equity for a specific period of time.
b. reports the changes in assets, liabilities, and owner's equity over a period of time.
c. reports the assets, liabilities, and owner's equity at a specific date.
d. presents the revenues and expenses for a specific period of time.

30. Net income results when

a. Assets > Liabilities. b. Revenues = Expenses.
c. Revenues > Expenses. d. Revenues < Expenses.

31. If an individual asset is increased, then

a. there must be an equal decrease in a specific liability.
b. there must be an equal decrease in owner's equity.
c. there must be an equal decrease in another asset.
d. none of these is possible.

31. If services are rendered for credit, then

a. assets will decrease. b. liabilities will increase.
c. owner's equity will increase. d. liabilities will decrease.

32. If expenses are paid in cash, then

a. assets will increase. b. liabilities will decrease.
c. owner's equity will increase. d. assets will decrease

33. Owner's equity is increased by

a. drawings. b. revenues.
c. expenses. d. liabilities.

34. Owner's equity is decreased by

a. assets. b. revenues.
c. expenses. d. liabilities

35. The final step in the recording process is to

a. analyze each transaction.
b. enter the transaction in a journal.
c. prepare a trial balance.
d. transfer journal information to ledger accounts.

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36 After a business transaction has been analyzed and entered in the book of original
entry, the next step in the recording process is to transfer the information to
a. the company's bank. b. owner's equity.
c. ledger accounts. d. financial statements.

37. The first step in the recording process is to

a. prepare financial statements.
b. analyze each transaction for its effect on the accounts.
c. post to a journal.
d. prepare a trial balance

38. After transaction information has been recorded in the journal, it is transferred to the
a. trial balance. b. income statement.
c. book of original entry. d. ledger.

39. The final step in the recording process is to transfer the journal information to the
a. trial balance. b. financial statements.
c. ledger. d. file cabinets.

40. The ledger should be arranged in

a. alphabetical order. b. chronological order.
c. dollar amount order. d. financial statement order.

41. During 2008, its first year of operations, Jane’s Bakery had revenues of $60,000 and
expenses of $33,000. The business had owner drawings of $18,000. What is the amount
of owner’s equity at December 31, 2008?
a. $0 b. $18,000 debit
c. $9,000 credit d. $27,000 credit

42. On July 7, 2008, Reethink Enterprises performed cash services of $1,400. The entry to
record this transaction would include
a. a debit to Service Revenue of $1,400.
b. a credit to Accounts Receivable of $1,400.
c. a debit to Cash of $1,400.
d. a credit to Accounts Payable of $1,400

43. Jack Wiser withdraws $300 cash from his business for personal use. The entry for this
transaction will include a debit of $300 to
a. Jack Wiser, Drawing. b. Jack Wiser, Capital.
c. Owner's Salary Expense. d. Salaries Expense

44. Meenen Company purchases equipment for $1,200 and supplies for $400 from
Sanders Co. for $1,600 cash. The entry for this transaction will include a

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 a. debit to Equipment $1,200 and a debit to Supplies Expense $400 for Sanders.
b. credit to Cash for Sanders.
c. credit to Accounts Payable for Meenen.
d. debit to Equipment $1,200 and a debit to Supplies $400 for Meenen

45. An account is an individual accounting record of increases and decreases in specific

a. liabilities. b. assets.
c. expenses. d. assets, liabilities, and owner's equity items.

46. An account consists of

a. one part. b. two parts.
c. three parts. d. four parts.

47. The left side of an account is

a. blank. b. a description of the account.
c. the debit side. d. the balance of the account.

48. Which one of the following is not a part of an account?

a. Credit side b. Trial balance
c. Debit side d. Title

49. An account is a part of the financial information system and is described by all except
which one of the following?
a. An account has a debit and credit side.
b. An account is a source document.
c. An account may be part of a manual or a computerized accounting system.
d. An account has a title.

50. The right side of an account

a. is the correct side.
b. reflects all transactions for the accounting period.
c. shows all the balances of the accounts in the system.
d. is the credit side.

51. An account consists of

a. a title, a debit balance, and a credit balance.
b. a title, a left side, and a debit balance.
c. a title, a debit side, and a credit side.
d. a title, a right side, and a debit balance.

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52. A T-account is
a. a way of depicting the basic form of an account.
b. what the computer uses to organize bytes of information.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.

53. Dawson’s Delivery Service purchased equipment for $2,500. Dawson paid $500 in cash
and signed a note for the balance. Dawson debited the Equipment account, credited Cash
and
a. nothing further must be done.
b. debited the Dawson, Capital account for $2,000.
c. credited another asset account for $500.
d. credited a liability account for $2,000

54. On January 14, Franco Industries purchased supplies of $500 on account. The entry to
record the purchase will include
a. a debit to Supplies and a credit to Accounts Payable.
b. a debit to Supplies Expense and a credit to Accounts Receivable.
c. a debit to Supplies and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Supplies.

55. Able Company pays its employees twice a month, on the 7th and the 21st. On June 21,
Able Company paid employee salaries of $4,000. This transaction would
a. increase owner’s equity by $4,000.
b. decrease the balance in Salaries Expense by $4,000.
c. decrease net income for the month by $4,000.
d. be record

56. During February 2008, its first month of operations, the owner of Rutwing Enterprises
invested cash of $25,000. Rutwing had cash revenues of $4,000 and paid expenses of
$7,000. Assuming no other transactions impacted the cash account, what is the balance
in Cash at February 28?
a. $3,000 credit b. $22,000 debit
c. $29,000 debit d. $18,000 credit

57. At January 31, 2008, the balance in Prieto Inc.’s supplies account was $250. During
February, Prieto purchased supplies of $300 and used supplies of $400. At the end of
February, the balance in the supplies account should be

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 a. $250 debit.
b. $350 credit.
c. $950 debit.
d. $150 debit.

58. When three or more accounts are required in one journal entry, the entry is referred to
as a
a. compound entry. b. triple entry.
c. multiple entry. d. simple entry

59. When two accounts are required in one journal entry, the entry is referred to as a
a. balanced entry. b. simple entry.
c. posting. d. nominal entry

60. Transactions in a journal are initially recorded in

a. account number order. b. dollar amount order.
c. alphabetical order. d. chronological order

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