Chapter 4

Types of Major Accounts

PROBLEM 1: TRUE OR FALSE
1. FALSE - account
2. TRUE
3. TRUE
4. TRUE
5. FALSE – debit balance
6. TRUE
7. TRUE
8. FALSE – income statement
9. TRUE
10. FALSE – Supplies expense

PROBLEM 2: TRUE OR FALSE

1. TRUE
2. TRUE
3. FALSE – accounts receivable
4. FALSE – accounts payable
5. TRUE
6. FALSE – interest expense
7. TRUE
8. TRUE
9. FALSE – revenue
10. TRUE

PROBLEM 3: FOR CLASSROOM DISCUSSION

1. D
2. D
3. D
4. C
5. B
6. A
7. B
8. A
9. C
10. B

PROBLEM 4: IDENTIFICATION

Account Titles COLUMN A COLUMN B

1. Accounts receivable ASSET BALANCE SHEET
INCOME
2. Bad debt expense EXPENSE
STATEMENT
3. Building ASSET BALANCE SHEET
4. Notes payable LIABILITY BALANCE SHEET
INCOME
5. Rent expense EXPENSE
STATEMENT
6. Owner’s equity EQUITY BALANCE SHEET
INCOME
7. Interest income INCOME
STATEMENT
8. Cash ASSET BALANCE SHEET
INCOME
9. Gain INCOME
STATEMENT
10. Computer
ASSET BALANCE SHEET
equipment
INCOME
11. Depreciation EXPENSE
STATEMENT
12. Utilities payable LIABILITY BALANCE SHEET
INCOME
13. Freight-out EXPENSE
STATEMENT
INCOME
14. Rent income INCOME
STATEMENT
15. Unearned income LIABILITY BALANCE SHEET
PROBLEM 5: IDENTIFICATION

Account Titles COLUMN A COLUMN B

INCOME
1. Taxes and licenses EXPENSE
STATEMENT
2. Furniture & fixture ASSET BALANCE SHEET
INCOME
3. Supplies expense EXPENSE
STATEMENT
INCOME
4. Interest expense EXPENSE
STATEMENT
5. Inventory ASSET BALANCE SHEET
6. Land ASSET BALANCE SHEET
7. Accounts payable LIABILITY BALANCE SHEET
8. Notes receivable ASSET BALANCE SHEET
9. Prepaid insurance ASSET BALANCE SHEET
INCOME
10. Loss EXPENSE
STATEMENT
11. Prepaid supplies ASSET BALANCE SHEET
12. Rent payable LIABILITY BALANCE SHEET
INCOME
13. Sales INCOME
STATEMENT
14. Interest receivable ASSET BALANCE SHEET
15. Transportation
ASSET BALANCE SHEET
equipment
PROBLEM 6: IDENTIFICATION
1. Income
2. Accounts receivable
3. Inventory
4. Advertising expense
5. Balance sheet or Statement of financial position
6. Bad debts expense
7. Sales
8. Cost of sales or Cost of goods sold
9. Supplies expense
10. Notes payable

PROBLEM 7: IDENTIFICATION
1. Income statement or Statement of profit or loss
2. Freight out (Delivery expense, Transportation-out, or Carriage outwards)
3. Accounts payable
4. Prepaid supplies or Office supplies
5. Unearned income (Unearned revenue or Advances from customers)
6. Miscellaneous expense
7. Utilities expense
8. Allowance for bad debts
9. Depreciation expense
10. Accumulated depreciation

PROBLEM 8: MULTIPLE CHOICE

1. D
2. D
3. A
4. B
5. A
6. B
7. A
8. C
9. A
10. D

PROBLEM 9: MULTIPLE CHOICE

1. A
2. D
3. A
4. A
5. B
6. A
7. B
8. A
9. B
10. A

PROBLEM 10: MULTIPLE CHOICE

1. C
2. B
3. A
4. B
5. D
6. C
7. D
8. B
9. C – e.g., cost of business permit
Choices (a) and (b) are incorrect because these are assets, not expenses.
Choice (d) is incorrect because billings for utilities (e.g., electricity or water) are normally
received only after a month. Accordingly, expenditures for taxes and licenses usually come first
before utilities.

10. D
PROBLEM 11: MULTIPLE CHOICE
1. B
2. D
3. C
4. A
5. B
6. B
7. C
8. B (100K ÷ 5 yrs.) = 20,000
9. A 20,000 x 3 yrs. = 60,000
10. C 100,000 cost – (20,000 x 2 yrs.) = 60,000