Question 1

Which of the following best describes the purpose of the trial balance in the accounting cycle?

Accepted Answer

To verify that total debits equal total credits after posting to the ledger.

Question 2

A company purchases office supplies on credit for $5,000. Which journal entry correctly records this transaction?

Accepted Answer

Office Supplies (Dr) $$5,000; Accounts Payable (Cr) 5$$,000

Question 3

Which of the following accounts normally has a credit balance?

Accepted Answer

Accounts Payable

Question 4

If a business owner withdraws cash for personal use, what is the effect on the accounting equation?

Accepted Answer

Assets decrease; Owner’s Equity decreases

Question 5

Which of the following is the correct formula for the accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner's\ Equity$$

Question 6

A company receives $10,000 cash from a client for services to be performed next month. What is the correct journal entry?

Accepted Answer

Cash (Dr) $$10,000; Unearned Revenue (Cr) 10$$,000

Question 7

Which step in the accounting cycle involves transferring information from the journal to the ledger?

Accepted Answer

Posting

Question 8

If a company pays $2,000 for utilities in cash, which accounts are affected and how?

Accepted Answer

Utilities Expense (Dr) $$2,000; Cash (Cr) 2$$,000

Question 9

Which of the following best describes the double-entry accounting system?

Accepted Answer

Every transaction affects at least two accounts, with debits equaling credits.

Question 10

A company provides consulting services and issues an invoice for $8,000 to a client. What is the correct journal entry?

Accepted Answer

Accounts Receivable (Dr) $$8,000; Service Revenue (Cr) 8$$,000

Question 11

Which of the following is NOT a source document in accounting?

Accepted Answer

A company’s annual budget

Question 12

What is the normal balance of an expense account?

Accepted Answer

Debit

Question 13

Which of the following transactions would increase both an asset and a liability?

Accepted Answer

Purchasing equipment by signing a note payable

Question 14

If the total debits and credits in the trial balance are not equal, what does this indicate?

Accepted Answer

There is an error in the recording or posting of transactions.

Question 15

Which account would be credited when the owner invests cash into the business?

Accepted Answer

Owner’s Capital

Question 16

A company pays $3,000 to settle part of its accounts payable. What is the correct journal entry?

Accepted Answer

Accounts Payable (Dr) $$3,000; Cash (Cr) 3$$,000

Question 17

Which of the following best describes the order of accounts in a trial balance?

Accepted Answer

Assets, Liabilities, Owner’s Equity, Revenues, Expenses

Question 18

Which of the following transactions would require a credit to the Cash account?

Accepted Answer

Paying employee salaries

Question 19

If a company provides services on account, which accounts are affected and how?

Accepted Answer

Accounts Receivable (Dr); Service Revenue (Cr)

Question 20

Which of the following is the correct effect of recording a $1,000 rent expense paid in cash?

Accepted Answer

Decrease in assets; increase in expenses

Recording Business Transactions: Principles of Financial Accounting

Study Guide - Practice Questions