$$\text{Assets} = \text{Liabilities} + \text{Owner's Capital} + \text{Revenues} - \text{Expenses} - \text{Withdrawals}$$

Question 1

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

Accepted Answer

To verify that total debits equal total credits in the ledger accounts.

Question 2

According to the rules of debit and credit, which side of the T-account do assets increase on?

Accepted Answer

Debit side

Question 3

A business purchases office supplies for $2,000 cash. Which accounts are affected and how?

Accepted Answer

Office Supplies is debited $$2,000; Cash is credited 2$$,000.

Question 4

Which of the following is NOT a source document used in recording business transactions?

Accepted Answer

Ledger account

Question 5

What is the normal balance of a revenue account?

Accepted Answer

Credit

Question 6

If Lisa Hunter invests $250,000 cash into her business, which journal entry is correct?

Accepted Answer

Debit Cash $$250,000; Credit Lisa Hunter, Capital 250$$,000

Question 7

Which equation represents the expanded accounting equation?

Accepted Answer

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Owner's Capital} + 	ext{Revenues} - 	ext{Expenses} - 	ext{Withdrawals}$$

Question 8

Which account type increases on the credit side?

Accepted Answer

Liability accounts

Question 9

A company pays $1,500 for rent expense in cash. What is the correct journal entry?

Accepted Answer

Debit Rent Expense $$1,500; Credit Cash 1$$,500

Question 10

What is the main function of the ledger in the accounting cycle?

Accepted Answer

To track all transactions related to a specific account

Question 11

If the trial balance does not balance, which method can help identify a transposition error?

Accepted Answer

Divide the difference by 9

Question 12

Which of the following is true about double-entry accounting?

Accepted Answer

Every transaction affects at least two accounts.

Question 13

A business receives a $5,000 bank loan. Which accounts are affected and how?

Accepted Answer

Debit Cash $$5,000; Credit Bank Loan Payable 5$$,000

Question 14

Which account would be listed first in a trial balance?

Accepted Answer

Cash

Question 15

What is the normal balance of a withdrawal account?

Accepted Answer

Debit

Question 16

Which of the following best describes the process of posting?

Accepted Answer

Transferring data from the journal to the ledger

Question 17

A company earns $3,000 in service revenue on account. What is the correct journal entry?

Accepted Answer

Debit Accounts Receivable $$3,000; Credit Service Revenue 3$$,000

Question 18

Which of the following is NOT a normal balance for the accounts listed?

Accepted Answer

Expense accounts: credit

Question 19

If a company mistakenly records a $$610 debit instead of 61$$, what type of error is this?

Accepted Answer

Slide error

Question 20

Which of the following statements about the T-account is correct?

Accepted Answer

It is a shortcut used to show the effect of transactions on an account.

Recording Business Transactions: The Accounting Cycle and Double-Entry System

Study Guide - Practice Questions