Chapter 2--Analyzing Transactions
Student: ___________________________________________________________________________
1. Accounts are records of increases and decreases in individual financial statement items. 
True    False
 
2. A chart of accounts is a listing of accounts that make up the journal. 
True    False
 
3. The chart of accounts should be the same for each business. 
True    False
 
4. Accounts payable are accounts that you expect will be paid to you. 
True    False
 
5. Consuming goods and services in the process of generating revenues results in expenses. 
True    False
 
6. Prepaid expenses are an example of an expense. 
True    False
 
7. Unearned Revenues account is an example of a liability. 
True    False
 
8. The Drawings account is an example of an expense. 
True    False
 
9. Accounts in the ledger are usually maintained in alphabetical order. 
True    False
 
10. Depending on the account title, the right side of the account is referred to as the credit side. 
True    False
 
11. To determine the balance in an account, always subtract credits from debits. 
True    False
 
12. The double-entry accounting system records each transaction twice. 
True    False
 
13. The increase side of all accounts is the normal balance. 
True    False
 
14. Transactions are initially entered into a record called a journal. 
True    False
 
15. The process of recording a transaction in the journal is called journalizing. 
True    False
 
16. Journalizing is the process of entering amounts in the ledger. 
True    False
 
17. Transactions are listed in the journal chronologically. 
True    False
 
18. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. 
True    False
 
19. Liability accounts are increased by debits. 
True    False
 
20. Expense accounts are increased by credits. 
True    False
 
21. Revenue accounts are increased by credits. 
True    False
 
22. The normal balance of a capital account is a debit. 
True    False
 
23. The normal balance of the drawing account is a debit. 
True    False
 
24. The normal balance of an expense account is a credit. 
True    False
 
25. The normal balance of revenue accounts is a credit. 
True    False
 
26. Withdrawals decrease owner's equity and are listed on the income statement as a deduction from revenue. 
True    False
 
27. For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries. 
True    False
 
28. For a month's transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries. 
True    False
 
29. When a business receives a bill from the utility company, no entry should be made until the invoice is paid. 
True    False
 
30. An account has three parts to it; a title, an increase side, and a decrease side. 
True    False
 
31. The T account got its name because it resembles the letter “T.” 
True    False
 
32. The right hand side of a T account is known as a debit and the left hand side is known as a credit. 
True    False
 
33. A debit is abbreviated as Db and a credit is abbreviated as Cr. 
True    False
 
34. Debiting the cash account will increase the account. 
True    False
 
35. A credit to the cash account will increase the account. 
True    False
 
36. The cash account will always be debited. 
True    False
 
37. The recording of cash receipts to the cash account will be done by debiting the account. 
True    False
 
38. The recording of cash payments from the cash account is done by entering the amount as a credit. 
True    False
 
39. The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the amounts together. 
True    False
 
40. When an owner contributes equipment to the business, he or she retains ownership of the property. 
True    False
 
41. Liabilities are debts owed by the business entity. 
True    False
 
42. The accounts payable account is listed in the chart of accounts as an asset. 
True    False
 
43. A drawing account represents the amount of withdrawals made by the owner. 
True    False
 
44. Revenues are equal to the difference between cash receipts and cash payments. 
True    False
 
45. Expenses use up assets or consume services in the process of generating revenues. 
True    False
 
46. Owner’s capital will be reduced by the amount in the drawing account. 
True    False
 
47. The journal includes both debit and credit accounts for each transaction. 
True    False
 
48. A transaction that is recorded in the journal is called a journal entry. 
True    False
 
49. Assets are increased with debits and decreased with credits. 
True    False
 
50. Liabilities are increased with debits and decreased with credits. 
True    False
 
51. Debits will increase Unearned Revenues and Revenues. 
True    False
 
52. All owner’s equity accounts record increases to the accounts with credits. 
True    False
 
53. Journal entries can have more than two accounts as long as the debits equal the credits. 
True    False
 
54. Normal balances are the side that increase the account balance. 
True    False
 
55. When an owner invests assets in the business, the capital account increases due to revenue being earned. 
True    False
 
56. When an accounts payable account is paid in cash, the owner's equity in the business decreases. 
True    False
 
57. When an account receivable is collected in cash, the total assets of the business increase. 
True    False
 
58. The process of transferring the data from the journal to the ledger accounts is posting. 
True    False
 
59. The post reference notation used in the ledger is the account number. 
True    False
 
60. The post reference notation used in the journal is the page number. 
True    False
 
61. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger. 
True    False
 
62. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements. 
True    False
 
63. The process of transferring the debits and credits from the journal entries to the accounts is known as “updating the accounts”. 
True    False
 
64. Journalizing eliminates fraud. 
True    False
 
65. Once journal entries are posted to accounts, each account will show a new balance after each entry. 
True    False
 
66. A group of related accounts that make up a complete unit is called a trial balance. 
True    False
 
67. A trial balance determines the accuracy of the numbers. 
True    False
 
68. Even when a trial balance is in balance, there may be errors in the individual accounts. 
True    False
 
69. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal. 
True    False
 
70. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet. 
True    False
 
71. If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made. 
True    False
 
72. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal. 
True    False
 
73. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. 
True    False
 
74. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause the trial balance to be out of balance. 
True    False
 
75. Posting a transaction twice will cause the trial balance totals to be equal. 
True    False
 
76. The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is called a transposition. 
True    False
 
77. Accounts 
A. do not reflect money amounts
B. are not used by entities that manufacture products
C. are records of increases and decreases in individual financial statement items
D. are only used by large entities with many transactions
 
78. Accounts are classified in the ledger 
A. chronologically
B. alphabetically
C. in accordance with their appearance in the financial statements
D. so that accounts used most often are listed first
 
79. Revenue should be recognized when 
A. cash is received
B. the service is performed
C. the customer places an order
D. the customer charges an order
 
80. Which of the following accounts is an owner's equity account? 
A. Cash
B. Accounts Payable
C. Prepaid Insurance
D. Ross Morris, Capital
 
81. The gross increases in owner's equity attributable to business activities are called 
A. assets
B. liabilities
C. revenues
D. net income
 
82. A chart of accounts is 
A. the same as a balance sheet
B. usually a listing of accounts in alphabetical order
C. usually a listing of accounts in financial statement order
D. used in place of a ledger
 
83. The debit side of an account 
A. depends on whether the account is an asset, liability or owner's equity
B. can be either side of the account depending on how the accountant set up the system
C. is the right side of the account
D. is the left side of the account
 
84. An account is said to have a debit balance if 
A. the amount of the debits exceeds the amount of the credits
B. there are more entries on the debit side than on the credit side
C. its normal balance is debit without regard to the amounts or number of entries on the debit side
D. the first entry of the accounting period was posted on the debit side
 
85. Which statement(s) concerning cash is (are) true? 
A. cash will always have more debits than credits
B. cash will never have a credit balance
C. cash is increased by debiting
D. all of the above
 
86. A debit may signify a(n) 
A. decrease in asset accounts
B. decrease in liability accounts
C. increase in the capital account
D. decrease in the drawing account
 
87. Which of the following types of accounts have a normal credit balance? 
A. assets and liabilities
B. liabilities and expenses
C. revenues and liabilities
D. capital and drawing
 
88. Which of the following groups of accounts have a normal debit balance? 
A. revenues, liabilities, capital
B. capital, assets
C. liabilities, expenses
D. assets, expenses
 
89. Which one of the statements below is not a purpose for the journal? 
A. to show increases and decreases in accounts
B. to show a chronological order by date
C. to show a complete transaction in one place
D. to help locate errors
 
90. A credit may signify a 
A. decrease in assets
B. decrease in liabilities
C. decrease in capital
D. decrease in revenue
 
91. A debit signifies a decrease in 
A. assets
B. expenses
C. drawing
D. revenues
 
92. Which of the following applications of the rules of debit and credit is true? 
A. decrease Prepaid Insurance with a credit and the normal balance is a credit
B. increase Accounts Payable with a credit and the normal balance is a debit
C. increase Supplies Expense with a debit and the normal balance is a debit
D. decrease Cash with a debit and the normal balance is a credit
 
93. Which of the following describes the classification and normal balance of the fees earned account? 
A. asset, credit
B. liability, credit
C. owner's equity, debit
D. revenue, credit
 
94. The classification and normal balance of the accounts payable account is 
A. an asset with a credit balance
B. a liability with a credit balance
C. owner's equity with a credit balance
D. revenue with a credit balance
 
95. The classification and normal balance of the drawing account is 
A. an expense with a credit balance
B. an expense with a debit balance
C. a liability with a credit balance
D. owner's equity with a debit balance
 
96. The classification and normal balance of the supplies expense account is a(n) 
A. asset with a debit balance
B. asset with a credit balance
C. expense with a debit balance
D. liability with a credit balance
 
97. In which of the following types of accounts are increases recorded by debits? 
A. assets, liabilities
B. drawing, liabilities
C. expenses, liabilities
D. assets, expenses
 
98. In which of the following types of accounts are increases recorded by credits? 
A. revenues, liabilities
B. drawing, assets
C. liabilities, drawing
D. expenses, liabilities
 
99. In which of the following types of accounts are decreases recorded by debits? 
A. assets
B. revenues
C. expenses
D. drawing
 
100. In which of the following types of accounts are decreases recorded by credits? 
A. liabilities
B. owner's capital
C. drawing
D. revenues
 
101. A credit balance in which of the following accounts would indicate a likely error? 
A. Fees Earned
B. Salary Expense
C. Janet James, Capital
D. Accounts Payable
 
102. A debit balance in which of the following accounts would indicate a likely error? 
A. Salaries Expense
B. Notes Payable
C. Edgar Martin, Drawing
D. Supplies
 
103. Randomly listed below are the steps for preparing a trial balance:

(1)	Verify that the total of the Debit column equals the total of the Credit column.	
(2)	List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.	
(3)	List the name of the company, the title of the trial balance, and the date the trial balance is prepared.	
(4)	Total the Debit and Credit columns of the trial balance.	

What is the proper order of these steps? 
A. (3), (2), (4), (1)
B. (2), (3), (4), (1)
C. (3), (2), (1), (4)
D. (4), (3), (2), (1)
 
104. Which of the following entries records the payment of an account payable? 
A. debit Cash; credit Accounts Payable
B. debit Accounts Receivable; credit Cash
C. debit Cash; credit Supplies Expense
D. debit Accounts Payable; credit Cash
 
105. Which of the following entries records the investment of cash by Ron York, owner of a proprietorship? 
A. debit Ron York, Capital; credit Accounts Receivable
B. debit Cash; credit Ron York, Capital
C. debit Ron York, Drawing; credit Cash
D. debit Cash; credit Ron York, Drawing
 
106. Which of the following entries records the receipt of a utility bill from the water company? 
A. debit Utilities Expense; credit Accounts Payable
B. debit Utilities Payable; credit Accounts Receivable
C. debit Accounts Payable; credit Cash
D. debit Accounts Payable; credit Utilities Payable
 
107. Which of the following entries records the withdrawal of cash by Sue Martin, owner of a proprietorship, for personal use? 
A. debit Sue Martin, Capital; credit Cash
B. debit Sue Martin, Drawing; credit Cash
C. debit Salaries Expense; credit Cash
D. debit Salaries Expense; credit Salaries Payable
 
108. Office supplies were sold by Ari’s Alarm Service at cost to another repair shop, with cash received.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Office Supplies, debit; Cash, credit
B. Office Supplies, debit; Accounts Payable, credit
C. Cash, debit; Office Supplies, credit
D. Accounts Payable, debit; Office Supplies, credit
 
109. Office supplies purchased by Ari’s Alarm Service on account were returned.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Office Supplies, credit
B. Office Supplies, debit; Accounts Receivable, credit
C. Accounts Payable, debit; Office Supplies, credit
D. Office Supplies, debit; Accounts Payable, credit
 
110. Cash was paid by Ari’s Alarm Service to creditors on account.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Ari Fleish, Capital, credit
B. Accounts Payable, debit; Cash, credit
C. Accounts Receivable, debit; Cash, credit
D. Accounts Payable, debit; Account Receivable, credit
 
111. The process of initially recording a business transaction is called 
A. trial balancing
B. posting
C. journalizing
D. balancing
 
112. Which of the following entries records the acquisition of office supplies on account? 
A. Office Supplies, debit; Cash, credit
B. Cash, debit; Office Supplies, credit
C. Office Supplies, debit; Accounts Payable, credit
D. Accounts Receivable, debit; Office Supplies, credit
 
113. Which of the following entries records the payment of rent for the current month? 
A. Cash, debit; Rent Expense, credit
B. Rent Expense, debit; Cash, credit
C. Rent Expense, debit; Accounts Receivable, credit
D. Accounts Payable, debit; Rent Expense, credit
 
114. Which of the following entries records the receipt of cash from patients on account? 
A. Accounts Payable, debit; Fees Earned, credit
B. Accounts Receivable, debit; Fees Earned, credit
C. Accounts Receivable, debit; Cash, credit
D. Cash, debit; Accounts Receivable, credit
 
115. Which of the following entries records the collection of cash from cash customers? 
A. Fees Earned, debit; Cash, credit
B. Fees Earned, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
116. Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service. 
A. Prepaid Rent, debit; Rent Revenue, credit.
B. Cash, debit; Unearned Rent, credit.
C. Cash, debit; Prepaid Rent, credit.
D. Cash, debit; Rent Expense credit.
 
117. A patient has a physical examination and asks the bookkeeper to mail the bill.  The bookkeeper should 
A. make no entry until the cash is received
B. Cash, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
118. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means 
A. all of the information from the journal was correctly transferred to the ledger
B. all accounts have their correct balances in the ledger
C. only the journal is accurate; the ledger may be incorrect
D. only that the debit dollar amounts equal the credit dollar amounts
 
119. Which of the following is true about a T-Account? 
A. Left hand side of the T-Account is called a debit.
B. Left hand side of the T-Accounts is called a credit
C. Right hand side of the T-Account is called a debit
D. None are true.
 
120. Which of the following abbreviations are correct? 
A. Debit “Dr”, Credit “Cd”
B. Debit “Db”, Credit “Cr”
C. Debit “Db”, Credit “Cd”
D. Debit “Dr”, Credit “Cr”
 
121. Which side of the account increases a cash account? 
A. credit
B. neither a debit or a credit
C. debit
D. either a debit or a credit
 
122. A cash payment is recorded on the cash account as a  
A. neither a debit or a credit
B. credit
C. debit
D. either a debit or a credit
 
123. The balance of the account is determined by 
A. adding all of the debits to all of the credits.
B. always subtracting the debits from the credits.
C. always subtracting the credits from the debits. 
D. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.
 
124. A list of the accounts is called 
A. ledger
B. chart of accounts
C. T-Account
D. Debit
 
125. On the chart of accounts, the balance sheet accounts are normally listed in the following order 
A. liabilities, assets, owner’s equity
B. assets, liabilities, owner’s equity
C. owner’s equity, assets, liabilities
D. assets, owner’s equity, liabilities
 
126. In which order are the accounts listed in the chart of accounts? 
A. assets, expenses, liabilities, owners’ equity, revenues
B. owners’ equity, assets, liabilities, revenues, expenses
C. assets, liabilities, owner’ equity, revenues, expenses
D. assets, liabilities, revenues, expenses, owners’ equity
 
127. Which are the parts of the T account? 
A. title, date, total
B. date, debit side, credit side
C. title, debit side, credit side
D. title, debit side, total
 
128. Which of the following is not a correct rule of debits and credits?  
A. assets, expenses and withdrawals are increased by debits
B. assets are decreased by credits and have a normal debit balance
C. liabilities, revenues and owner’s equity are increased by credits
D. the normal balance for revenues and expenses is a credit
 
129. Prarie Clinic purchased X-ray equipment for $4,000, paid $1,275 down, with the remainder to be paid later.  The correct entry would be 
A. Equipment                     1,275
           Cash                              1,275
B. Cash                             1,275
Accounts Payable         2,725
           Equipment                      4,000
C. Equipment Expense        4,000
           Accounts Payable           1,275
           Cash                                2,725
D. Equipment                     4,000
           Accounts Payable           2,725
           Cash                                1,275
 
130. The chart of accounts is designed to 
A. alphabetize the accounts to make reading easier for its financial statement users.
B. analyze the accounts and organize them in order of dollar amount to simplify the accounting information for users.
C. summarize the transactions and determine their ending balances.
D. meet the information needs of a company and other financial statement users.
 
131. Which group of accounts is comprised of only assets? 
A. Cash, Accounts Payable, Buildings
B. Accounts Receivable, Revenue, Cash
C. Prepaid Expenses,  Buildings, Patents
D. Unearned Revenues, Prepaid Expenses, Cash
 
132. Of the following which istrue about assets? 
A. Assets include physical and intangible assets.
B. Assets include only physical assets.
C. Assets are owned solely by the owner of the company.
D. Assets are the result of selling products or services to customers.
 
133. Which of the following is not considered to be a liability? 
A. Wages Payable
B. Accounts Receivable
C. Unearned Revenues
D. Accounts Payable
 
134. Which of the following statements is not true about liabilities? 
A. Liabilities are debts owed to outsiders.
B. Account titles of liabilities often include the term “payable”.
C. Cash received before services are performed are considered to be liabilities.
D. Liabilities do not include wages owed to employees of the company.
 
135. The owner’s equity will be reduced by all of the following accounts except: 
A. Revenues
B. Expenses
C. Drawing account
D. All are true.
 
136. Expenses can result from:  
A. increasing owner’s equity.
B. consuming services.
C. using up liabilities.
D. all are true.
 
137. The chart of accounts classify the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account.  Which of the following indicates the use of this classification? 
A. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Expenses, 5-Revenues
B. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Revenues, 5-Expenses
C. 1-Assets, 2-Owner’s Equity, 3-Revenues, 4-Expenses, 5-Drawing
D. 1-Owner’s Equity, 2-Drawing, 3-Revenues, 4-Expenses
 
138. The ____ is where a transaction can first be found on the accounting records. 
A. chart of accounts
B. income statement
C. balance sheet
D. journal
 
139. The process of recording a transaction in the journal is called 
A. recording
B. journalizing
C. posting
D. summarizing
 
140. Joshua Scott invests $65,000 into his new business.  How would the journal entry for this transaction be entered in the journal? 
A. Cash                                     65,000
       Joshua Scott, Capital                   65,000
   Invested cash in business
B. Cash                                     65,000
Joshua Scott, Capital                          65,000
   Invested cash in business
C. Joshua Scott, Capital              65,000
       Cash                                          65,000
   Invested cash in business
D. Joshua Scott, Capital              65,000
Cash                                                 65,000
   Invested cash in business
 
141. 
April	23	Cash	 	14,000	 	
 	 	       Jim Xu, Capital	 	 	14,000	
 	 	  Invest cash in Xu Co.	 	 	 	

The  journal entry will: 
A. Increase Capital and decrease Cash
B. Increase Cash and decrease Capital
C. Increase Cash and increase Capital
D. Decrease Cash and decrease Capital
 
142. 
May	24	Land	 	53,000	 	
 	 	       Cash	 	 	53,000	
 	 	  Purchased land for business	 	 	 	

What effects does this journal entry have on the accounts? 
A. Increase to Cash and increase to Land
B. Increase to Land and decrease to Cash
C. Decrease to Cash and decrease to Land
D. Increase to Cash and decrease to Land
 
143. 
May	31	Supplies	 	120	 	
 	 	       Accounts Payable	 	 	120	
 	 	  ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Purchased supplies with cash
B. Investment of supplies by owner
C. Purchased supplies on account
D. Paid accounts payable.
 
144. 
March	10	Accounts Payable	 	3,300	 	
 	 	       Cash	 	 	3,300	
 	 	  Paid creditors on account	 	 	 	

What effect does this journal entry have on the accounts? 
A. Decrease accounts payable, increase cash
B. Increase cash, decrease accounts payable
C. Increase accounts payable, increase cash
D. Decrease accounts payable, decrease cash
 
145. Which of the following accounts would be increased with a credit? 
A. Land, Accounts Payable, Drawing
B. Accounts Payable, Unearned revenue, Collins Capital
C. Collins Capital, Accounts Receivable, Unearned Revenue
D. Cash, Accounts Receivable, Collins Capital
 
146. In accordance with the debit and credit rules, which of the following is true? 
A. Debits increase assets.
B. Credits increase assets.
C. Debits increase both assets and capital.
D. Credits increase both assets and liabilities.
 
147. All of the following accounts are increased with a debit except: 
A. Unearned Revenues
B. Land
C. Accounts Receivable
D. Cash
 
148. Which of the following owner’s equity accounts follow the same debit and credit rules as liabilities? 
A. Expense accounts only
B. Drawing accounts only
C. Revenues accounts only
D. Expenses and drawing accounts
 
149. The payment for the monthly rent will require the following entry 
A. Debit Cash and Debit Rent Expense
B. Credit Cash and Credit Rent Expense
C. Debit Rent Expense and Credit Cash
D. Credit Rent Expense and Debit Cash
 
150. Expenses follow the same debit and credit rules as 
A. Revenues
B. Drawing Account
C. Capital Account
D. Liabilities
 
151. Net income will result when 
A. revenues (credits) > expenses (debits)
B. revenues (debits) > expenses (credits)
C. expenses (credits) < revenues (debits)
D. revenues (credits) = expenses (debits)
 
152. Which of the following will increase owner’s equity? 
A. Expenses > revenues
B. the owner draws money for personal use
C. Revenues > expenses
D. Cash is received from customers on account.
 
153. Which of the following situations increase owner’s equity? 
A. Supplies are purchased on account.
B. Services are provided on account.
C. Cash is received from customers.
D. Utility bill will be paid next month.
 
154. Which of the following group of accounts are increased with a debit? 
A. assets, liabilities, owner’s equity
B. assets, drawing, expenses
C. assets, revenues, expenses
D. assets, liabilities, revenues
 
155. Which of the following group of accounts increase with a credit? 
A. Capital, revenues, expenses
B. Assets, capital, revenues
C. Liabilities, capital, revenues
D. None of these
 
156. Which of the following is true regarding normal balances of accounts? 
A. All accounts have a normal debit balance.
B. The normal balance of all accounts will have either a positive or negative balance.
C. Accounts that have a normal debit balance will only have debit entries, never credit entries.
D. The normal balance is the side of the account that increases the account.
 
157. All of the following occur with a double-entry accounting system except: 
A. The accounting equation remains in balance.
B. The sum of all debits is always equal to the sum of all credits in each journal entry.
C. Each business transaction will have only two entries.
D. Every transaction affects at least two accounts.
 
158. 
March	6	Cash	 	375	 	
 	 	       Unearned Fees	 	 	375	
 	 	  ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Received cash for services performed
B. Received cash for services to be performed in the future.
C. Paid cash in advance for services to be done.
D. Paid cash for services to be performed.
 
159. 
April	14	Equipment	 	6,700	 	
 	 	        Cash	 	 	  2,000	
 	 	        Note Payable	 	 	  4,700	
 	 	  ????????????	 	 	 	

Which is the best explanation for this journal entry? 
A. Purchased equipment, paid cash of $2,000, with the remainder to be paid in payments.
B. Purchased equipment, paid cash of $4,700, with the remainder to be received in the future.
C. Purchased equipment, paid cash for the entire amount.
D. Purchased equipment on credit.
 
160. The process of rewriting the information from the journal into the ledger is called 
A. sliding
B. transposing
C. journalizing
D. posting
 
161. The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a 
A. ledger
B. trial balance
C. account
D. balance sheet
 
162. The process of transferring the journal entries to the accounts is known as 
A. posting
B. updating
C. journalizing
D. summarizing
 
163. The posting process will include the transfer of the following information from the journal to the account. 
A. date, amount (debit or credit)
B. date, amount (debit or credit), journal page number
C. amount (debit or credit), account number
D. date, amount (debit or credit) account number
 
164. The post reference columns are used to trace transactions from the journal to the accounts.  What will be posted on the post reference column of (a) the journal and (b) on the account? 
A. (a) the amount of the debit or credit (b) the journal page number
B. (a) the journal page number (b) the date of the transaction
C. (a) the journal page number, (b) the account number
D. (a) the account number, (b) the journal page number
 
165. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the cash account? 
A. 11
B. 15
C. 3
D. None
 
166. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the Prepaid Insurance account? 
A. 11
B. 15
C. 3
D. None
 
167. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the journal entry? 
A. 15, 11
B. 15
C. 11
D. 3
 
168. The chart of account for the Miguel Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Miguel, Capital	31	
Miguel, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Cash	640	 	
       Fees Earned	 	640	

What is the post reference that will be found on the journal entry? 
A. 41
B. 3
C. 11, 41
D. 11
 
169. The chart of account for the Miguel Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Miguel, Capital	31	
Miguel, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 5, the following transaction was found:

Salaries Expense	525	 	
      Cash	 	525	

What is the post reference that will be found on the Salaries Expense account? 
A. 5
B. 11
C. 54
D. None
 
170. The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,000	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Investment	2,000	 	Land	3,000	
Cash	2,600	 	Wages Expense	1,400	
Drawing	1,200	 	Capital	8,800	

The total of all the assets is: 
A. $9,400
B. $9,000
C. $9,100
D. $9,800
 
171. A trial balance is prepared to 
A. prove that there were no errors made in recording transactions into the journal
B. prove that no errors were made in posting to the ledger
C. prove that each account balance is correct
D. summarize the account balances to help prepare financial statements
 
172. The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,000	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Investment	2,000	 	Land	3,000	
Cash	2,600	 	Wages Expense	1,400	
Drawing	1,200	 	Capital	8,800	

Prepare a trial balance.  The total of the debits is 
A. $13,300
B. $9,400
C. $9,100
D. $9,600
 
173. Of the following financial reports, which one is the one that will determine if the accounting equation is in balance? 
A. Journal entry
B. Income statement
C. Trial balance
D. Account reconciliation
 
174. An overpayment error was discovered in computing and paying the wages of a Jamison Tree Trimming employee.  When Jamison receives cash from the employee for the amount of the overpayment, which of the following entries will Jamison make? 
A. Cash, debit; Wages Expense, credit
B. Wages Payable, debit; Wages Expense, credit
C. Wages Expense, debit, Cash, credit
D. Cash, debit; Wages Payable, credit
 
175. If the two totals of a trial balance are not equal, it could be due to  
A. failure to record a transaction
B. recording the same erroneous amount for both the debit and the credit parts of a transaction
C. an error in determining the account balances, such as a balance being incorrectly computed
D. recording the same transaction more than once
 
176. When a transposition error is made on the trial balance, the difference between the debit and credit totals on the trial balance will be 
A. zero
B. twice the amount of the transposition
C. one-half the amount of the transposition
D. divisible by 9
 
177. Which of the following errors, each considered individually, would cause the trial balance totals to be unequal? 
A. a transaction was not posted
B. a payment of $67 for insurance was posted as a debit of $42 to Prepaid Insurance and a credit of $42 to Cash
C. a payment of $1,311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to Accounts Receivable
D. cash received from customers on account was posted as a debit of $680 to Cash and a credit of $680 to Accounts Payable
 
178. Supplies purchased on account were incorrectly recorded as Office Equipment.  The correcting entry would be 
A. Supplies, debit; Office Equipment, credit.
B. Accounts Receivable, debit; Supplies, credit.
C. Office Equipment, debit; Supplies Expense, credit.
D. Supplies, debit; Accounts Payable, credit.
 
179. Which of the following errors will cause the trial balance totals to be unequal? 
A. post the debit portion of a journal entry incorrectly and the credit portion of the entry is correctly posted
B. failure to record a transaction or to post a transaction
C. recording the same transaction more than once
D. recording the same erroneous amount for both the debit and the credit parts of a transaction
E. posting a part of a transaction correctly as a debit or credit but to the wrong account
 
180. The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.  What will the accountant do to find the error? 
A. Determine the amount of the error and look for that amount on the trial balance.
B. Determine the amount of the error and divide by two, then look for that amount on the trial balance.
C. Determine the amount of the error and refer to the journal entries for that amount.
D. Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
 
181. Which of the following is not a short-cut in finding errors on the trial balance? 
A. Determine the difference between debits and credits and look for the amount.
B. Determine the amount and change any account to make the trial balance correct.
C. Determine the difference between debits and credits, divide the amount by 2, look for the amount.
D. Determine the difference between debits and credits, divide the amount by 9, if it divides evenly, look for a transposition or slide error.
 
182. All of the following statements regarding a horizontal analysis are true except:  
A. A horizontal analysis is used to compare an item in a current statement with the same item in prior statements.  
B. A horizontal analysis can be performed on a balance sheet and income statement, but not on a statement of cash flows.
C. If Fees Earned in 2010 is $150,000 and Fees Earned in 2011 is $187,500, a horizontal analysis will indicate a 25% increase over this period.
D. When two statement are compared in horizontal analysis, the earlier statement is used as the base for computing the amount and the percent of change.
 
183. The chart of accounts classify the accounts to make identification of the accounts easier. Discuss how companies set up their chart of accounts for use in their business 

 

 
 
184. On September 1st, Erika Company purchased land for $47,500 cash. Write the journal entry in the space below. 

 

 
 
185. On October 10th, Nikle Company purchased supplies worth $2,750 on account.
(a)  Write the journal entry in the space below.

(b) Nikle Company paid this bill on October 25th. Write the journal entry in the space below. 

 

 
 
186. On October 17th Nikle Company purchased a building and a plot of land for $750,000. The building was valued at $500,000 while the land carried a value of $250,000. Nikle paid $300,000 down in cash and signed a notes payable for the balance. In the space below write the journal entry. 

 

 
 
187. On November 1st Nikle Company made a cash payment of $200,000 on a note payable that was generated in the purchase of a building and land plot. Write the journal entry for this payment in the space below. 

 

 
 
188. Damien Lawson invests $45,000 to initiate the operation of his business, JumpStart, on January 7th. Journalize this transaction. 

 

 
 
189. On January 8th, Damien Lawson transfers ownership of several pieces of office equipment to his new business, JumpStart. When new, these items were worth $72,500. The fair market value of the equipment is $60,000. Journalize this transfer. 

 

 
 
190. On August 30th JumpStart  pays numerous bills which include:
         Payment to the landlord for August rent - $950
         Payment to the Gas & Electric Company for August’s bill - $525
         Payment of employee wages for the last half of August - $1,880
         Payment of shopping center’s parking lot cleaning fee - $275
Journalize these payments as one compound journal entry. 

 

 
 
191. On October 30th Damien Lawson withdraws $3,330 from JumpStart for personal use. Journalize this event. 

 

 
 
192. Prepare a journal entry for the purchase of a truck on April 4 for $85,700, paying $15,000 cash and the remainder on account. 

 

 
 
193. Prepare a journal entry on October 12 for the fees earned on account, $14,600. 

 

 
 
194. Prepare a journal entry on March 27 for the payment of $8,000 to the owner of Credit Consultant Company, Neal Stone, for personal use. 

 

 
 
195. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.  Also, indicate the normal balance of each account.

1.	Fees Earned	4.	Supplies	
2.	Utilities Expense	5.	Cash	
3.	Accounts Payable	6.	Accounts Receivable	

 

 

 
196. On June 1, the cash account balance was $75,880.  During June, cash receipts totaled $305,000 and the June 30 balance was $96,750.  Determine the cash payments made during June. 

 

 
 
197. For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal.  If the error would cause the trial balance total to be unequal, indicate whether the debit or credit total is higher and by how much.
A.	Payment of a cash withdrawal of $6,800 was journalized and posted as a debit of $8,600 to Salaries Expense and a credit of $8,600 to Cash.	
B.	A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited to Fees Earned for $9,780.	
C.	A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts Payable and a credit of $3,000 to Cash.	

 

 

 
198. The following errors took place in journalizing and posting transactions:

A.	A withdrawal of $5,000 by Stan Norton, owner of the business, was recorded as a debit to Office Expense and a credit to Cash.	
B.	Accounts receivable payment for $7,800 was recorded as a debit to Cash and a credit to Fees Earned.	

Journalize the entries to correct the errors.  Omit the explanations. 

 

 
 
199. Discuss and describe how errors in accounts can be found. 

 

 
 
200. On November 30th, Damien Lawson is informed by his accountant that $550 of a transaction recording the purchase of office supplies was really office equipment. He has been asked to correct this journal entry. Write the journal entry to correct this situation. 

 

 
 
201. Journalize the entries to correct the following errors:

(a)	A purchase of supplies for $200 on account was recorded and posted as a debit to Supplies for $500 and as a credit to Accounts Receivable for $500.	
(b)	A receipt of $4,000 from Fees Earned was recorded and posted as a debit to Fees Earned for $4,000 and a credit to Cash for $4,000.	

 

 

 
202. For the following, mark an “D” if the following account normally has a debit balance and mark a “C” if the following account normally has a credit balance.

_____1. Notes Payable
_____2. Mortgage Payable
_____3. Drawing
_____4. Accounts Receivable
_____5. Capital
_____6. Rent Revenue
_____7. Unearned Income
_____8. Utility Expense
_____9. Automobiles 

 

 
 
203. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Cary transferred cash from a  personal bank account to an account to be used for the business.	 	 	
b.  Paid rent for the period of January 3 to the end of the month.	 	 	
c.  Purchased truck for $30,000 with a cash down payment of $5,000 and the remainder on a note.	 	 	
d. Purchased equipment on account.	 	 	

 

 

 
204. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (e), each identified by a number.  Following this list are the transactions that occurred in Parsons’ first month of operation.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Purchased supplies for cash.	 	 	
b.  Paid the annual premiums on property and casualty insurance.	 	 	
c.  Received cash for a job previously recorded on account.	 	 	
d. Paid a creditor a portion of the amount owed for equipment previously purchased on account.	 	 	
e.  Received cash for a completed job.	 	 	

 

 

 
205. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (f), each identified by a number.  Following this list are the transactions that occurred in Parsons’ first month of operation.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Recorded jobs completed on account and sent invoices to customers.	 	 	
b.  Received an invoice for truck expenses to be paid in February.	 	 	
c.  Paid utilities expense	 	 	
d. Received cash from customers on account.	 	 	
e.  Paid employee wages.	 	 	
f. Withdrew cash for personal use.	 	 	

 

 

 
206. Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Office Supplies	
4.	Land	
5.	Interest Receivable	
6.	Building	
7.	Accumulated Depreciation - Building	
8.	Depreciation Expense - Building	
9.	Accounts Payable	
10.	Interest Payable	
11.	Insurance Payable	
12.	Utility Expense	
13.	Notes Payable	
14.	Prepaid Insurance	
15.	Service Revenue	
16.	Owner, Capital	
17.	Insurance Expense	
18.	Utility Payable	
19.	Office Supplies Expense	
20.	Unearned Service Revenue	
21.	Owner, Drawing	
22.	Interest Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a. Utility bill is received; payment will be made in 10 days.	 	 	
b. Paid the utility bill previously recorded in transaction (a).	 	 	
c. Bought a three year insurance policy and paid in full.	 	 	
d. Received $7,000 from a contract to perform accounting services over the next two years.	 	 	

 

 

 
207. Below is the unadjusted trial balance for Dawson Designs.  

REQUIRED:

(1) Identify the errors in the following trial balance.  All accounts have normal balances.
(2) Prepare a corrected trial balance.

Dawson Co.
Unadjusted Trial Balance
For the Month of January 2011	
 	Debits	Credits	
Cash	23,000	 	
Accounts Receivable	 	49,700	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	6,050	 	
Salaries Payable	 	4,250	
Tim Dawson, Capital	 	110,000	
Tim Dawson, Drawing	 	18,500	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	 	4,970	
 	424,020	424,020	

 

 

 
208. The following two situations are independent of each other.

1.  On June 1, the cash account balance was $38,750.  During June, cash payments totaled $239,140 and the June 30 balance was $42,175.  Determine the cash receipts during June and show your calculation.

2.  On March 1, the supplies account balance was $1,340.  During March, supplies of $4,335 were purchased and $890 of supplies were on hand as of March 31.  Determine the supplies expense for March and show your calculation. 

 

 
 
209. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts she would like to open in the general ledger. List the accounts in the order in which they should appear in the ledger and propose a two digit account numbering scheme that is consistent with the rules of a proper chart of accounts.

1.	Cash	
2.	Supplies	
3.	Equipment	
4.	Accounts Payable	
5.	Cary Parsons, Capital	
6.	Wages Expense	
7.	Rent Expense	
8.	Truck	
9.	Utilities Expense	
10.	Cary Parsons, Drawing	
11.	Truck Expense	
12.	Prepaid Insurance	
13.	Fees Earned	
14.	Miscellaneous Expense	
15.	Insurance Expense	
16.	Notes Payable	
17.	Accounts Receivable	

 

 

 
210. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space provided under the accounting equation. You need an identification code for each element of the accounting equation. An example is given before the first transaction.

I-Increase	D-Decrease	NE-No Effect	

 	 	  Assets  	=	Liabilities	+	  Owners’ Equity  	
Example	John Smith invests in his new business by giving it his personal drill press valued at $3,500.	
       I__    	 	
___NE__	 	
___ I____ 	

A)	
Cash sales are made.	

                 	
B)	Equipment is purchased on credit.	

                 	
C)	Payment is made for the equipment purchased on credit in (B).	

               	 	

      _____	
D)	The company sold excess supplies to another company on credit.	
________	 	
_______	 	
________	
E)	Cash is collected from customers for accounts receivable balances.	

________	 	

_______	 	

________	

       

 

 
 
211. Journalize the  five transactions for Mirmax Rentals described below.

 	August   1	Mirmax purchases two new saws on credit at $375 each.  The saws are added to Mirmax’s rental inventory.  Payment is due in 30 days.	
 	 	 	
 	8	Mirmax accepts advance deposits for tool rentals of $75 that will be applied to the cash rental when the tools are returned.	
 	 	 	
 	15	Mirmax receives a bill from Macon Utility Company for $150.  Payment is due in 30 days.	
 	 	 	
 	20	Customers are charged $750 by Mirmax for tool rentals.  Payment is due from the customers in 30 days.	
 	 	 	
 	31	Mirmax receives $500 in payments from the customers that were billed for rentals on August 20.	

 

 

 
212. Journalize the following five transactions for Nexium & Associates, Inc.  Omit explanations. 

 	March 1	Bills are sent to clients for services provided in February in the amount of $800.	
 	 	 	
 	9	Corner Office, Inc. delivers office furniture ($1,060) and office supplies ($160) to Nexium leaving an invoice for $1,220.	
 	 	 	
 	15	Payment is made to Corner Office, Inc. for the furniture and office supplies delivered on March 9.	
 	 	 	
 	23	A bill for $430 for electricity for the month of March is received and will be paid on its due date in April.	
 	 	 	
 	31	Salaries of $850 are paid to employees.	

 

 

 
213. McMann Company has a condensed income statement as shown::

 	2011	2010	
Sales	$178,400	$162,500	
Wage expenses	100,000	92,500	
Rent expenses	33,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	163,000	147,500	
Net income	15,400	15,000	

REQUIRED:

Prepare a horizontal analysis of McMann Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 

 
 
214. Georgia Company has a condensed income statement as shown::

 	2011	2010	
Sales	$158,400	$162,500	
Wage expenses	80,000	92,500	
Rent expenses	28,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	138,000	147,500	
Net income	20,400	15,000	

REQUIRED:

Prepare a horizontal analysis of Georgia Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 

 
 
215. Organize the following accounts into the usual sequence of a chart of accounts.

Miscellaneous Expense
Accounts Payable
Accounts Receivable
Cash
Alecia Morris, Capital
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Alecia Morris, Drawing 

 

 
 
216. Selected accounts from the ledger of Garrison Company appear below.  For each account, indicate the following:

(a)	In the first column at the right, indicate the nature of each account, using the following abbreviations:	
 	 	
 	Asset - A	Revenue - R	
 	Liability - L	Expense - E	
 	None of the above - N	 	
 	 	
(b)	In the second column, indicate the increase side of each account by inserting Dr. or Cr.	
 	 	 	 	
 	Account	Type of Account	Increase Side	
(1)	Supplies	_______	________	
(2)	Notes Receivable	_______	________	
(3)	Fees Earned	_______	________	
(4)	Garrison, Drawing	_______	________	
(5)	Accounts Payable	_______	________	
(6)	Salaries Expense	_______	________	
(7)	Garrison, Capital	_______	________	
(8)	Accounts Receivable	_______	________	
(9)	Equipment	_______	________	
(10)	Notes Payable	_______	________	

 

 

 
217. Calculate the following:

(a)	Determine the cash receipts for April based on the following data:	
 	 	 	
 	Cash payments during April	$45,500	
 	Cash account balance, April 1	6,750	
 	Cash account balance, April 30	10,000	
 	 	
(b)	Determine the cash received from customers on account during April based on the following data:	
 	 	 	
 	Accounts receivable account balance, April 1	$10,500	
 	Accounts receivable account balance, April 30	7,250	
 	Fees billed to customers during April	26,000	

 

 

 
218. Increases and decreases in various types of accounts are listed below.  In each case, indicate by "Dr." or "Cr." (a) whether the change in the account would be recorded as a debit or a credit and (b) whether the normal balance of the account is a debit or a credit.

 	 	(a)	(b)	
 	 	Recorded
As	Normal
Balance	
(1)	Increase in Denice Dickenson, Capital	________	_______	
(2)	Increase in Denice Dickenson, Drawing	________	_______	
(3)	Decrease in Accounts Receivable	________	_______	
(4)	Increase in Note Payable	________	_______	
(5)	Increase in Accounts Payable	________	_______	
(6)	Decrease in Supplies	________	_______	
(7)	Decrease in Salaries Expense	________	_______	
(8)	Increase in Accounts Receivable	________	_______	
(9)	Increase in Cash	________	_______	
(10)	Decrease in Land	________	_______	

 

 

 
219. Record the following selected transactions for April in a two-column journal, identifying each entry by letter:

(a)	Received $12,000 from Katie Long, owner.	
(b)	Purchased equipment for $25,000, paying $10,000 in cash and giving a note payable for the remainder.	
(c)	Paid $1,800 for rent for April.	
(d)	Purchased $9,800 of supplies on account.	
(e)	Recorded $2,250 of fees earned on account.	
(f)	Received $9,000 in cash for fees earned.	
(g)	Paid $300 to creditors on account.	
(h)	Paid wages of $1,650.	
(i)	Received $1,190 from customers on account.	
(j)	Recorded owner's withdrawal of $2,350.	

 

 

 
220. All nine transactions for Dalton Survey Company for September, the first month of operations, are recorded in the following T accounts:

Cash	 	Michael Dalton, Capital	
(1)	20,000 	 (3)	7,500	 	 	 	 (1)	20,000	
(7)	6,900 	 (5)	2,600	 	 	 	 	 	
(9)	4,700 	 (6)	5,500	 	 	 	 	 	
 	 	 (8)	2,000	 	 	 	 	 	

Accounts Receivable	 	Michael Dalton, Drawing	
(4)	4,900 	 (9)	4,700	 	 (8)	2,000  	 	 	

Supplies	 	Fees Earned	
(3)	7,500 	 	 	 	 	 	 (4)	4,900	
 	 	 	 	 	 	 	 (7)	6,900	

Equipment	 	Operating Expense	
(2)	4,500 	 	 	 	(6)	5,500 	 	 	

Accounts Payable	 	 	
(5)	2,600 	 (2)	4,500	 	 	 	 	 	

 Indicate the following for each debit and each credit:

(a)	The type of account affected (asset, liability, capital, drawing, revenue, or expense).	
(b)	The effect on the account, using + for increase and - for decrease.	

Present your answers in the following form:

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	

 

 

 
221. On January 12th, JumpStart Co. purchased $870 in office supplies. 
(a) Journalize this transaction as if JumpStart paid cash.

(b) (1) Journalize this transaction as if JumpStart placed it on account.

(b) (2) On January 18th, JumpStart pays the amount due. Journalize this event. 

 

 
 
222. On December 1st, JumpStart Company provides $2,800 in services to clients.
(a) Journalize this event as if the clients had paid cash at the time the services were rendered.

(b)(1) Journalize this event as if the clients had placed this on account.

(b)(2) Assume that the clients paid $1,200 of the amount on account on December 30th. Journalize this transaction. 

 

 
 
223. On November 10th, JumpStart Co. provides $2,900 in services to clients. At the time of service, the clients paid $600.00 in cash and put the balance on account.
(a) Journalize this event.

(b) On November 20th, JumpStart Co. clients paid an additional $900 on their accounts due. Journalize this event.

(c) Calculate the amount on accounts receivable on November 30th. 

 

 
 
224. Journalize the following selected transactions for April 2011 in a two-column journal.  Journal entry explanations may be omitted.

April 1	Received cash from the investment made by the owner, $14,000.	
2	Received cash for providing accounting services, $9,500.	
3	Billed customers on account for providing services, $4,200.	
4	Paid advertising expense, $700.	
5	Received cash from customers on account, $2,500.	
6	Owner withdraws, $1,010.	
7	Received telephone bill, $900.	
8	Paid telephone bill, $900.	

Date	Description	Post Ref	Debit	Credit	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

					

 

 

 
225. Analyze the following transactions as to their effect on the accounting equation.

(a)	The company paid $725 to a vendor for supplies purchased previously on account.	
(b)	The company performed $850 of services and billed the customer.	
(c)	The company received a utility bill for $395 and will pay it next month.	
(d)	The owner of the company withdrew $145 of supplies for personal use.	
(e)	The company paid $315 in salaries to its employees.	
(f)	The company collected $730 of cash from its customers on account.	

Some of the possible effects of a transaction on the accounting equation are listed below:

(1)	Asset, dr.; Asset, cr.	
(2)	Asset, dr.; Owner's Equity, cr.	
(3)	Asset, dr.; Liability, cr.	
(4)	Asset, dr.; Revenue, cr.	
(5)	Liability, dr.; Assets, cr.	
(6)	Drawing, dr.; Asset, cr.	
(7)	Expense, dr.; Assets, cr.	
(8)	Expense, dr.; Liability, cr.	

Put the appropriate letter next to each transaction. 

 

 
 
226. Set up T accounts for Cash; Accounts Receivable; Supplies; Accounts Payable; Clay Potter, Capital; Clay Potter, Drawing; Professional Fees; and Operating Expenses.

(a)	In the T accounts, record the following transactions of Potter Pool Services for June, 2011, identifying each entry by number:	
 	(1)	Potter invested $12,500 cash in the business.	
 	(2)	Purchased supplies on account, $6,250.	
 	(3)	Paid operating expenses, $5,500.	
 	(4)	Billed clients for fees, $7,440.	
 	(5)	Received cash from cash clients, $4,700.	
 	(6)	Paid creditors on account, $1,400.	
 	(7)	Received $3,100 from clients on account.	
 	(8)	Withdrew $1,500 cash for personal use.	
 	 	
(b)	Prepare a trial balance as of June 30, 2011 for Potter Pool Services.	
 	 	
(c)	Assuming that supplies expense (which has not been recorded) amounts to $1,500 for June, determine the following:	
 	(1)	Net income for the month.	
 	(2)	Owner's equity as of June 30.	

 

 

 
227. Prepare a trial balance, listing the following accounts in proper sequence.  The accounts (all normal balances) were taken from the ledger of Sophie Designs Co. on April 30, 2010.

Accounts Payable	$ 4,100	 	Rent Expense	$11,500	
Accounts Receivable	3,450	 	Salary Expense	14,000	
Cash	7,375	 	Fees Earned	54,100	
Sophie Dawson, Capital	17,800	 	Supplies	3,125	
Sophie Dawson, Drawing	15,500	 	Supplies Expense	1,700	
Equipment	14,500	 	Utilities Expense	4,000	
Miscellaneous Expense	850 	 	 	 	

 

 

 
228. Exhibit 2-1
All nine transactions for Ralston Sports Co. for September 2011, the first month of operations, are recorded in the following T accounts:

Cash	 	James Ralston, Capital	
(1)	25,000 	 (3)	12,500	 	 	 	 (1)	25,000	
(7)	11,900 	 (5)	7,600	 	 	 	 	 	
(9)	9,700 	 (6)	10,500	 	 	 	 	 	
 	 	 (8)	7,000	 	 	 	 	 	

Accounts Receivable	 	James Ralston, Drawing	
(4)	9,900 	 (9)	9,700	 	(8)	7,000 	 	 	

Supplies	 	Fees Earned	
(3)	12,500 	 	 	 	 	 	 (4)	9,900	
 	 	 	 	 	 	 	 (7)	11,900	

Equipment	 	Operating Expense	
(2)	9,500 	 	 	 	(6)	10,500 	 	 	

Accounts Payable	 	 	
(5)	7,600 	 (2)	9,500	 	 	 	 	 	

 Refer to Exhibit 2-1.  Prepare a trial balance, listing the accounts in their proper order. 

 

 
 
229. 
(a)	List the errors in the following trial balance. All accounts have normal balances.	
(b)	What would be the new balance of the trial balance after errors are corrected? What would be the balance of Accounts Receivable?	

Winslow’s Auto Body
Trial Balance
For Month Ending April 30, 2011	
Cash	 	19,475	
Accounts Receivable	?	 	
Supplies	 	1,000	
Equipment	15,000	 	
Prepaid Insurance	 	500	
Accounts Payable	 	2,500	
Thad Winslow, Capital	17,000	 	
Thad Winslow, Drawing	 	1,000	
Fees Earned	 	49,600	
Salary Expense	14,500	 	
Rent Expense	 	9,000	
Utilities Expense	1,400	 	
Supplies Expense	3,900	 	
Miscellaneous Expense	     250	           	
 	55,000	81,575	

 

 

 
230. Answer the following questions for each of the errors listed below, considered individually:

(a)	Did the error cause the trial balance totals to be unequal?	
(b)	What is the amount of the difference between the trial balance totals (where applicable)?	
(c)	Which of the trial balance totals, debit or credit, is the larger (where applicable)?	

Present your answers in columnar form, using the following headings:

Error	Totals	Difference in Totals	Larger of Totals	
(identifying number)	(equal or unequal)	(amount)	(debit or credit)	

Errors:
(1)	A withdrawal of $3,000 cash by the owner was recorded by a debit of $3,000 to Salary Expense and a credit of $3,000 to Cash.	
(2)	A $650 purchase of supplies on account was recorded as a debit of $1,650 to Equipment and a credit of $1,650 to Accounts Payable.	
(3)	A purchase of equipment for $3,450 on account was not recorded.	
(4)	A $870 receipt on account was recorded as a $870 debit to Cash and a $780 credit to Accounts Receivable.	
(5)	A payment of $1,530 cash on account was recorded only as a credit to Cash.	
(6)	Cash sales of $8,500 were recorded as a credit of $8,500 to Cash and a credit of $8,500 to Fees Earned.	
(7)	The debit to record a $4,000 cash receipt on account was posted twice; the credit was posted once.	
(8)	The credit to record an $300 cash payment on account was posted twice; the debit was posted once.	
(9)	The debit balance of $7,400 in Accounts Receivable was recorded in the trial balance as a debit of $7,200.	

 

 

 
231. The bookkeeper for Brockton Industries prepared the following journal entries and posted the entries to the general ledger as indicated in the T accounts presented. Assume that the dollar amounts and the descriptions of the entries are correct.

Journal entries:

July  3	Accounts Receivable 	1,000	 	
 	            Service Revenue 	 	1,000	
 	Customers were billed for services completed.	 	 	
 	 	 	 	
11	Cash 	500	 	
 	            Service Revenue  	 	500	
 	Payment is received from a customer billed for services on July 1.	 	 	
 	 	 	 	
12	Office Supplies	600	 	
 	            Accounts Payable  	 	600	
 	Purchased office furniture on credit; payment is due in 30 days.	 	 	
 	 	 	 	
25	Office Furniture 	700	 	
 	            Cash 	 	700	
 	Payment is made for office furniture received on July 25.	 	 	

ACCOUNTS RECEIVABLE	 	SERVICE REVENUE	
7/3	1,000	|	 	 	 	7/3	1,000	|	 	 	
 	 	|	 	 	 	 	 	|	7/11	500	

CASH	 	ACCOUNTS PAYABLE	
7/11	500	|	7/25	700	 	7/12	600	|	 	 	

OFFICE SUPPLIES	 	OFFICE FURNITURE	
7/12	600	|	 	 	 	7/25	700	|	 	 	

Required:  If you assume that all journal entries have been recorded correctly, use the above information to: 
(1) Identify the postings to the general ledger that were made incorrectly. 
(2) Describe how the each incorrect posting should have been made. 

 

 

Chapter 2--Analyzing Transactions Key
 
1. Accounts are records of increases and decreases in individual financial statement items. 
TRUE
 
2. A chart of accounts is a listing of accounts that make up the journal. 
FALSE
 
3. The chart of accounts should be the same for each business. 
FALSE
 
4. Accounts payable are accounts that you expect will be paid to you. 
FALSE
 
5. Consuming goods and services in the process of generating revenues results in expenses. 
TRUE
 
6. Prepaid expenses are an example of an expense. 
FALSE
 
7. Unearned Revenues account is an example of a liability. 
TRUE
 
8. The Drawings account is an example of an expense. 
FALSE
 
9. Accounts in the ledger are usually maintained in alphabetical order. 
FALSE
 
10. Depending on the account title, the right side of the account is referred to as the credit side. 
FALSE
 
11. To determine the balance in an account, always subtract credits from debits. 
FALSE
 
12. The double-entry accounting system records each transaction twice. 
FALSE
 
13. The increase side of all accounts is the normal balance. 
TRUE
 
14. Transactions are initially entered into a record called a journal. 
TRUE
 
15. The process of recording a transaction in the journal is called journalizing. 
TRUE
 
16. Journalizing is the process of entering amounts in the ledger. 
FALSE
 
17. Transactions are listed in the journal chronologically. 
TRUE
 
18. Journalizing transactions using the double-entry bookkeeping system will eliminate fraud. 
FALSE
 
19. Liability accounts are increased by debits. 
FALSE
 
20. Expense accounts are increased by credits. 
FALSE
 
21. Revenue accounts are increased by credits. 
TRUE
 
22. The normal balance of a capital account is a debit. 
FALSE
 
23. The normal balance of the drawing account is a debit. 
TRUE
 
24. The normal balance of an expense account is a credit. 
FALSE
 
25. The normal balance of revenue accounts is a credit. 
TRUE
 
26. Withdrawals decrease owner's equity and are listed on the income statement as a deduction from revenue. 
FALSE
 
27. For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries. 
FALSE
 
28. For a month's transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries. 
FALSE
 
29. When a business receives a bill from the utility company, no entry should be made until the invoice is paid. 
FALSE
 
30. An account has three parts to it; a title, an increase side, and a decrease side. 
TRUE
 
31. The T account got its name because it resembles the letter “T.” 
TRUE
 
32. The right hand side of a T account is known as a debit and the left hand side is known as a credit. 
FALSE
 
33. A debit is abbreviated as Db and a credit is abbreviated as Cr. 
FALSE
 
34. Debiting the cash account will increase the account. 
TRUE
 
35. A credit to the cash account will increase the account. 
FALSE
 
36. The cash account will always be debited. 
FALSE
 
37. The recording of cash receipts to the cash account will be done by debiting the account. 
TRUE
 
38. The recording of cash payments from the cash account is done by entering the amount as a credit. 
TRUE
 
39. The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding the amounts together. 
FALSE
 
40. When an owner contributes equipment to the business, he or she retains ownership of the property. 
FALSE
 
41. Liabilities are debts owed by the business entity. 
TRUE
 
42. The accounts payable account is listed in the chart of accounts as an asset. 
FALSE
 
43. A drawing account represents the amount of withdrawals made by the owner. 
TRUE
 
44. Revenues are equal to the difference between cash receipts and cash payments. 
FALSE
 
45. Expenses use up assets or consume services in the process of generating revenues. 
TRUE
 
46. Owner’s capital will be reduced by the amount in the drawing account. 
TRUE
 
47. The journal includes both debit and credit accounts for each transaction. 
TRUE
 
48. A transaction that is recorded in the journal is called a journal entry. 
TRUE
 
49. Assets are increased with debits and decreased with credits. 
TRUE
 
50. Liabilities are increased with debits and decreased with credits. 
FALSE
 
51. Debits will increase Unearned Revenues and Revenues. 
FALSE
 
52. All owner’s equity accounts record increases to the accounts with credits. 
FALSE
 
53. Journal entries can have more than two accounts as long as the debits equal the credits. 
TRUE
 
54. Normal balances are the side that increase the account balance. 
TRUE
 
55. When an owner invests assets in the business, the capital account increases due to revenue being earned. 
FALSE
 
56. When an accounts payable account is paid in cash, the owner's equity in the business decreases. 
FALSE
 
57. When an account receivable is collected in cash, the total assets of the business increase. 
FALSE
 
58. The process of transferring the data from the journal to the ledger accounts is posting. 
TRUE
 
59. The post reference notation used in the ledger is the account number. 
FALSE
 
60. The post reference notation used in the journal is the page number. 
FALSE
 
61. A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger. 
TRUE
 
62. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements. 
FALSE
 
63. The process of transferring the debits and credits from the journal entries to the accounts is known as “updating the accounts”. 
FALSE
 
64. Journalizing eliminates fraud. 
FALSE
 
65. Once journal entries are posted to accounts, each account will show a new balance after each entry. 
TRUE
 
66. A group of related accounts that make up a complete unit is called a trial balance. 
FALSE
 
67. A trial balance determines the accuracy of the numbers. 
FALSE
 
68. Even when a trial balance is in balance, there may be errors in the individual accounts. 
TRUE
 
69. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal. 
FALSE
 
70. A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet. 
FALSE
 
71. If the trial balance is in balance, it can be assumed that all journal entries were posted correctly and no errors were made. 
FALSE
 
72. Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal. 
FALSE
 
73. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. 
FALSE
 
74. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause the trial balance to be out of balance. 
FALSE
 
75. Posting a transaction twice will cause the trial balance totals to be equal. 
TRUE
 
76. The erroneous moving of an entire number one or more spaces to the right or left, such as writing $85 as $850, is called a transposition. 
FALSE
 
77. Accounts 
A. do not reflect money amounts
B. are not used by entities that manufacture products
C. are records of increases and decreases in individual financial statement items
D. are only used by large entities with many transactions
 
78. Accounts are classified in the ledger 
A. chronologically
B. alphabetically
C. in accordance with their appearance in the financial statements
D. so that accounts used most often are listed first
 
79. Revenue should be recognized when 
A. cash is received
B. the service is performed
C. the customer places an order
D. the customer charges an order
 
80. Which of the following accounts is an owner's equity account? 
A. Cash
B. Accounts Payable
C. Prepaid Insurance
D. Ross Morris, Capital
 
81. The gross increases in owner's equity attributable to business activities are called 
A. assets
B. liabilities
C. revenues
D. net income
 
82. A chart of accounts is 
A. the same as a balance sheet
B. usually a listing of accounts in alphabetical order
C. usually a listing of accounts in financial statement order
D. used in place of a ledger
 
83. The debit side of an account 
A. depends on whether the account is an asset, liability or owner's equity
B. can be either side of the account depending on how the accountant set up the system
C. is the right side of the account
D. is the left side of the account
 
84. An account is said to have a debit balance if 
A. the amount of the debits exceeds the amount of the credits
B. there are more entries on the debit side than on the credit side
C. its normal balance is debit without regard to the amounts or number of entries on the debit side
D. the first entry of the accounting period was posted on the debit side
 
85. Which statement(s) concerning cash is (are) true? 
A. cash will always have more debits than credits
B. cash will never have a credit balance
C. cash is increased by debiting
D. all of the above
 
86. A debit may signify a(n) 
A. decrease in asset accounts
B. decrease in liability accounts
C. increase in the capital account
D. decrease in the drawing account
 
87. Which of the following types of accounts have a normal credit balance? 
A. assets and liabilities
B. liabilities and expenses
C. revenues and liabilities
D. capital and drawing
 
88. Which of the following groups of accounts have a normal debit balance? 
A. revenues, liabilities, capital
B. capital, assets
C. liabilities, expenses
D. assets, expenses
 
89. Which one of the statements below is not a purpose for the journal? 
A. to show increases and decreases in accounts
B. to show a chronological order by date
C. to show a complete transaction in one place
D. to help locate errors
 
90. A credit may signify a 
A. decrease in assets
B. decrease in liabilities
C. decrease in capital
D. decrease in revenue
 
91. A debit signifies a decrease in 
A. assets
B. expenses
C. drawing
D. revenues
 
92. Which of the following applications of the rules of debit and credit is true? 
A. decrease Prepaid Insurance with a credit and the normal balance is a credit
B. increase Accounts Payable with a credit and the normal balance is a debit
C. increase Supplies Expense with a debit and the normal balance is a debit
D. decrease Cash with a debit and the normal balance is a credit
 
93. Which of the following describes the classification and normal balance of the fees earned account? 
A. asset, credit
B. liability, credit
C. owner's equity, debit
D. revenue, credit
 
94. The classification and normal balance of the accounts payable account is 
A. an asset with a credit balance
B. a liability with a credit balance
C. owner's equity with a credit balance
D. revenue with a credit balance
 
95. The classification and normal balance of the drawing account is 
A. an expense with a credit balance
B. an expense with a debit balance
C. a liability with a credit balance
D. owner's equity with a debit balance
 
96. The classification and normal balance of the supplies expense account is a(n) 
A. asset with a debit balance
B. asset with a credit balance
C. expense with a debit balance
D. liability with a credit balance
 
97. In which of the following types of accounts are increases recorded by debits? 
A. assets, liabilities
B. drawing, liabilities
C. expenses, liabilities
D. assets, expenses
 
98. In which of the following types of accounts are increases recorded by credits? 
A. revenues, liabilities
B. drawing, assets
C. liabilities, drawing
D. expenses, liabilities
 
99. In which of the following types of accounts are decreases recorded by debits? 
A. assets
B. revenues
C. expenses
D. drawing
 
100. In which of the following types of accounts are decreases recorded by credits? 
A. liabilities
B. owner's capital
C. drawing
D. revenues
 
101. A credit balance in which of the following accounts would indicate a likely error? 
A. Fees Earned
B. Salary Expense
C. Janet James, Capital
D. Accounts Payable
 
102. A debit balance in which of the following accounts would indicate a likely error? 
A. Salaries Expense
B. Notes Payable
C. Edgar Martin, Drawing
D. Supplies
 
103. Randomly listed below are the steps for preparing a trial balance:

(1)	Verify that the total of the Debit column equals the total of the Credit column.	
(2)	List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.	
(3)	List the name of the company, the title of the trial balance, and the date the trial balance is prepared.	
(4)	Total the Debit and Credit columns of the trial balance.	

What is the proper order of these steps? 
A. (3), (2), (4), (1)
B. (2), (3), (4), (1)
C. (3), (2), (1), (4)
D. (4), (3), (2), (1)
 
104. Which of the following entries records the payment of an account payable? 
A. debit Cash; credit Accounts Payable
B. debit Accounts Receivable; credit Cash
C. debit Cash; credit Supplies Expense
D. debit Accounts Payable; credit Cash
 
105. Which of the following entries records the investment of cash by Ron York, owner of a proprietorship? 
A. debit Ron York, Capital; credit Accounts Receivable
B. debit Cash; credit Ron York, Capital
C. debit Ron York, Drawing; credit Cash
D. debit Cash; credit Ron York, Drawing
 
106. Which of the following entries records the receipt of a utility bill from the water company? 
A. debit Utilities Expense; credit Accounts Payable
B. debit Utilities Payable; credit Accounts Receivable
C. debit Accounts Payable; credit Cash
D. debit Accounts Payable; credit Utilities Payable
 
107. Which of the following entries records the withdrawal of cash by Sue Martin, owner of a proprietorship, for personal use? 
A. debit Sue Martin, Capital; credit Cash
B. debit Sue Martin, Drawing; credit Cash
C. debit Salaries Expense; credit Cash
D. debit Salaries Expense; credit Salaries Payable
 
108. Office supplies were sold by Ari’s Alarm Service at cost to another repair shop, with cash received.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Office Supplies, debit; Cash, credit
B. Office Supplies, debit; Accounts Payable, credit
C. Cash, debit; Office Supplies, credit
D. Accounts Payable, debit; Office Supplies, credit
 
109. Office supplies purchased by Ari’s Alarm Service on account were returned.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Office Supplies, credit
B. Office Supplies, debit; Accounts Receivable, credit
C. Accounts Payable, debit; Office Supplies, credit
D. Office Supplies, debit; Accounts Payable, credit
 
110. Cash was paid by Ari’s Alarm Service to creditors on account.  Which of the following entries for Ari’s Alarm Service records this transaction? 
A. Cash, debit; Ari Fleish, Capital, credit
B. Accounts Payable, debit; Cash, credit
C. Accounts Receivable, debit; Cash, credit
D. Accounts Payable, debit; Account Receivable, credit
 
111. The process of initially recording a business transaction is called 
A. trial balancing
B. posting
C. journalizing
D. balancing
 
112. Which of the following entries records the acquisition of office supplies on account? 
A. Office Supplies, debit; Cash, credit
B. Cash, debit; Office Supplies, credit
C. Office Supplies, debit; Accounts Payable, credit
D. Accounts Receivable, debit; Office Supplies, credit
 
113. Which of the following entries records the payment of rent for the current month? 
A. Cash, debit; Rent Expense, credit
B. Rent Expense, debit; Cash, credit
C. Rent Expense, debit; Accounts Receivable, credit
D. Accounts Payable, debit; Rent Expense, credit
 
114. Which of the following entries records the receipt of cash from patients on account? 
A. Accounts Payable, debit; Fees Earned, credit
B. Accounts Receivable, debit; Fees Earned, credit
C. Accounts Receivable, debit; Cash, credit
D. Cash, debit; Accounts Receivable, credit
 
115. Which of the following entries records the collection of cash from cash customers? 
A. Fees Earned, debit; Cash, credit
B. Fees Earned, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
116. Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service. 
A. Prepaid Rent, debit; Rent Revenue, credit.
B. Cash, debit; Unearned Rent, credit.
C. Cash, debit; Prepaid Rent, credit.
D. Cash, debit; Rent Expense credit.
 
117. A patient has a physical examination and asks the bookkeeper to mail the bill.  The bookkeeper should 
A. make no entry until the cash is received
B. Cash, debit; Accounts Receivable, credit
C. Cash, debit; Fees Earned, credit
D. Accounts Receivable, debit; Fees Earned, credit
 
118. Proof that the dollar amount of the debits equals the dollar amount of the credits in the ledger means 
A. all of the information from the journal was correctly transferred to the ledger
B. all accounts have their correct balances in the ledger
C. only the journal is accurate; the ledger may be incorrect
D. only that the debit dollar amounts equal the credit dollar amounts
 
119. Which of the following is true about a T-Account? 
A. Left hand side of the T-Account is called a debit.
B. Left hand side of the T-Accounts is called a credit
C. Right hand side of the T-Account is called a debit
D. None are true.
 
120. Which of the following abbreviations are correct? 
A. Debit “Dr”, Credit “Cd”
B. Debit “Db”, Credit “Cr”
C. Debit “Db”, Credit “Cd”
D. Debit “Dr”, Credit “Cr”
 
121. Which side of the account increases a cash account? 
A. credit
B. neither a debit or a credit
C. debit
D. either a debit or a credit
 
122. A cash payment is recorded on the cash account as a  
A. neither a debit or a credit
B. credit
C. debit
D. either a debit or a credit
 
123. The balance of the account is determined by 
A. adding all of the debits to all of the credits.
B. always subtracting the debits from the credits.
C. always subtracting the credits from the debits. 
D. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.
 
124. A list of the accounts is called 
A. ledger
B. chart of accounts
C. T-Account
D. Debit
 
125. On the chart of accounts, the balance sheet accounts are normally listed in the following order 
A. liabilities, assets, owner’s equity
B. assets, liabilities, owner’s equity
C. owner’s equity, assets, liabilities
D. assets, owner’s equity, liabilities
 
126. In which order are the accounts listed in the chart of accounts? 
A. assets, expenses, liabilities, owners’ equity, revenues
B. owners’ equity, assets, liabilities, revenues, expenses
C. assets, liabilities, owner’ equity, revenues, expenses
D. assets, liabilities, revenues, expenses, owners’ equity
 
127. Which are the parts of the T account? 
A. title, date, total
B. date, debit side, credit side
C. title, debit side, credit side
D. title, debit side, total
 
128. Which of the following is not a correct rule of debits and credits?  
A. assets, expenses and withdrawals are increased by debits
B. assets are decreased by credits and have a normal debit balance
C. liabilities, revenues and owner’s equity are increased by credits
D. the normal balance for revenues and expenses is a credit
 
129. Prarie Clinic purchased X-ray equipment for $4,000, paid $1,275 down, with the remainder to be paid later.  The correct entry would be 
A. Equipment                     1,275
           Cash                              1,275
B. Cash                             1,275
Accounts Payable         2,725
           Equipment                      4,000
C. Equipment Expense        4,000
           Accounts Payable           1,275
           Cash                                2,725
D. Equipment                     4,000
           Accounts Payable           2,725
           Cash                                1,275
 
130. The chart of accounts is designed to 
A. alphabetize the accounts to make reading easier for its financial statement users.
B. analyze the accounts and organize them in order of dollar amount to simplify the accounting information for users.
C. summarize the transactions and determine their ending balances.
D. meet the information needs of a company and other financial statement users.
 
131. Which group of accounts is comprised of only assets? 
A. Cash, Accounts Payable, Buildings
B. Accounts Receivable, Revenue, Cash
C. Prepaid Expenses,  Buildings, Patents
D. Unearned Revenues, Prepaid Expenses, Cash
 
132. Of the following which istrue about assets? 
A. Assets include physical and intangible assets.
B. Assets include only physical assets.
C. Assets are owned solely by the owner of the company.
D. Assets are the result of selling products or services to customers.
 
133. Which of the following is not considered to be a liability? 
A. Wages Payable
B. Accounts Receivable
C. Unearned Revenues
D. Accounts Payable
 
134. Which of the following statements is not true about liabilities? 
A. Liabilities are debts owed to outsiders.
B. Account titles of liabilities often include the term “payable”.
C. Cash received before services are performed are considered to be liabilities.
D. Liabilities do not include wages owed to employees of the company.
 
135. The owner’s equity will be reduced by all of the following accounts except: 
A. Revenues
B. Expenses
C. Drawing account
D. All are true.
 
136. Expenses can result from:  
A. increasing owner’s equity.
B. consuming services.
C. using up liabilities.
D. all are true.
 
137. The chart of accounts classify the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account.  Which of the following indicates the use of this classification? 
A. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Expenses, 5-Revenues
B. 1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Revenues, 5-Expenses
C. 1-Assets, 2-Owner’s Equity, 3-Revenues, 4-Expenses, 5-Drawing
D. 1-Owner’s Equity, 2-Drawing, 3-Revenues, 4-Expenses
 
138. The ____ is where a transaction can first be found on the accounting records. 
A. chart of accounts
B. income statement
C. balance sheet
D. journal
 
139. The process of recording a transaction in the journal is called 
A. recording
B. journalizing
C. posting
D. summarizing
 
140. Joshua Scott invests $65,000 into his new business.  How would the journal entry for this transaction be entered in the journal? 
A. Cash                                     65,000
       Joshua Scott, Capital                   65,000
   Invested cash in business
B. Cash                                     65,000
Joshua Scott, Capital                          65,000
   Invested cash in business
C. Joshua Scott, Capital              65,000
       Cash                                          65,000
   Invested cash in business
D. Joshua Scott, Capital              65,000
Cash                                                 65,000
   Invested cash in business
 
141. 
April	23	Cash	 	14,000	 	
 	 	       Jim Xu, Capital	 	 	14,000	
 	 	  Invest cash in Xu Co.	 	 	 	

The  journal entry will: 
A. Increase Capital and decrease Cash
B. Increase Cash and decrease Capital
C. Increase Cash and increase Capital
D. Decrease Cash and decrease Capital
 
142. 
May	24	Land	 	53,000	 	
 	 	       Cash	 	 	53,000	
 	 	  Purchased land for business	 	 	 	

What effects does this journal entry have on the accounts? 
A. Increase to Cash and increase to Land
B. Increase to Land and decrease to Cash
C. Decrease to Cash and decrease to Land
D. Increase to Cash and decrease to Land
 
143. 
May	31	Supplies	 	120	 	
 	 	       Accounts Payable	 	 	120	
 	 	  ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Purchased supplies with cash
B. Investment of supplies by owner
C. Purchased supplies on account
D. Paid accounts payable.
 
144. 
March	10	Accounts Payable	 	3,300	 	
 	 	       Cash	 	 	3,300	
 	 	  Paid creditors on account	 	 	 	

What effect does this journal entry have on the accounts? 
A. Decrease accounts payable, increase cash
B. Increase cash, decrease accounts payable
C. Increase accounts payable, increase cash
D. Decrease accounts payable, decrease cash
 
145. Which of the following accounts would be increased with a credit? 
A. Land, Accounts Payable, Drawing
B. Accounts Payable, Unearned revenue, Collins Capital
C. Collins Capital, Accounts Receivable, Unearned Revenue
D. Cash, Accounts Receivable, Collins Capital
 
146. In accordance with the debit and credit rules, which of the following is true? 
A. Debits increase assets.
B. Credits increase assets.
C. Debits increase both assets and capital.
D. Credits increase both assets and liabilities.
 
147. All of the following accounts are increased with a debit except: 
A. Unearned Revenues
B. Land
C. Accounts Receivable
D. Cash
 
148. Which of the following owner’s equity accounts follow the same debit and credit rules as liabilities? 
A. Expense accounts only
B. Drawing accounts only
C. Revenues accounts only
D. Expenses and drawing accounts
 
149. The payment for the monthly rent will require the following entry 
A. Debit Cash and Debit Rent Expense
B. Credit Cash and Credit Rent Expense
C. Debit Rent Expense and Credit Cash
D. Credit Rent Expense and Debit Cash
 
150. Expenses follow the same debit and credit rules as 
A. Revenues
B. Drawing Account
C. Capital Account
D. Liabilities
 
151. Net income will result when 
A. revenues (credits) > expenses (debits)
B. revenues (debits) > expenses (credits)
C. expenses (credits) < revenues (debits)
D. revenues (credits) = expenses (debits)
 
152. Which of the following will increase owner’s equity? 
A. Expenses > revenues
B. the owner draws money for personal use
C. Revenues > expenses
D. Cash is received from customers on account.
 
153. Which of the following situations increase owner’s equity? 
A. Supplies are purchased on account.
B. Services are provided on account.
C. Cash is received from customers.
D. Utility bill will be paid next month.
 
154. Which of the following group of accounts are increased with a debit? 
A. assets, liabilities, owner’s equity
B. assets, drawing, expenses
C. assets, revenues, expenses
D. assets, liabilities, revenues
 
155. Which of the following group of accounts increase with a credit? 
A. Capital, revenues, expenses
B. Assets, capital, revenues
C. Liabilities, capital, revenues
D. None of these
 
156. Which of the following is true regarding normal balances of accounts? 
A. All accounts have a normal debit balance.
B. The normal balance of all accounts will have either a positive or negative balance.
C. Accounts that have a normal debit balance will only have debit entries, never credit entries.
D. The normal balance is the side of the account that increases the account.
 
157. All of the following occur with a double-entry accounting system except: 
A. The accounting equation remains in balance.
B. The sum of all debits is always equal to the sum of all credits in each journal entry.
C. Each business transaction will have only two entries.
D. Every transaction affects at least two accounts.
 
158. 
March	6	Cash	 	375	 	
 	 	       Unearned Fees	 	 	375	
 	 	  ????????????	 	 	 	

What is the best explanation for this journal entry? 
A. Received cash for services performed
B. Received cash for services to be performed in the future.
C. Paid cash in advance for services to be done.
D. Paid cash for services to be performed.
 
159. 
April	14	Equipment	 	6,700	 	
 	 	        Cash	 	 	  2,000	
 	 	        Note Payable	 	 	  4,700	
 	 	  ????????????	 	 	 	

Which is the best explanation for this journal entry? 
A. Purchased equipment, paid cash of $2,000, with the remainder to be paid in payments.
B. Purchased equipment, paid cash of $4,700, with the remainder to be received in the future.
C. Purchased equipment, paid cash for the entire amount.
D. Purchased equipment on credit.
 
160. The process of rewriting the information from the journal into the ledger is called 
A. sliding
B. transposing
C. journalizing
D. posting
 
161. The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a 
A. ledger
B. trial balance
C. account
D. balance sheet
 
162. The process of transferring the journal entries to the accounts is known as 
A. posting
B. updating
C. journalizing
D. summarizing
 
163. The posting process will include the transfer of the following information from the journal to the account. 
A. date, amount (debit or credit)
B. date, amount (debit or credit), journal page number
C. amount (debit or credit), account number
D. date, amount (debit or credit) account number
 
164. The post reference columns are used to trace transactions from the journal to the accounts.  What will be posted on the post reference column of (a) the journal and (b) on the account? 
A. (a) the amount of the debit or credit (b) the journal page number
B. (a) the journal page number (b) the date of the transaction
C. (a) the journal page number, (b) the account number
D. (a) the account number, (b) the journal page number
 
165. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the cash account? 
A. 11
B. 15
C. 3
D. None
 
166. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the Prepaid Insurance account? 
A. 11
B. 15
C. 3
D. None
 
167. The chart of account for the Corning Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Corning, Capital	31	
Corning, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Prepaid Insurance	1,530	 	
      Cash	 	1,530	

 What is the post reference that will be found on the journal entry? 
A. 15, 11
B. 15
C. 11
D. 3
 
168. The chart of account for the Miguel Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Miguel, Capital	31	
Miguel, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 3, the following transaction was found:

Cash	640	 	
       Fees Earned	 	640	

What is the post reference that will be found on the journal entry? 
A. 41
B. 3
C. 11, 41
D. 11
 
169. The chart of account for the Miguel Company includes some of the following accounts:

Account Name	Account Number	
Cash	11	
Accounts Receivable	13	
Prepaid Insurance	15	
Accounts Payable	21	
Unearned Revenue	24	
Miguel, Capital	31	
Miguel, Drawing	32	
Fees Earned	41	
Salaries Expense	54	
Rent Expense	56	

On the journal page 5, the following transaction was found:

Salaries Expense	525	 	
      Cash	 	525	

What is the post reference that will be found on the Salaries Expense account? 
A. 5
B. 11
C. 54
D. None
 
170. The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,000	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Investment	2,000	 	Land	3,000	
Cash	2,600	 	Wages Expense	1,400	
Drawing	1,200	 	Capital	8,800	

The total of all the assets is: 
A. $9,400
B. $9,000
C. $9,100
D. $9,800
 
171. A trial balance is prepared to 
A. prove that there were no errors made in recording transactions into the journal
B. prove that no errors were made in posting to the ledger
C. prove that each account balance is correct
D. summarize the account balances to help prepare financial statements
 
172. The accounts in the ledger of Monroe Entertainment Co. are listed in alphabetical order.  All accounts have normal balances.
Accounts Payable	1,500	 	Fees Earned	3,000	
Accounts Receivable	1,800	 	Insurance Expense	1,300	
Investment	2,000	 	Land	3,000	
Cash	2,600	 	Wages Expense	1,400	
Drawing	1,200	 	Capital	8,800	

Prepare a trial balance.  The total of the debits is 
A. $13,300
B. $9,400
C. $9,100
D. $9,600
 
173. Of the following financial reports, which one is the one that will determine if the accounting equation is in balance? 
A. Journal entry
B. Income statement
C. Trial balance
D. Account reconciliation
 
174. An overpayment error was discovered in computing and paying the wages of a Jamison Tree Trimming employee.  When Jamison receives cash from the employee for the amount of the overpayment, which of the following entries will Jamison make? 
A. Cash, debit; Wages Expense, credit
B. Wages Payable, debit; Wages Expense, credit
C. Wages Expense, debit, Cash, credit
D. Cash, debit; Wages Payable, credit
 
175. If the two totals of a trial balance are not equal, it could be due to  
A. failure to record a transaction
B. recording the same erroneous amount for both the debit and the credit parts of a transaction
C. an error in determining the account balances, such as a balance being incorrectly computed
D. recording the same transaction more than once
 
176. When a transposition error is made on the trial balance, the difference between the debit and credit totals on the trial balance will be 
A. zero
B. twice the amount of the transposition
C. one-half the amount of the transposition
D. divisible by 9
 
177. Which of the following errors, each considered individually, would cause the trial balance totals to be unequal? 
A. a transaction was not posted
B. a payment of $67 for insurance was posted as a debit of $42 to Prepaid Insurance and a credit of $42 to Cash
C. a payment of $1,311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to Accounts Receivable
D. cash received from customers on account was posted as a debit of $680 to Cash and a credit of $680 to Accounts Payable
 
178. Supplies purchased on account were incorrectly recorded as Office Equipment.  The correcting entry would be 
A. Supplies, debit; Office Equipment, credit.
B. Accounts Receivable, debit; Supplies, credit.
C. Office Equipment, debit; Supplies Expense, credit.
D. Supplies, debit; Accounts Payable, credit.
 
179. Which of the following errors will cause the trial balance totals to be unequal? 
A. post the debit portion of a journal entry incorrectly and the credit portion of the entry is correctly posted
B. failure to record a transaction or to post a transaction
C. recording the same transaction more than once
D. recording the same erroneous amount for both the debit and the credit parts of a transaction
E. posting a part of a transaction correctly as a debit or credit but to the wrong account
 
180. The trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred.  What will the accountant do to find the error? 
A. Determine the amount of the error and look for that amount on the trial balance.
B. Determine the amount of the error and divide by two, then look for that amount on the trial balance.
C. Determine the amount of the error and refer to the journal entries for that amount.
D. Determine the amount of the error and divide by nine. If the result is evenly divided, then this type of error is likely.
 
181. Which of the following is not a short-cut in finding errors on the trial balance? 
A. Determine the difference between debits and credits and look for the amount.
B. Determine the amount and change any account to make the trial balance correct.
C. Determine the difference between debits and credits, divide the amount by 2, look for the amount.
D. Determine the difference between debits and credits, divide the amount by 9, if it divides evenly, look for a transposition or slide error.
 
182. All of the following statements regarding a horizontal analysis are true except:  
A. A horizontal analysis is used to compare an item in a current statement with the same item in prior statements.  
B. A horizontal analysis can be performed on a balance sheet and income statement, but not on a statement of cash flows.
C. If Fees Earned in 2010 is $150,000 and Fees Earned in 2011 is $187,500, a horizontal analysis will indicate a 25% increase over this period.
D. When two statement are compared in horizontal analysis, the earlier statement is used as the base for computing the amount and the percent of change.
 
183. The chart of accounts classify the accounts to make identification of the accounts easier. Discuss how companies set up their chart of accounts for use in their business 
A chart of accounts is set-up by assigning numbers to each of the accounts.  The account number for assets will begin with (1), liabilities (2), owner’s equity (3), revenues (4), and expenses (5).
 
184. On September 1st, Erika Company purchased land for $47,500 cash. Write the journal entry in the space below. 

 	Sep 1	Land	47,500	
 	Cash	47,500	
 	 	Purchased land for the company	

185. On October 10th, Nikle Company purchased supplies worth $2,750 on account.
(a)  Write the journal entry in the space below.

(b) Nikle Company paid this bill on October 25th. Write the journal entry in the space below. 

(a)	Oct 10	Supplies	2,750	
 	Accounts Payable	2,750	
 	Purchased supplies on account.	 	
 	 	 	
(b)	Oct 25	Accounts Payable	2,750	
 	Cash	2,750	
 	Paid for supplies on account.	 	

186. On October 17th Nikle Company purchased a building and a plot of land for $750,000. The building was valued at $500,000 while the land carried a value of $250,000. Nikle paid $300,000 down in cash and signed a notes payable for the balance. In the space below write the journal entry. 

 	Oct 17  Building	500,000	 	
 	Land	250,000	 	
 	 	Cash	300,000	
 	 	Notes Payable	450,000	
 	 	Purchased building and land with cash down payment	 	

187. On November 1st Nikle Company made a cash payment of $200,000 on a note payable that was generated in the purchase of a building and land plot. Write the journal entry for this payment in the space below. 

 	Nov 1	Notes Payable	200,000	 	
 	 	Cash	200,000	
 	 	Made payment on notes payable	 	

188. Damien Lawson invests $45,000 to initiate the operation of his business, JumpStart, on January 7th. Journalize this transaction. 

Jan 7	Cash	45,000	
 	Damien Lawson, Capital	45,000	

189. On January 8th, Damien Lawson transfers ownership of several pieces of office equipment to his new business, JumpStart. When new, these items were worth $72,500. The fair market value of the equipment is $60,000. Journalize this transfer. 

January 8	Office Equipment	60,000	
 	Damien Lawson, Capital	60,000	

While Damien may have paid $72,500 for this equipment some time in the past, it should be transferred into the company at fair market value (FMV), $60,000.
 
190. On August 30th JumpStart  pays numerous bills which include:
         Payment to the landlord for August rent - $950
         Payment to the Gas & Electric Company for August’s bill - $525
         Payment of employee wages for the last half of August - $1,880
         Payment of shopping center’s parking lot cleaning fee - $275
Journalize these payments as one compound journal entry. 

Aug 30	Rent Expense	950	 	
 	Utilities Expense	525	 	
 	Wages Expense	1,880	 	
 	Maintenance Expense	275	 	
 	Cash	 	3,630	

191. On October 30th Damien Lawson withdraws $3,330 from JumpStart for personal use. Journalize this event. 

Oct 30	Damien Lawson, Drawing	3,330	
 	Cash	3,330	

192. Prepare a journal entry for the purchase of a truck on April 4 for $85,700, paying $15,000 cash and the remainder on account. 

April 4	Truck	85,700	
 	Cash	15,000	
 	Accounts Payable	70,700	

193. Prepare a journal entry on October 12 for the fees earned on account, $14,600. 

Oct 12	Accounts Receivable	14,600	 	
 	Fees Earned	14,600	

194. Prepare a journal entry on March 27 for the payment of $8,000 to the owner of Credit Consultant Company, Neal Stone, for personal use. 

Mar 27	Neal Stone, Drawing	8,000	 	
 	Cash	8,000	

195. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries.  Also, indicate the normal balance of each account.

1.	Fees Earned	4.	Supplies	
2.	Utilities Expense	5.	Cash	
3.	Accounts Payable	6.	Accounts Receivable	

1.  Credit entries only, normal credit balance
2.  Debit entries only, normal debit balance
3.  Both debit and credit entries, normal credit balance
4.  Both debit and credit entries, normal debit balance
5.  Both debit and credit entries, normal debit balance
6.  Both debit and credit entries, normal debit balance
 
196. On June 1, the cash account balance was $75,880.  During June, cash receipts totaled $305,000 and the June 30 balance was $96,750.  Determine the cash payments made during June. 
96,750 = 75,880 + 305,000 - ?
Cash payments = $284,130
 
197. For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal.  If the error would cause the trial balance total to be unequal, indicate whether the debit or credit total is higher and by how much.
A.	Payment of a cash withdrawal of $6,800 was journalized and posted as a debit of $8,600 to Salaries Expense and a credit of $8,600 to Cash.	
B.	A fee of $9,780 earned was debited to Accounts Receivable for $7,980 and credited to Fees Earned for $9,780.	
C.	A payment of $3,000 to a creditor was posted as a credit of $3,000 to Accounts Payable and a credit of $3,000 to Cash.	

a.	The totals are equal.	
b.	The totals are unequal.  The credit total is higher by $1,800.	
c.	The totals are unequal. The credit total is higher by $6,000.	

198. The following errors took place in journalizing and posting transactions:

A.	A withdrawal of $5,000 by Stan Norton, owner of the business, was recorded as a debit to Office Expense and a credit to Cash.	
B.	Accounts receivable payment for $7,800 was recorded as a debit to Cash and a credit to Fees Earned.	

Journalize the entries to correct the errors.  Omit the explanations. 

a.	Stan Norton, Drawing	5,000	
 	 	Office Expense	 	5,000	

b.	Fees Earned	7,800	
 	 	Accounts Receivable	 	7,800	

199. Discuss and describe how errors in accounts can be found. 
1)  through audit procedures.
2)  by looking at the trial balance.
3)  by chance.
 
200. On November 30th, Damien Lawson is informed by his accountant that $550 of a transaction recording the purchase of office supplies was really office equipment. He has been asked to correct this journal entry. Write the journal entry to correct this situation. 

Nov 30	Office Equipment	550	
 	Office Supplies	550	

201. Journalize the entries to correct the following errors:

(a)	A purchase of supplies for $200 on account was recorded and posted as a debit to Supplies for $500 and as a credit to Accounts Receivable for $500.	
(b)	A receipt of $4,000 from Fees Earned was recorded and posted as a debit to Fees Earned for $4,000 and a credit to Cash for $4,000.	

(a)	Accounts Receivable	500	 	
 	   Supplies	 	500	
 	 	 	 	
 	Supplies	200	 	
 	   Accounts Payable	 	200	
 	 	 	 	
(b)	Cash	8,000	 	
 	   Fees Earned	 	8,000	

 
202. For the following, mark an “D” if the following account normally has a debit balance and mark a “C” if the following account normally has a credit balance.

_____1. Notes Payable
_____2. Mortgage Payable
_____3. Drawing
_____4. Accounts Receivable
_____5. Capital
_____6. Rent Revenue
_____7. Unearned Income
_____8. Utility Expense
_____9. Automobiles 
1.C  2.C  3.D  4.D  5.C  6.C  7.C  8.D  9.D
 
203. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions that occurred during the first month of operations.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Cary transferred cash from a  personal bank account to an account to be used for the business.	 	 	
b.  Paid rent for the period of January 3 to the end of the month.	 	 	
c.  Purchased truck for $30,000 with a cash down payment of $5,000 and the remainder on a note.	 	 	
d. Purchased equipment on account.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	1	9	
b.	13	1	
c.	6	1,7	
d.	5	8	

204. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (e), each identified by a number.  Following this list are the transactions that occurred in Parsons’ first month of operation.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Purchased supplies for cash.	 	 	
b.  Paid the annual premiums on property and casualty insurance.	 	 	
c.  Received cash for a job previously recorded on account.	 	 	
d. Paid a creditor a portion of the amount owed for equipment previously purchased on account.	 	 	
e.  Received cash for a completed job.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	3	1	
b.	4	1	
c.	1	2	
d.	8	1	
e.	1	11	

205. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts to use for transactions (a) through (f), each identified by a number.  Following this list are the transactions that occurred in Parsons’ first month of operation.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Supplies	
4.	Prepaid Insurance	
5.	Equipment	
6.	Truck	
7.	Notes Payable	
8.	Accounts Payable	
9.	Cary Parsons, Capital	
10.	Cary Parsons, Drawing	
11.	Fees Earned	
12.	Wages Expense	
13.	Rent Expense	
14.	Utilities Expense	
15.	Truck Expense	
16.	Miscellaneous Expense	
17.	Insurance Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a.  Recorded jobs completed on account and sent invoices to customers.	 	 	
b.  Received an invoice for truck expenses to be paid in February.	 	 	
c.  Paid utilities expense	 	 	
d. Received cash from customers on account.	 	 	
e.  Paid employee wages.	 	 	
f. Withdrew cash for personal use.	 	 	

Transactions	Account(s) Debited	Account(s) Credited	
a.	2	11	
b.	15	8	
c.	14	1	
d.	1	2	
e.	12	1	
f.	10	1	

206. Listed below are accounts to use for transactions (a) through (d), each identified by a number.  Following this list are the transactions.  You are to indicate for each transaction the accounts that should be debited and credited by place the account number(s) in the appropriate box. 

1.	Cash	
2.	Accounts Receivable	
3.	Office Supplies	
4.	Land	
5.	Interest Receivable	
6.	Building	
7.	Accumulated Depreciation - Building	
8.	Depreciation Expense - Building	
9.	Accounts Payable	
10.	Interest Payable	
11.	Insurance Payable	
12.	Utility Expense	
13.	Notes Payable	
14.	Prepaid Insurance	
15.	Service Revenue	
16.	Owner, Capital	
17.	Insurance Expense	
18.	Utility Payable	
19.	Office Supplies Expense	
20.	Unearned Service Revenue	
21.	Owner, Drawing	
22.	Interest Expense	

Transactions	Account(s) Debited	Account(s) Credited	
a. Utility bill is received; payment will be made in 10 days.	 	 	
b. Paid the utility bill previously recorded in transaction (a).	 	 	
c. Bought a three year insurance policy and paid in full.	 	 	
d. Received $7,000 from a contract to perform accounting services over the next two years.	 	 	

 	Debit	Credit	
a.	12	18	
b.	18	1	
c.	15	1	
d.	1	20	

207. Below is the unadjusted trial balance for Dawson Designs.  

REQUIRED:

(1) Identify the errors in the following trial balance.  All accounts have normal balances.
(2) Prepare a corrected trial balance.

Dawson Co.
Unadjusted Trial Balance
For the Month of January 2011	
 	Debits	Credits	
Cash	23,000	 	
Accounts Receivable	 	49,700	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	6,050	 	
Salaries Payable	 	4,250	
Tim Dawson, Capital	 	110,000	
Tim Dawson, Drawing	 	18,500	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	 	4,970	
 	424,020	424,020	

(1)
a.  The debit column is added incorrectly; the sum is actually $289,780.
b.  The date of the trial balance should be dated January 31, 2011, rather than “For the Month of January 2011.”
c.  The accounts receivable balance should be in the debit column.
d.  The accounts payable should be in the credit column.
e.  Tim Dawson, Drawing should be in the debit column.
f.  Miscellaneous Expense should be in the debit column. 

(2)  
Dawson Co.
Unadjusted Trial Balance
January 31, 2011	
 	Debits	Credits	
Cash	23,000	 	
Accounts Receivable	49,700	 	
Prepaid Insurance	11,300	 	
Equipment	150,500	 	
Accounts Payable	 	6,050	
Salaries Payable	 	4,250	
Tim Dawson, Capital	 	110,000	
Tim Dawson, Drawing	18,500	 	
Service Revenue	 	236,600	
Salary Expense	98,930	 	
Miscellaneous Expense	4,970	 	
 	356,900	356,900	

208. The following two situations are independent of each other.

1.  On June 1, the cash account balance was $38,750.  During June, cash payments totaled $239,140 and the June 30 balance was $42,175.  Determine the cash receipts during June and show your calculation.

2.  On March 1, the supplies account balance was $1,340.  During March, supplies of $4,335 were purchased and $890 of supplies were on hand as of March 31.  Determine the supplies expense for March and show your calculation. 
1.  $42,175 = $38,750 + Cash receipts - $239,140 
Cash receipts  = $242,565

2.  $890 = $1,340 + $4,335 - Supplies Expense
Supplies expense = $4,785
 
209. On January 1, 2010, Cary Parsons established a catering service.  Listed below are accounts she would like to open in the general ledger. List the accounts in the order in which they should appear in the ledger and propose a two digit account numbering scheme that is consistent with the rules of a proper chart of accounts.

1.	Cash	
2.	Supplies	
3.	Equipment	
4.	Accounts Payable	
5.	Cary Parsons, Capital	
6.	Wages Expense	
7.	Rent Expense	
8.	Truck	
9.	Utilities Expense	
10.	Cary Parsons, Drawing	
11.	Truck Expense	
12.	Prepaid Insurance	
13.	Fees Earned	
14.	Miscellaneous Expense	
15.	Insurance Expense	
16.	Notes Payable	
17.	Accounts Receivable	

11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
15 Equipment
16 Truck
21 Accounts Payable
22 Notes Payable
31 Cary Parsons, Capital
32 Cary Parons, Drawing
41 Fees Earned
51 Wages Expense
52 Rent Expense
53 Utilities Expense
54 Truck Expense
55 Insurance Expense
56 Miscellaneous Expense
 
210. Several transactions are listed below, with the accounting equation stated to the right side of each. Use the following identification codes to indicate the effects of each transaction on the accounting equation. Write your answers in the space provided under the accounting equation. You need an identification code for each element of the accounting equation. An example is given before the first transaction.

I-Increase	D-Decrease	NE-No Effect	

 	 	  Assets  	=	Liabilities	+	  Owners’ Equity  	
Example	John Smith invests in his new business by giving it his personal drill press valued at $3,500.	
       I__    	 	
___NE__	 	
___ I____ 	

A)	
Cash sales are made.	

                 	
B)	Equipment is purchased on credit.	

                 	
C)	Payment is made for the equipment purchased on credit in (B).	

               	 	

      _____	
D)	The company sold excess supplies to another company on credit.	
________	 	
_______	 	
________	
E)	Cash is collected from customers for accounts receivable balances.	

________	 	

_______	 	

________	

       

 	 	  Assets  	=	Liabilities	+	  Owners’ Equity  	

A)	
Cash sales are made.	
       I        	 	
      NE           	 	
        I                   	
B)	Equipment is purchased on credit.	
       I         	 	
       I          	 	
       NE                   	
C)	Payment is made for the equipment purchased on credit in (B).	

       D         	 	

       D           	 	

      NE___	
D)	The company sold excess supplies to another company on credit.	
___NE___	 	
___NE__	 	
___NE___	
E)	Cash is collected from customers for accounts receivable balances.	

___NE___	 	

___NE__	 	

___NE___	

211. Journalize the  five transactions for Mirmax Rentals described below.

 	August   1	Mirmax purchases two new saws on credit at $375 each.  The saws are added to Mirmax’s rental inventory.  Payment is due in 30 days.	
 	 	 	
 	8	Mirmax accepts advance deposits for tool rentals of $75 that will be applied to the cash rental when the tools are returned.	
 	 	 	
 	15	Mirmax receives a bill from Macon Utility Company for $150.  Payment is due in 30 days.	
 	 	 	
 	20	Customers are charged $750 by Mirmax for tool rentals.  Payment is due from the customers in 30 days.	
 	 	 	
 	31	Mirmax receives $500 in payments from the customers that were billed for rentals on August 20.	

Aug. 1	Equipment	750	 	
 	         Accounts Payable	 	750	
 	 	 	 	
        8	Cash	75	 	
 	         Unearned Revenue	 	75	
 	 	 	 	
        15	Utilities Expense	150	 	
 	         Accounts Payable 	 	150	
 	 	 	 	
        20	Accounts Receivable	750	 	
 	        Rental Revenue	 	750	
 	 	 	 	
        31	Cash	500	 	
 	        Accounts Receivable	 	500	

 
212. Journalize the following five transactions for Nexium & Associates, Inc.  Omit explanations. 

 	March 1	Bills are sent to clients for services provided in February in the amount of $800.	
 	 	 	
 	9	Corner Office, Inc. delivers office furniture ($1,060) and office supplies ($160) to Nexium leaving an invoice for $1,220.	
 	 	 	
 	15	Payment is made to Corner Office, Inc. for the furniture and office supplies delivered on March 9.	
 	 	 	
 	23	A bill for $430 for electricity for the month of March is received and will be paid on its due date in April.	
 	 	 	
 	31	Salaries of $850 are paid to employees.	

March 1	Accounts Receivable	800	 	
 	      Service Revenue  	 	800	
 	 	 	 	
           9	Office Furniture	1,060	 	
 	Office Supplies   	160	 	
 	        Accounts Payable	 	1,220	
 	 	 	 	
          15	Accounts Payable	1,220	 	
 	        Cash	 	1,220	
 	 	 	 	
          23	Electricity Expense	430	 	
 	        Accounts Payable	 	430	
 	 	 	 	
          31	Salaries Expense	850	 	
 	        Cash	 	850	

 
213. McMann Company has a condensed income statement as shown::

 	2011	2010	
Sales	$178,400	$162,500	
Wage expenses	100,000	92,500	
Rent expenses	33,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	163,000	147,500	
Net income	15,400	15,000	

REQUIRED:

Prepare a horizontal analysis of McMann Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 	2011	2010	Increase/
Decrease
Amount	Percent Change	
Sales	$178,400	$162,500	15,900	9.8	
Wage expenses	100,000	92,500	7,500	8.1	
Rent expenses	33,000	30,000	3,000	10.0	
Utilities expenses	30,000	25,000	5,000	20.0	
Total operating expenses	163,000	147,500	15,500	10.5	
Net income	15,400	15,000	400	2.7	

While the trend in sales revenue is favorable, it is not sufficient enough to offset the rising expenses, resulting in a positive but small and slowing increase in net income.
 
214. Georgia Company has a condensed income statement as shown::

 	2011	2010	
Sales	$158,400	$162,500	
Wage expenses	80,000	92,500	
Rent expenses	28,000	30,000	
Utilities expenses	30,000	25,000	
Total operating expenses	138,000	147,500	
Net income	20,400	15,000	

REQUIRED:

Prepare a horizontal analysis of Georgia Company’s income statements. Comment on the trends, both favorable and unfavorable. 

 	2011	2010	Increase/Decrease
Amount	Percent Change	
Sales	$158,400	$162,500	(4,100)	(2.5)	
Wage expenses	80,000	92,500	(12,500)	(13.5)	
Rent expenses	28,000	30,000	(2,000)	(6.7)	
Utilities expenses	30,000	25,000	5,000	20.0	
Total operating expenses	138,000	147,500	(9,500)	(6.4)	
Net income	20,400	15,000	5,400	36.0	

The trend in sales revenue is unfavorable, but that is more than offset by the declines in operating expenses, with the exception of utilities, which increased over the period.  Despite the 2.5% drop in sales, the net effect was a favorable increase in net income of 36%, which was in large part spurred by the drop in wages expense.
 
215. Organize the following accounts into the usual sequence of a chart of accounts.

Miscellaneous Expense
Accounts Payable
Accounts Receivable
Cash
Alecia Morris, Capital
Fees Earned
Prepaid Rent
Salaries Expense
Unearned Revenue
Alecia Morris, Drawing 
Cash
Accounts Receivable
Prepaid Rent
Accounts Payable
Unearned Revenue
Alecia Morris, Capital
Alecia Morris, Drawing
Fees Earned
Salaries Expense
Miscellaneous Expense
 
216. Selected accounts from the ledger of Garrison Company appear below.  For each account, indicate the following:

(a)	In the first column at the right, indicate the nature of each account, using the following abbreviations:	
 	 	
 	Asset - A	Revenue - R	
 	Liability - L	Expense - E	
 	None of the above - N	 	
 	 	
(b)	In the second column, indicate the increase side of each account by inserting Dr. or Cr.	
 	 	 	 	
 	Account	Type of Account	Increase Side	
(1)	Supplies	_______	________	
(2)	Notes Receivable	_______	________	
(3)	Fees Earned	_______	________	
(4)	Garrison, Drawing	_______	________	
(5)	Accounts Payable	_______	________	
(6)	Salaries Expense	_______	________	
(7)	Garrison, Capital	_______	________	
(8)	Accounts Receivable	_______	________	
(9)	Equipment	_______	________	
(10)	Notes Payable	_______	________	

 	Type of Account	Increase Side	
(1)	A	Dr.	
(2)	A	Dr.	
(3)	R	Cr.	
(4)	N	Dr.	
(5)	L	Cr.	
(6)	E	Dr.	
(7)	N	Cr.	
(8)	A	Dr.	
(9)	A	Dr.	
(10)	L	Cr.	

217. Calculate the following:

(a)	Determine the cash receipts for April based on the following data:	
 	 	 	
 	Cash payments during April	$45,500	
 	Cash account balance, April 1	6,750	
 	Cash account balance, April 30	10,000	
 	 	
(b)	Determine the cash received from customers on account during April based on the following data:	
 	 	 	
 	Accounts receivable account balance, April 1	$10,500	
 	Accounts receivable account balance, April 30	7,250	
 	Fees billed to customers during April	26,000	

(a)	$48,750 ($10,000 + $45,500 - $6,750)	
(b)	$29,250 ($10,500 + $26,000 - $7,250)	

218. Increases and decreases in various types of accounts are listed below.  In each case, indicate by "Dr." or "Cr." (a) whether the change in the account would be recorded as a debit or a credit and (b) whether the normal balance of the account is a debit or a credit.

 	 	(a)	(b)	
 	 	Recorded
As	Normal
Balance	
(1)	Increase in Denice Dickenson, Capital	________	_______	
(2)	Increase in Denice Dickenson, Drawing	________	_______	
(3)	Decrease in Accounts Receivable	________	_______	
(4)	Increase in Note Payable	________	_______	
(5)	Increase in Accounts Payable	________	_______	
(6)	Decrease in Supplies	________	_______	
(7)	Decrease in Salaries Expense	________	_______	
(8)	Increase in Accounts Receivable	________	_______	
(9)	Increase in Cash	________	_______	
(10)	Decrease in Land	________	_______	

 	(a)	(b)	
(1)	Cr.	Cr.	
(2)	Dr.	Dr.	
(3)	Cr.	Dr.	
(4)	Cr.	Cr.	
(5)	Cr.	Cr.	
(6)	Cr.	Dr.	
(7)	Cr.	Dr.	
(8)	Dr.	Dr.	
(9)	Dr.	Dr.	
(10)	Cr.	Dr.	

219. Record the following selected transactions for April in a two-column journal, identifying each entry by letter:

(a)	Received $12,000 from Katie Long, owner.	
(b)	Purchased equipment for $25,000, paying $10,000 in cash and giving a note payable for the remainder.	
(c)	Paid $1,800 for rent for April.	
(d)	Purchased $9,800 of supplies on account.	
(e)	Recorded $2,250 of fees earned on account.	
(f)	Received $9,000 in cash for fees earned.	
(g)	Paid $300 to creditors on account.	
(h)	Paid wages of $1,650.	
(i)	Received $1,190 from customers on account.	
(j)	Recorded owner's withdrawal of $2,350.	

(a)	Cash	12,000	 	
 	  Katie Long, Capital	 	12,000	
 	 	 	 	
(b)	Equipment	25,000	 	
 	  Cash	 	10,000	
 	  Notes Payable	 	15,000	
 	 	 	 	
(c)	Rent Expense	1,800	 	
 	  Cash	 	1,800	
 	 	 	 	
(d)	Supplies	9,800	 	
 	  Accounts Payable	 	9,800	
 	 	 	 	
(e)	Accounts Receivable	2,250	 	
 	  Fees Earned	 	2,250	
 	 	 	 	
(f)	Cash	9,000	 	
 	  Fees Earned	 	9,000	
 	 	 	 	
(g)	Accounts Payable	300	 	
 	  Cash	 	300	
 	 	 	 	
(h)	Wages Expense	1,650	 	
 	  Cash	 	1,650	
 	 	 	 	
(i)	Cash	1,190	 	
 	  Accounts Receivable	 	1,190	
 	 	 	 	
(j)	Katie Long, Drawing	2,350	 	
 	  Cash	 	2,350	

220. All nine transactions for Dalton Survey Company for September, the first month of operations, are recorded in the following T accounts:

Cash	 	Michael Dalton, Capital	
(1)	20,000 	 (3)	7,500	 	 	 	 (1)	20,000	
(7)	6,900 	 (5)	2,600	 	 	 	 	 	
(9)	4,700 	 (6)	5,500	 	 	 	 	 	
 	 	 (8)	2,000	 	 	 	 	 	

Accounts Receivable	 	Michael Dalton, Drawing	
(4)	4,900 	 (9)	4,700	 	 (8)	2,000  	 	 	

Supplies	 	Fees Earned	
(3)	7,500 	 	 	 	 	 	 (4)	4,900	
 	 	 	 	 	 	 	 (7)	6,900	

Equipment	 	Operating Expense	
(2)	4,500 	 	 	 	(6)	5,500 	 	 	

Accounts Payable	 	 	
(5)	2,600 	 (2)	4,500	 	 	 	 	 	

 Indicate the following for each debit and each credit:

(a)	The type of account affected (asset, liability, capital, drawing, revenue, or expense).	
(b)	The effect on the account, using + for increase and - for decrease.	

Present your answers in the following form:

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	

 	Account Debited	Accounted Credited	
Transaction	Type	Effect	Type	Effect	
(1)	asset	+	capital	+	
(2)	asset	+	liability	+	
(3)	asset	+	asset	-	
(4)	asset	+	revenue	+	
(5)	liability	-	asset	-	
(6)	expense	+	asset	-	
(7)	asset	+	revenue	+	
(8)	drawing	+	asset	-	
(9)	asset	+	asset	-	

221. On January 12th, JumpStart Co. purchased $870 in office supplies. 
(a) Journalize this transaction as if JumpStart paid cash.

(b) (1) Journalize this transaction as if JumpStart placed it on account.

(b) (2) On January 18th, JumpStart pays the amount due. Journalize this event. 

(a) Journalize this transaction as if JumpStart paid cash.	
Jan 12	Office Supplies	870	
 	Cash	870	

(b)(1) Journalize this transaction as if JumpStart placed it on account.	
Jan 12	Office Supplies	870	
 	Accounts Payable	870	

(b)(2) On January 18th, JumpStart pays the amount due. Journalize this event.	
Jan 18	Accounts Payable	870	
 	Cash	870	

222. On December 1st, JumpStart Company provides $2,800 in services to clients.
(a) Journalize this event as if the clients had paid cash at the time the services were rendered.

(b)(1) Journalize this event as if the clients had placed this on account.

(b)(2) Assume that the clients paid $1,200 of the amount on account on December 30th. Journalize this transaction. 

(a) December 1      Cash	2,800	
 	Fees Earned	2,800	
 	 	
(b)(1) December 1  Accounts Receivable	2,800	
 	Fees Earned	2,800	
(b)(2) December 30  Cash	1,200	
 	Accounts Receivable	1,200	

223. On November 10th, JumpStart Co. provides $2,900 in services to clients. At the time of service, the clients paid $600.00 in cash and put the balance on account.
(a) Journalize this event.

(b) On November 20th, JumpStart Co. clients paid an additional $900 on their accounts due. Journalize this event.

(c) Calculate the amount on accounts receivable on November 30th. 

(a) Nov 10	Cash	600	 	
 	Accounts Receivable	2,300	 	
 	Fees Earned	2,900	
 	 	 	
(b) Nov 20	Cash	900	 	
 	Accounts Receivable	900	

(c)	 	
 	Original invoice	$2,900	
 	  Less cash paid upon completion	600	
 	Original amount on accounts receivable	2,300	
 	  Less Nov 20th payment	900	
 	Accounts Receivable balance	$1,400	

224. Journalize the following selected transactions for April 2011 in a two-column journal.  Journal entry explanations may be omitted.

April 1	Received cash from the investment made by the owner, $14,000.	
2	Received cash for providing accounting services, $9,500.	
3	Billed customers on account for providing services, $4,200.	
4	Paid advertising expense, $700.	
5	Received cash from customers on account, $2,500.	
6	Owner withdraws, $1,010.	
7	Received telephone bill, $900.	
8	Paid telephone bill, $900.	

Date	Description	Post Ref	Debit	Credit	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

 	 	 	 	 	

					

Date	Description	Post Ref	Debit 	Credit	
April 1	Cash	 	14,000	 	
 	      Owner, Capital	 	 	14,000	
 	 	 	 	 	
April 2	Cash	 	9,500	 	
 	      Revenues	 	 	9,500	
 	 	 	 	 	
April 3	Accounts Receivable	 	4,200	 	
 	     Revenues	 	 	4,200	
 	 	 	 	 	
April 4	Advertising Expense	 	700	 	
 	     Cash	 	 	700	
 	 	 	 	 	
April 5	Cash	 	2,500	 	
 	     Accounts Receivable	 	 	2,500	
 	 	 	 	 	
April 6	Owner, Drawing	 	1,010	 	
 	      Cash	 	 	1,010	
 	 	 	 	 	
April 7	Telephone Expense	 	900	 	
 	      Accounts Payable	 	 	900	
 	 	 	 	 	
April 8	Accounts Payable	 	900	 	
 	      Cash	 	 	900	

225. Analyze the following transactions as to their effect on the accounting equation.

(a)	The company paid $725 to a vendor for supplies purchased previously on account.	
(b)	The company performed $850 of services and billed the customer.	
(c)	The company received a utility bill for $395 and will pay it next month.	
(d)	The owner of the company withdrew $145 of supplies for personal use.	
(e)	The company paid $315 in salaries to its employees.	
(f)	The company collected $730 of cash from its customers on account.	

Some of the possible effects of a transaction on the accounting equation are listed below:

(1)	Asset, dr.; Asset, cr.	
(2)	Asset, dr.; Owner's Equity, cr.	
(3)	Asset, dr.; Liability, cr.	
(4)	Asset, dr.; Revenue, cr.	
(5)	Liability, dr.; Assets, cr.	
(6)	Drawing, dr.; Asset, cr.	
(7)	Expense, dr.; Assets, cr.	
(8)	Expense, dr.; Liability, cr.	

Put the appropriate letter next to each transaction. 

Transaction	Effect on the accounting equation	
(a)	5	
(b)	4	
(c)	8	
(d)	6	
(e)	7	
(f)	1	

226. Set up T accounts for Cash; Accounts Receivable; Supplies; Accounts Payable; Clay Potter, Capital; Clay Potter, Drawing; Professional Fees; and Operating Expenses.

(a)	In the T accounts, record the following transactions of Potter Pool Services for June, 2011, identifying each entry by number:	
 	(1)	Potter invested $12,500 cash in the business.	
 	(2)	Purchased supplies on account, $6,250.	
 	(3)	Paid operating expenses, $5,500.	
 	(4)	Billed clients for fees, $7,440.	
 	(5)	Received cash from cash clients, $4,700.	
 	(6)	Paid creditors on account, $1,400.	
 	(7)	Received $3,100 from clients on account.	
 	(8)	Withdrew $1,500 cash for personal use.	
 	 	
(b)	Prepare a trial balance as of June 30, 2011 for Potter Pool Services.	
 	 	
(c)	Assuming that supplies expense (which has not been recorded) amounts to $1,500 for June, determine the following:	
 	(1)	Net income for the month.	
 	(2)	Owner's equity as of June 30.	

(a)	
Cash	 	Clay Potter, Capital	
(1)	12,500 	 (3)	5,500	 	 	 	 (1)	12,500	
(5)	4,700 	 (6)	1,400	 	 	 	 	 	
(7)	3,100 	 (8)	1,500	 	 	 	 	 	

Accounts Receivable	 	Clay Potter, Drawing	
(4)	7,440 	 (7)	3,100	 	(8)	1,500 	 	 	

Supplies	 	Professional Fees	
(2)	6,250 	 	 	 	 	 	 (4)	7,440	
 	 	 	 	 	 	 	 (5)	4,700	

Accounts Payable	 	Operating Expenses	
(6)	1,400 	 (2)	6,250	 	 (3)	5,500 	 	 	

(b)	
Potter Pool Services
Trial Balance
June 30, 2011	
Cash	11,900	 	
Accounts Receivable	4,340	 	
Supplies	6,250	 	
Accounts Payable	 	4,850	
Clay Potter, Capital	 	12,500	
Clay Potter, Drawing	1,500	 	
Professional Fees	 	12,140	
Operating Expenses	  5,500	           	
 	29,490	29,490	

(c)	(1) $5,140 ($12,140 - $5,500 - $1,500)	
 	(2) $16,140 ($12,500 + $5,140 - $1,500)	

227. Prepare a trial balance, listing the following accounts in proper sequence.  The accounts (all normal balances) were taken from the ledger of Sophie Designs Co. on April 30, 2010.

Accounts Payable	$ 4,100	 	Rent Expense	$11,500	
Accounts Receivable	3,450	 	Salary Expense	14,000	
Cash	7,375	 	Fees Earned	54,100	
Sophie Dawson, Capital	17,800	 	Supplies	3,125	
Sophie Dawson, Drawing	15,500	 	Supplies Expense	1,700	
Equipment	14,500	 	Utilities Expense	4,000	
Miscellaneous Expense	850 	 	 	 	

Sophie Designs
Trial Balance
April 30, 2010	
Cash	7,375	 	
Accounts Receivable	3,450	 	
Supplies	3,125	 	
Equipment	14,500	 	
Accounts Payable	 	4,100	
Sophie Dawson, Capital	 	17,800	
Sophie Dawson, Drawing	15,500	 	
Fees Earned	 	54,100	
Salary Expense	14,000	 	
Rent Expense	11,500	 	
Utilities Expense	4,000	 	
Supplies Expense	1,700	 	
Miscellaneous Expense	       850	           	
 	76,000	76,000	

228. Exhibit 2-1
All nine transactions for Ralston Sports Co. for September 2011, the first month of operations, are recorded in the following T accounts:

Cash	 	James Ralston, Capital	
(1)	25,000 	 (3)	12,500	 	 	 	 (1)	25,000	
(7)	11,900 	 (5)	7,600	 	 	 	 	 	
(9)	9,700 	 (6)	10,500	 	 	 	 	 	
 	 	 (8)	7,000	 	 	 	 	 	

Accounts Receivable	 	James Ralston, Drawing	
(4)	9,900 	 (9)	9,700	 	(8)	7,000 	 	 	

Supplies	 	Fees Earned	
(3)	12,500 	 	 	 	 	 	 (4)	9,900	
 	 	 	 	 	 	 	 (7)	11,900	

Equipment	 	Operating Expense	
(2)	9,500 	 	 	 	(6)	10,500 	 	 	

Accounts Payable	 	 	
(5)	7,600 	 (2)	9,500	 	 	 	 	 	

 Refer to Exhibit 2-1.  Prepare a trial balance, listing the accounts in their proper order. 

Ralston Sports Company
Trial Balance
September 30, 2011	
Cash	9,000	 	
Accounts Receivable	200	 	
Supplies	12,500	 	
Equipment	9,500	 	
Accounts Payable	 	1,900	
James Ralston, Capital	 	25,000	
James Ralston, Drawing	7,000	 	
Fees Earned	 	21,800	
Operating Expense	  10,500	           	
 	48,700	48,700	

229. 
(a)	List the errors in the following trial balance. All accounts have normal balances.	
(b)	What would be the new balance of the trial balance after errors are corrected? What would be the balance of Accounts Receivable?	

Winslow’s Auto Body
Trial Balance
For Month Ending April 30, 2011	
Cash	 	19,475	
Accounts Receivable	?	 	
Supplies	 	1,000	
Equipment	15,000	 	
Prepaid Insurance	 	500	
Accounts Payable	 	2,500	
Thad Winslow, Capital	17,000	 	
Thad Winslow, Drawing	 	1,000	
Fees Earned	 	49,600	
Salary Expense	14,500	 	
Rent Expense	 	9,000	
Utilities Expense	1,400	 	
Supplies Expense	3,900	 	
Miscellaneous Expense	     250	           	
 	55,000	81,575	

(a)	 	 	
 	(1)	In the heading, the date should be April 30, 2011; not for a period of time.	
 	(2)	The cash balance should be a debit.	
 	(3)	Thad Winslow, Capital should be a credit.	
 	(4)	The supplies account should be a debit.	
 	(5)	Prepaid Insurance should be a debit and follow Accounts Receivable.	
 	(6)	Thad Winslow, Drawing should be a debit.	
 	(7)	Rent Expense should be a debit.	
 	(8)	The trial balance does not balance.	

(b)	The new balance for credits would be accounts payable $2,500 + fees earned $49,600 + $17,000 for capital = $69,100. Accounts receivable would be $69,100 (total credits) - $66,025 (corrected debits) = $3,075	

230. Answer the following questions for each of the errors listed below, considered individually:

(a)	Did the error cause the trial balance totals to be unequal?	
(b)	What is the amount of the difference between the trial balance totals (where applicable)?	
(c)	Which of the trial balance totals, debit or credit, is the larger (where applicable)?	

Present your answers in columnar form, using the following headings:

Error	Totals	Difference in Totals	Larger of Totals	
(identifying number)	(equal or unequal)	(amount)	(debit or credit)	

Errors:
(1)	A withdrawal of $3,000 cash by the owner was recorded by a debit of $3,000 to Salary Expense and a credit of $3,000 to Cash.	
(2)	A $650 purchase of supplies on account was recorded as a debit of $1,650 to Equipment and a credit of $1,650 to Accounts Payable.	
(3)	A purchase of equipment for $3,450 on account was not recorded.	
(4)	A $870 receipt on account was recorded as a $870 debit to Cash and a $780 credit to Accounts Receivable.	
(5)	A payment of $1,530 cash on account was recorded only as a credit to Cash.	
(6)	Cash sales of $8,500 were recorded as a credit of $8,500 to Cash and a credit of $8,500 to Fees Earned.	
(7)	The debit to record a $4,000 cash receipt on account was posted twice; the credit was posted once.	
(8)	The credit to record an $300 cash payment on account was posted twice; the debit was posted once.	
(9)	The debit balance of $7,400 in Accounts Receivable was recorded in the trial balance as a debit of $7,200.	

Error	Totals	Difference in Totals	Larger of Totals	
(1)	equal	----	 	----	 	
(2)	equal	----	 	----	 	
(3)	equal	----	 	----	 	
(4)	unequal	$     90	 	debit 	 	
(5)	unequal	1,530	 	credit	 	
(6)	unequal	17,000	 	credit	 	
(7)	unequal	4,000	 	debit 	 	
(8)	unequal	300	 	credit	 	
(9)	unequal	200	 	credit	 	

231. The bookkeeper for Brockton Industries prepared the following journal entries and posted the entries to the general ledger as indicated in the T accounts presented. Assume that the dollar amounts and the descriptions of the entries are correct.

Journal entries:

July  3	Accounts Receivable 	1,000	 	
 	            Service Revenue 	 	1,000	
 	Customers were billed for services completed.	 	 	
 	 	 	 	
11	Cash 	500	 	
 	            Service Revenue  	 	500	
 	Payment is received from a customer billed for services on July 1.	 	 	
 	 	 	 	
12	Office Supplies	600	 	
 	            Accounts Payable  	 	600	
 	Purchased office furniture on credit; payment is due in 30 days.	 	 	
 	 	 	 	
25	Office Furniture 	700	 	
 	            Cash 	 	700	
 	Payment is made for office furniture received on July 25.	 	 	

ACCOUNTS RECEIVABLE	 	SERVICE REVENUE	
7/3	1,000	|	 	 	 	7/3	1,000	|	 	 	
 	 	|	 	 	 	 	 	|	7/11	500	

CASH	 	ACCOUNTS PAYABLE	
7/11	500	|	7/25	700	 	7/12	600	|	 	 	

OFFICE SUPPLIES	 	OFFICE FURNITURE	
7/12	600	|	 	 	 	7/25	700	|	 	 	

Required:  If you assume that all journal entries have been recorded correctly, use the above information to: 
(1) Identify the postings to the general ledger that were made incorrectly. 
(2) Describe how the each incorrect posting should have been made. 
(1) The bookkeeper incorrectly posted the July 3, July 11 and 12 journal entries. 
(2) For the July 3  journal entry, the $1,000 credit to Service Revenue should have been posted to the Service Revenue account as a credit, not as a debit. For the July 11 journal entry, the $500 credit should be posted to Accounts Receivable, not to Service Revenue. For the July 12 journal entry, the $600 credit to Accounts Payable should have been posted to the Accounts Payable account as a credit, not as a debit.  The debit side of the entry should have been made to Office Furniture, not Office Supplies.