$\text{Assets} = \text{Liabilities} + \text{Stockholders' Equity}$

$\text{Assets} = \text{Liabilities} + \text{Common Stock} + \text{Retained Earnings} + \text{Revenues} - \text{Expenses} - \text{Dividends}$

Question 1

Which of the following best describes the accounting equation and its components?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Stockholders' Equity}$

Question 2

Alladin Travel, Inc. purchased land for $40,000 cash. What is the effect of this transaction on the accounting equation?

Accepted Answer

Increase in assets (land), decrease in assets (cash), no effect on total assets

Question 3

Which of the following is NOT considered an asset account?

Accepted Answer

Accounts Payable

Question 4

A company performs services on account for $3,000. Which accounts are affected and how?

Accepted Answer

Accounts Receivable increases (debit), Service Revenue increases (credit)

Question 5

Which of the following journal entries correctly records the payment of $1,900 on account?

Accepted Answer

Debit Accounts Payable $1,900; Credit Cash $1,900

Question 6

Which of the following transactions would NOT be recorded in the accounting records of a business?

Accepted Answer

A stockholder remodels her home using personal funds

Question 7

If Alladin Travel, Inc. began May with $1,000 cash, received $8,000 during May, and ended with $3,000, what were the total cash payments during May?

Accepted Answer

$6,000$

Question 8

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

Accepted Answer

Every transaction affects at least two accounts, with equal debits and credits

Question 9

What is the normal balance for an expense account?

Accepted Answer

Debit

Question 10

Which of the following is the correct expanded accounting equation?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Common Stock} + 	ext{Retained Earnings} + 	ext{Revenues} - 	ext{Expenses} - 	ext{Dividends}$

Question 11

A company declares and pays a $2,100 dividend. What is the effect on the accounting equation?

Accepted Answer

Decrease in assets (cash), decrease in stockholders' equity (dividends)

Question 12

Which of the following is an example of a liability account?

Accepted Answer

Accounts Payable

Question 13

Which of the following best describes the purpose of a trial balance?

Accepted Answer

To verify that total debits equal total credits after posting

Question 14

Which of the following is a correct journal entry for earning $7,000 of service revenue in cash?

Accepted Answer

Debit Cash $7,000; Credit Service Revenue $7,000

Question 15

Which of the following is an example of supervised machine learning in accounting?

Accepted Answer

A program that predicts the next value in a sequence of transactions

Question 16

If a company’s trial balance does not balance, and the difference is divisible by 9, what type of error might have occurred?

Accepted Answer

Transposition error

Question 17

Which programming language is most commonly used for machine learning applications in accounting?

Accepted Answer

Python

Question 18

A company purchases supplies for $3,700 on account. What is the correct journal entry?

Accepted Answer

Debit Supplies $3,700; Credit Accounts Payable $3,700

Question 19

Which of the following best describes the flow of accounting data?

Accepted Answer

Transaction occurs → Transaction analyzed → Journal entry → Posting to ledger

Question 20

Which of the following accounts would be listed under stockholders’ equity in the chart of accounts?

Accepted Answer

Common Stock

Chapter 2: Transaction Analysis – Financial Accounting Study Notes

Study Guide - Practice Questions