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

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

Question 1

Which of the following best describes the accounting equation?

Accepted Answer

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

Question 2

A company purchases supplies on account for $3,700. Which accounts are affected and how?

Accepted Answer

Supplies increase (debit); Accounts Payable increases (credit)

Question 3

Which of the following is NOT considered an asset account?

Accepted Answer

Accounts Payable

Question 4

If a company pays $1,900 on account, what is the effect on the accounting equation?

Accepted Answer

Assets decrease; Liabilities decrease

Question 5

Which of the following journal entries correctly records the issuance of $50,000 of common stock for cash?

Accepted Answer

Debit Cash $$50,000; Credit Common Stock 50$$,000

Question 6

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

Accepted Answer

A stockholder pays $30,000 from a personal account to remodel her home

Question 7

Which of the following best describes the normal balance for an asset account?

Accepted Answer

Debit

Question 8

Alladin Travel, Inc. performs services on account for $3,000. What is the correct journal entry?

Accepted Answer

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

Question 9

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 10

A company pays $2,100 in dividends to stockholders. What is the effect on the financial statements?

Accepted Answer

Assets decrease; Stockholders' Equity decreases

Question 11

Which of the following is an example of an accrued liability?

Accepted Answer

Salaries payable for work performed but not yet paid

Question 12

Which of the following statements about the double-entry system is TRUE?

Accepted Answer

Every transaction affects at least two accounts

Question 13

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

Accepted Answer

To verify that total debits equal total credits

Question 14

A company sells land for $22,000, which is the same amount it paid for the land. What is the effect on the accounting equation?

Accepted Answer

One asset (land) decreases; another asset (cash) increases

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

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

Accepted Answer

Python

Question 17

If a company receives $7,000 cash for services performed, which accounts are affected and how?

Accepted Answer

Cash increases (debit); Service Revenue increases (credit)

Question 18

Which of the following is the correct sequence for recording and posting a transaction?

Accepted Answer

Journalize the transaction, then post to the ledger

Question 19

Which of the following is a real-world example of an investing transaction?

Accepted Answer

Purchasing land for cash

Question 20

Which of the following errors would cause the trial balance to be out of balance by a number divisible by 9?

Accepted Answer

A transposition error

Chapter 2: Transaction Analysis – Financial Accounting Study Notes

Study Guide - Practice Questions