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

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

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 equipment for $10,000 cash. What is the effect on the accounting equation?

Accepted Answer

Increase Equipment (Asset) by $$10,000; Decrease Cash (Asset) by 10$$,000; No effect on Liabilities or Stockholders' Equity

Question 3

Which of the following accounts is classified as a liability?

Accepted Answer

Accounts Payable

Question 4

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 5

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

Accepted Answer

The owner pays for remodeling her personal home with personal funds.

Question 6

What is the normal balance of the Dividends account?

Accepted Answer

Debit

Question 7

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

Accepted Answer

Decrease Cash (Asset) by $$1,900; Decrease Accounts Payable (Liability) by 1$$,900

Question 8

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

Accepted Answer

Salaries payable for work performed but not yet paid

Question 9

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

Accepted Answer

Each transaction affects at least two accounts, with debits equaling credits

Question 10

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

Accepted Answer

Decrease Cash (Asset) by $$2,100; Decrease Retained Earnings (Stockholders' Equity) by 2$$,100

Question 11

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 12

Which of the following is a real-world application of machine learning in accounting?

Accepted Answer

Automatically identifying general ledger account names for transactions

Question 13

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

Accepted Answer

Python

Question 14

A company receives $7,000 cash for services performed. What is the correct journal entry?

Accepted Answer

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

Question 15

Which of the following accounts would be increased by a credit?

Accepted Answer

Accounts Payable

Question 16

If the trial balance does not balance, which of the following steps should you take first?

Accepted Answer

Compute the difference between debits and credits

Question 17

Which of the following is an example of a prepaid expense?

Accepted Answer

Insurance paid in advance

Question 18

Which of the following best describes supervised machine learning?

Accepted Answer

Task driven and focused on predicting the next value

Question 19

What is the purpose of a trial balance?

Accepted Answer

To ensure that total debits equal total credits before preparing financial statements

Question 20

Which of the following accounts would be decreased by a debit?

Accepted Answer

Notes Payable

Chapter 2: Transaction Analysis – Financial Accounting Study Notes

Study Guide - Practice Questions