Question 1

Which of the following best describes the accounting equation and its significance in financial accounting?

Accepted Answer

Assets = Liabilities + Stockholders’ Equity. It ensures that every transaction is recorded in at least two accounts, maintaining the balance of the equation.

Question 2

Alladin Travel, Inc. purchased land for $40,000 cash. Which accounts are affected and how?

Accepted Answer

Land is debited for $$40,000 and Cash is credited for 40$$,000.

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. 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 corporation?

Accepted Answer

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

Question 6

If Alladin Travel, Inc. pays $1,900 on account, which accounts are affected and how?

Accepted Answer

Accounts Payable is debited for $$1,900 and Cash is credited for 1$$,900.

Question 7

Which of the following best describes the normal balance for the Dividends account?

Accepted Answer

Debit

Question 8

A company’s beginning cash balance was $$6,000. At the end of the period, the balance was 4$$,000. If total cash paid out during the period was $50,000, what was the amount of cash receipts?

Accepted Answer

$52,000

Question 9

Which of the following is the correct expanded accounting equation?

Accepted Answer

$$Assets = Liabilities + Common\ Stock + Retained\ Earnings + (Revenues - Expenses - Dividends)$$

Question 10

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 11

If a company pays $2,700 for rent, salaries, and utilities, what is the effect on the accounting equation?

Accepted Answer

Assets decrease by $$2,700; Stockholders’ Equity decreases by 2$$,700

Question 12

Which of the following is the correct journal entry for declaring and paying a $2,100 dividend?

Accepted Answer

Debit Dividends $$2,100; Credit Cash 2$$,100

Question 13

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

Accepted Answer

Service Revenue

Question 14

A company’s Accounts Payable had a normal beginning balance of $$3,800. During the period, there were debit postings of 1$$,000 and credit postings of $1,800. What was the ending balance?

Accepted Answer

$$4,600$$ credit

Question 15

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

Accepted Answer

Every transaction affects at least two accounts, with debits equaling credits.

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

Accounts Payable

Question 18

If Alladin Travel, Inc. 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

Cash increases by $$22,000; Land decreases by 22$$,000; no effect on total assets

Question 19

Which of the following best describes the purpose of the chart of accounts?

Accepted Answer

It lists all accounts and their numbers used by a company.

Chapter 2: Transaction Analysis – Financial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards