Question 1

Which of the following best describes a business transaction in financial accounting?

Accepted Answer

Any event that has a financial impact on the business and can be measured reliably.

Question 2

Which of the following is NOT considered an asset account?

Accepted Answer

Notes Payable

Question 3

If a company purchases supplies on account, which accounts are affected and how?

Accepted Answer

Supplies (debit increase), Accounts Payable (credit increase)

Question 4

Which equation represents the fundamental accounting equation?

Accepted Answer

$Assets = Liabilities + Stockholders' Equity$

Question 5

A company receives $7,000 cash for services provided. What is the impact on the accounting equation?

Accepted Answer

Increase assets and increase stockholders' equity

Question 6

Which of the following accounts normally has a debit balance?

Accepted Answer

Dividends

Question 7

When Freddy's Auto Service pays $1,900 on account, what is the effect on the accounts?

Accepted Answer

Decrease Cash (credit), Decrease Accounts Payable (debit)

Question 8

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 9

Which of the following transactions would NOT affect the accounting equation?

Accepted Answer

Owner pays for personal home remodeling from personal funds

Question 10

If Freddy's Auto Service started May with $2,000 cash, received $8,000 cash, and ended with $3,000 cash, what were the total cash payments during May?

Question 11

Which of the following is TRUE regarding the double-entry system?

Accepted Answer

Each transaction affects at least two accounts.

Question 12

What is the normal balance of the Accounts Payable account?

Accepted Answer

Credit

Question 13

Which of the following is the correct sequence for recording transactions in the books?

Accepted Answer

Specify accounts, determine increase/decrease, record in the journal

Question 14

If a company sells land for cash at the land's cost, what is the effect on the accounting equation?

Accepted Answer

Increase cash, decrease land; no effect on total assets

Question 15

Which account is increased by a credit entry?

Accepted Answer

Service Revenue

Question 16

A trial balance is prepared to:

Accepted Answer

Ensure that total debits equal total credits

Question 17

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

Accepted Answer

Accounts Payable

Question 18

If a company performs services for a customer on account, which accounts are affected?

Accepted Answer

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

Question 19

Which of the following best describes the purpose of analyzing accounts using T-accounts?

Accepted Answer

To track increases and decreases in specific accounts

Question 20

Which of the following is TRUE about the normal balance of revenue accounts?

Accepted Answer

Revenue accounts normally have a credit balance.

Transaction Analysis: Accounting for Business Transactions

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