Q: Which equation must always be kept in balance according to the rules of debit and credit?

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

Question 1

Which of the following best describes the purpose of the accounting cycle in financial accounting?

Accepted Answer

To systematically record, process, and report financial transactions for a specific period.

Question 2

A merchandising company like Walmart records the cost of goods sold (COGS) as an expense. Which journal entry correctly records the sale of inventory for cash?

Accepted Answer

Dr. Cash \$$X; Cr. Sales \X$$; Dr. COGS \$$Y; Cr. Inventory \Y$$

Question 3

Which of the following events should NOT be recorded in the accounting books?

Accepted Answer

The weather forecast predicts a severe storm next week, which may damage the company’s \$100,000 worth of roof.

Question 4

A company borrowed \$3,000 from a bank. Which accounts are affected and how?

Accepted Answer

Dr. Cash \$$3,000; Cr. Bank Loan \3$$,000

Question 5

Which equation must always be kept in balance according to the rules of debit and credit?

Accepted Answer

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

Question 6

If a company pays \$8,000 to employees for salaries, which journal entry is correct?

Accepted Answer

Dr. Salary Expense \$$8,000; Cr. Cash \8$$,000

Question 7

What is the main function of the general ledger in the accounting information system?

Accepted Answer

To summarize increases and decreases in specific accounts and show their balances.

Question 8

Which of the following is TRUE about double-entry accounting?

Accepted Answer

Total debits must always equal total credits in every transaction.

Question 9

A company purchased \$75,000 of equipment using cash. What is the correct journal entry?

Accepted Answer

Dr. Equipment \$$75,000; Cr. Cash \75$$,000

Question 10

Which of the following best describes a T-account?

Accepted Answer

A standardized record used to accumulate the dollar effects of transactions for a specific item.

Question 11

If the trial balance does NOT balance, which of the following is NOT a possible cause?

Accepted Answer

Errors in preparing tax returns.

Question 12

Laundry Shop performed service for a hotel and received \$6,000 cash. Which accounts are affected?

Accepted Answer

Dr. Cash \$$6,000; Cr. Sales \6$$,000

Question 13

Which of the following is the correct formula for the accounting equation?

Accepted Answer

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

Question 14

Which account is credited when a company receives interest revenue for its bank deposits?

Accepted Answer

Interest Revenue

Question 15

A company purchased \$200 worth of supplies on account. Which accounts are affected?

Accepted Answer

Dr. Supplies \$$200; Cr. Accounts Payable \200$$

Question 16

Which step comes first in the accounting cycle?

Accepted Answer

Analyze transactions.

Question 17

At the end of the period, which process ensures that all debits equal all credits?

Accepted Answer

Preparing an unadjusted trial balance.

Question 18

Which of the following is NOT a function of the general journal?

Accepted Answer

Summarizing increases and decreases in specific accounts and showing their balances.

Question 19

If a company starts a new period, what is the beginning account balance?

Accepted Answer

The ending balance of the last period.

Chapter 3: The Accounting Information System – Structured Study Notes

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