Q: Which of the following best describes the accounting equation?

$$\text{Assets} = \text{Liabilities} + \text{Shareholder Equity}$$

Q: Which formula correctly calculates ending retained earnings?

$$\text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends}$$

Question 1

Which of the following best describes the accounting equation?

Accepted Answer

$$	ext{Assets} = 	ext{Liabilities} + 	ext{Shareholder Equity}$$

Question 2

What is the primary purpose of posting in the accounting cycle?

Accepted Answer

To transfer journal entries to the ledger

Question 3

Which of the following is a limitation of a trial balance?

Accepted Answer

It cannot detect transactions that were not journalized

Question 4

Given the following account numbers, which group represents liabilities?

Accepted Answer

3000–3999

Question 5

If Koizumi Kollections Ltd. has the following balances: Cash $$3200$$, Accounts Receivable $$7200$$, Equipment $$25,700$$, and Land $$51,000$$, what is the total amount of assets?

Accepted Answer

$$3200 + 7200 + 25,700 + 51,000 = 87,100$$

Question 6

Which of the following accounts would be classified as Shareholder Equity?

Accepted Answer

Common Shares

Question 7

A company declared dividends of $$4,000. $$How does this affect the accounting equation?

Accepted Answer

Decrease in Shareholder Equity by $$4,000$$

Question 8

Which step comes immediately after posting in the accounting cycle?

Accepted Answer

Trial Balance

Question 9

Service Revenue is recorded as which type of account?

Accepted Answer

Revenue

Question 10

If a company has total assets of $$38,150$$ and total liabilities of $$7,000$$, what is the Shareholder Equity?

Accepted Answer

$$38,150 - 7,000 = 31,150$$

Question 11

Which of the following is NOT a step in the accounting cycle?

Accepted Answer

Calculating depreciation

Question 12

Deferred Revenue is classified as which type of account?

Accepted Answer

Liability

Question 13

Which formula correctly calculates ending retained earnings?

Accepted Answer

$$	ext{Beginning Retained Earnings} + 	ext{Net Income} - 	ext{Dividends}$$

Question 14

Which account number range is used for expenses in the chart of accounts?

Accepted Answer

7000–9999

Question 15

A company has Service Revenue of $$171,100$$ and Income Tax Expense of $$12,000. $$What is the net income?

Accepted Answer

$$171,100 - 12,000 = 159,100$$

Question 16

Which of the following is a reason why a trial balance may not detect all errors?

Accepted Answer

A journal entry is posted twice

Question 17

What is the effect on the accounting equation when equipment is purchased for cash?

Accepted Answer

No net effect; one asset increases and another decreases

Question 18

Which of the following is included in the closing entries step of the accounting cycle?

Accepted Answer

Closing revenue and expense accounts to retained earnings

Question 19

If a company issues common shares worth $$99,400$$, how does this affect the accounting equation?

Accepted Answer

Increase in Shareholder Equity by $$99,400$$

Question 20

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

Accepted Answer

It provides a list of all accounts and their numbers

Chapter 4: The Accounting Cycle and Transaction Analysis

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