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

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

Question 1

Which of the following best describes the accounting equation?

Accepted Answer

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

Question 2

Alladin Travel, Inc. purchases supplies on account for $3,700. Which accounts are affected and how?

Accepted Answer

Supplies (debit) and Accounts Payable (credit) both increase by $3,700

Question 3

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

Accepted Answer

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

Question 4

If Alladin Travel, Inc. pays $1,900 on account, what is the effect on the accounting equation?

Accepted Answer

Assets (Cash) decrease by $$1,900; Liabilities (Accounts Payable) decrease by 1$$,900

Question 5

Which of the following accounts normally has a credit balance?

Accepted Answer

Accounts Payable

Question 6

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 7

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

Accepted Answer

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

Question 8

Alladin Travel, Inc. pays $2,700 for rent, salaries, and utilities. What is the effect on the financial statements?

Accepted Answer

Assets (Cash) decrease by $$2,700; Expenses increase by 2$$,700, reducing Retained Earnings

Question 9

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 10

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

Accepted Answer

Salaries owed but not yet paid

Question 11

What is the primary purpose of preparing a trial balance?

Accepted Answer

To verify that total debits equal total credits after posting

Question 12

If a company issues common stock for $50,000 cash, what is the correct journal entry?

Accepted Answer

Debit Cash $$50,000; Credit Common Stock 50$$,000

Question 13

Which of the following best describes the normal balance for an expense account?

Accepted Answer

Debit

Question 14

A company collects $1,000 from a customer for services previously performed on account. What is the effect on the accounts?

Accepted Answer

Debit Cash $$1,000; Credit Accounts Receivable 1$$,000

Question 15

Which of the following is an example of a financing transaction?

Accepted Answer

Issuing common stock for cash

Question 16

Which of the following statements about machine learning in accounting is TRUE?

Accepted Answer

Machine learning can be used to identify general ledger account names for transactions

Question 17

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

Accepted Answer

Python

Question 18

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

Accepted Answer

Assets (Cash) decrease by $$2,100; Stockholders’ Equity (Retained Earnings) decreases by 2$$,100

Question 19

Which of the following is an example of an investing transaction?

Accepted Answer

Purchasing land for cash

Question 20

Which of the following best describes the purpose of the ledger in accounting?

Accepted Answer

It is a collection of all individual accounts and their balances

Transaction Analysis in Financial Accounting: Chapter 2 Study Notes

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