Multiple-Choice Questions

1. The effects of purchasing inventory on credit are to:

a. Increase assets and increase stockholders’ equity.

b. Increase assets and increase liabilities.

c. Decrease assets and decrease stockholders’ equity.

d. Decrease assets and decrease liabilities.

2. The effects of paying salaries for the current period are to:

a. Increase assets and increase stockholders’ equity

b. Increase assets and increase liabilities

c. Decrease assets and decrease stockholders’ equity

d. Decrease assets and decrease liabilities

3. Which of the following statements is false?

a. The amount in an account at any time is called the balance of the account.

b. Transactions are frequently analyzed using a T-account.

c. All T-accounts have both a debit and a credit side.

d. The left side of a T-account is called the credit side.

4. Which of the following statements are true?

I. Debits represent decreases and credits represent increases.

II. Debits must always equal credits.

III. Assets have normal debit balances while liabilities and stockholders’ equity have normal credit balances.

a. I

b. II and III

c. I and II

d. All of the above are true.

5. Debits will:

a. Increase assets, liabilities, revenues, expenses, and dividends

b. Decrease assets, liabilities, revenues, expenses, and dividends

c. Increase assets, expenses, and dividends

d. Decrease liabilities, revenues, and dividends

6. Which of the following statements are true?

I. A journal provides a chronological record of a transaction.

II. A journal entry contains the complete effect of a transaction.

III. The first step in preparing a journal entry involves analyzing the transaction.

a. I and II

b. II and III

c. I and III

d. All of the above are true.

7. Posting:

a. Is an optional step in the accounting cycle.

b. Involves transferring the information in journal entries to the general ledger.

c. Is performed after a trial balance is prepared.

d. Involves transferring information to the trial balance.

8. A trial balance:

a. Lists all accounts and their balances.

b. Lists only revenue and expense accounts.

c. Will help detect omitted journal entries.

d. Detects all errors that could be made during the journalizing or posting steps of the accounting cycle.