Multiple Choice: Classifying Information Select the correct answer for each of the following:

1, The three primary functions of debits and credits in an accounting system are:

a. To serve as labels for the left and right sides of Taccounts, to describe increases and decreases in accounts, and to permit the use of bookkeeping on a cash basis.

b. To serve as labels for the left and right sides of the Taccounts, to indicate in which financial statement an account will be reported, and to identify the normal balance in each account.

c. To indicate in which financial statement an account will be reported, to describe increases and decreases in accounts, and to identify the normal balance in each account.

d. To serve as labels for the left and right sides of the Taccounts, to describe increases and decreases in accounts, and to identify the normal balance in each account.

2. Which of the following transactions correctly maintains equality in the accounting equation?

a. To record the collection of cash from a previous sale, Cash is increased and the Accounts Receivable account is increased by $8,000.

b. To record the payment of a note to the bank, Notes Payable is decreased and Cash in Bank is increased by $3,500.

c. To record the purchase of a new piece of equipment, Equipment is increased and Cash in Bank is decreased by $23,000.

d. To record the payment of salaries to workers, Salaries Expense is increased and Cash in Bank is increased $6,500.
3. Financial statement articulation is illustrated:

a. When an increase in revenue reported in the income statement results in an increase in the net assets reported on the balance sheet.

b. When total revenue in the income statement equals the amount of cash reported on the balance sheet.

c. When expenses incurred and paid are included as liabilities on the balance sheet.

d. When an increase in an expense reported in the income statement results in a decrease in a liability reported on the balance sheet.
4. When accounting information is accumulated in individual accounts, a chart of accounts is:

a. Limited to those accounts that will appear in the balance sheet.

b. A listing of each account that will be used to accumulate information.

c. Changed each year by a company as a function of the success or failure of the previous year’s operations.

d. Used to determine whether a debit or credit balance will appear in each of the accounts at the end of the accounting period.
5. Balance sheet accounts are:

a. Temporary accounts.

b. Permanent accounts.

c. Adjusting accounts.

d. Debit-balance accounts only.