1. Which of the following statements about the accounting equation is not true?

• A. A transaction may add to both sides of the equation.

• B. A transaction may add to two items on the same side of the equation.

• C. A transaction may transfer between the terms on one side of the equation and have no effect on the other side of the equation.

• D. A transaction may subtract from both sides of the equation

2.

The trial balance would automatically reveal the following error: Land was purchased for cash but instead of crediting cash, the credit was made to Accounts Receivable.

A. True

B. False

3. Stockholders equity is the term applied to which of the following?

• A. Amount of cash the stockholders invested in the company 10 years ago.

• B. Residual claim against the assets of the business after the total liabilities are deducted.

• C. Is also referred to as net worth.

• D. Residual cash of the business after the total liabilities are deducted.

• E. (b) and (c) are correct.

4.

Account numbers are entered in the posting reference column of the two-column general journal at the time the transactions are recorded in the ledger accounts.

A. True

B. False

5.

A liability account normally has a debit balance.

A. True

B. False

6.

The primary function of the general ledger is to store transactions by account classification and to provide a balance of each account.

A. True

B. False

7. Expenses for an accounting period are:

• A. The costs of goods and/or services consumed in the earning of the revenue of the period.

• B. Former assets whose usefulness expired this period in the earning of revenues.

• C. Only the amounts actually paid for services used during the period.

• D. (a) and (b), but not (c).

8.

Every transaction always affects two or more accounts in a double-entry accounting system.

A. True

B. False

9.

A debit to the Dividends account would indicate an increase in expenses.

A. True

B. False

10.

Transactions are recorded in the journal in chronological order.

A. True

B. False