Accounting 2 Chapter 1

True/False Indicate whether the statement is true or false. ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. The petty cash fund is replenished at the mid-point of each fiscal period. 2. Liability accounts have normal credit balances. 3. Amounts in the General Debit and General Credit columns of a cash payments journal are posted individually. 4. Expense accounts have normal debit balances. 5. The accounting equation may be stated as assets = liabilities. 6. An owner's equity account has a normal debit balance. 7. A purchases discount is typically stated as a percentage. 8. A departmental purchases journal should contain a Purchases Debit column for each department. 9. Increases in asset accounts are recorded on the debit side.

____ 10. Increases in liability accounts are recorded on the debit side. ____ 11. Decreases in expense accounts are recorded on the debit side. ____ 12. A merchandising business purchases and sells goods. ____ 13. A purchases journal is proved by adding each column and then proving that the sum of the debit column totals equals the credit column total. ____ 14. A purchases discount increases the net amount of cash paid for a purchase. ____ 15. A ledger is a group of accounts. ____ 16. The total of the subsidiary ledger account balances should equal the balance of the controlling account. ____ 17. A deduction that a vendor allows on the invoice amount to encourage prompt payment is called a cash discount. ____ 18. Invoice terms of 2/10, n/30 mean that the customer may take a 10% discount if the invoice is paid within 2 days. If the discount is not taken, the entire amount of the invoice is due within 30 days. ____ 19. In a departmental accounting system, each department has a separate Purchases Credit column in the purchases journal. ____ 20. Posting involves transferring transaction information from a ledger account to a journal entry. ____ 21. When the petty cash fund is replenished, the credit is to Petty Cash. ____ 22. The two debit columns in the cash payments journal are General Debit and Cash Debit. ____ 23. When merchandise is returned to a vendor, the vendor's account and Accounts Payable are reduced by a credit. ____ 24. Purchases discount accounts are contra cost accounts. ____ 25. Matching expenses with revenue gives a true picture of business operations for an accounting period.

Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. An amount owed by a business is called a(n) ____. A. asset C. equity B. liability D. none of the above 2. An account balance that is opposite the normal balance is called a(n) ____. A. contra balance C. liability B. opposite balance D. none of the above 3. Transferring information from a journal entry to a ledger account is called ____. A. ordering C. posting B. recording D. none of the above 4. A journal used to record only one kind of transaction is called a(n) ____. A. ledger C. source document B. special journal D. none of the above 5. A record summarizing all the information pertaining to a single item in the accounting equation is called a(n) ____. A. ledger C. journal B. account D. none of the above 6. Anything of value that is owned is called a(n) ____. A. asset C. equity B. liability D. none of the above 7. An account in a general ledger that summarizes all accounts in a subsidiary ledger is called a(n) ____. A. general account C. maintenance account B. special account D. none of the above 8. An amount of cash kept on hand and used for making small payments is called ____. A. cash on hand C. quick cash B. petty cash D. none of the above 9. A form for recording transactions in chronological order is called a(n) ____. A. journal C. ledger B. special journal D. none of the above 10. A ledger that contains all accounts needed to prepare financial statements is called a(n) ____. A. special ledger C. subsidiary ledger B. general ledger D. none of the above 11. A business that purchases and sells goods is called a(n) ____. A. service business C. selling business B. merchandising business D. none of the above 12. A form prepared by the customer showing the price deduction taken by the customer for returns and allowances is called a(n) ____. A. credit memorandum C. return memorandum B. debit memorandum D. none of the above 13. Information about business transactions is obtained from original business papers called ____. A. journals C. invoices B. ledgers D. none of the above 14. A deduction that a vendor allows on the invoice amount to encourage prompt payment is called a(n) ____. A. cash discount C. good customer discount B. credit discount D. none of the above

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____ 15. A departmental purchases journal should contain a Purchases Debit column for ____. A. recording purchase returns C. each department B. the company as a whole D. administrative purchases

Accounting 2 Chapter 1 Answer Section

TRUE/FALSE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: F T T T F F T T T F F T T F T T T F F F F F F T T PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: B A C B B A D B A B B B D PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: PTS: 1 1 1 1 1 1 1 1 1 1 1 1 1

14. ANS: A 15. ANS: C

PTS: 1 PTS: 1