Chapter 02
The Account
1.Which one of the following is not a part of an account?
a. credit side
b. trial balance
c. debit side
d. title
2.The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and a ledger.
d. first as a revenue and then as an expense.
3.Which one of the following represents the expanded basic accounting equation?
a. Assets = Liabilities + Share Capital–Ordinary + Retained Earnings + Dividends –
Revenue – Expenses
b. Assets + Dividends + Expenses = Liabilities + Share Capital–Ordinary + Retained
Earnings + Revenues
c. Assets – Liabilities – Dividends = Share Capital–Ordinary + Retained Earnings +
Revenues – Expenses
d. Assets = Revenues + Expenses – Liabilities
4.Martin’s Mail Service purchased equipment for $8,000. Martin paid $1,000 in cash and
signed a note for the balance. Martin debited the Equipment account, credited Cash and
a. nothing further must be done.
b. debited the retained earnings account for $7,000.
c. credited another asset account for $1,000.
d. credited a liability account for $7,000.
The Journal
1.Which of the following is false about a journal?
a. It discloses in one place the complete effects of a transaction.
b. It provides a chronological record of transactions.
c. It helps to prevent or locate errors because debit and credit amounts for each
entry can be readily compared.
d. It keeps in one place all the information about changes in specific account
balances.
2. At September 1, 2025, Crews Co. reported equity of ₤272,000. During the month, Crews
generated revenues of ₤40,000, incurred expenses of ₤24,000, purchased equipment for
₤10,000, and paid dividends of ₤4,000. What is total equity at September 30, 2025?
a. ₤272,000
b. ₤16,000
c. ₤274,000
d. ₤284,000
3. After a business transaction has been analyzed and entered in the book of original entry,
the next step in the recording process is to transfer the information to
a. the company's bank.
b. equity.
c. ledger accounts.
d. financial statements.
4. Journalize the following transactions for Mercado Company for June 2025, the
company’s. first month of operations. You may omit explanations for the transactions.
1. Purchased equipment on account for $6,000.
2. Billed customers $5,000 for services performed.
3. Made payment of $1,500 on account for equipment purchased earlier in the month.
4. Collected $2,400 on customer accounts.
The Ledger and Posting
1. An accounting record of the balances of all assets, liabilities, and equity accounts is called
a. compound entry.
b. general journal.
c. general ledger.
d. chart of accounts.
2. A number in the reference column in a general journal indicates
a. that the entry has been posted to a particular account.
b. the page number of the journal.
c. the dollar amount of the transaction.
d. the date of the transaction.
3. Which of the following statements is false concerning the use of currency signs?
a. Currency signs do not appear in journals or ledgers.
b. Currency signs are generally only shown for the first item in a column and the
column total.
c. Currency signs are not typically used in the trial balance.
d. All of the answer choices are correct.
4. A numbering system for a chart of accounts
a. is prescribed by IFRS.
b. is uniform for all businesses.
c. usually starts with income statement accounts.
d. usually starts with the statement of financial position accounts.
5. Post the following transactions to T-accounts and determine each account's ending
balance.
1. Supplies....................................................................................................... 2,000
Accounts Payable.............................................................................. 2,000
2. Accounts Receivable................................................................................... 4,000
Service Revenue ................................................................................ 4,000
3. Cash ........................................................................................................... 3,500
Accounts Receivable ......................................................................... 3,500
4. Accounts Payable ....................................................................................... 1,000
Cash ................................................................................................... 1,000
The Trial Balance
1. Which of the following errors will prevent the trial balance from balancing?
a. A transaction is not journalized.
b. Transposition error related to the statement of financial position.
c. A journal entry is posted twice.
d. A journal entry to purchase $100 worth of equipment is posted as a $1,000
purchase.
2. Which of the following statement is true regarding the recording process?
a. Because IFRS rely more on fair value and less on historical cost than U.S. GAAP
the double-entry accounting system is not widely used by companies who use
IFRS.
b. Both IFRS and U.S. GAAP, use the same general rules of debits and credits and
the steps in the recording process.
c. A trial balance using IFRS is organised by first showing the accounts from the
statement of financial position followed by accounts from the income
statement; a trial balance using U.S. GAAP is organized using the opposite order.
d. All of the choices are correct regarding the recording process.
3. M. Caria and Associates is a financial planning service. The account balances at December.
31, 2025 are shown by the following alphabetical list:
Accounts Payable $ 13,000
Accounts Receivable 19,000
Buildings 120,000
Cash 26,500
Equipment 71,000
Land 42,000
Notes Payable 95,000
Notes Receivable 8,100
Share Capital-Ordinary 179,700
Supplies 1,100
Instructions
Prepare a trial balance with the accounts arranged in proper order.
