Exam 3: The Double-Entry Accounting System

Indicate whether each of the following statements is true or false. If a company made the following journal entry, this entry would cause: _____ a) net income to decrease. _____ b) total assets to decrease. _____ c) liabilities to increase. _____ d) cash flows from investing activities to decrease. _____ e) owners' equity to decrease.

Verne Company recorded a business event in T-accounts as follows: Which of the following reflects how this event affects the company's financial statements?

Indicate whether each of the following statements is true or false. _____ a) The entry to record the purchase of supplies involves a debit to Supplies Expense and a credit to Cash. _____ b) The entry to record the amount of supplies used involves a debit to Supplies and a credit to Supplies Expense. _____ c) An asset use transaction may involve a debit to an asset and a credit to a liability. _____ d) An asset exchange transaction may involve a debit to an asset and a credit to a liability. _____ e) A claims exchange transaction may involve a debit to a liability and a credit to revenue.

An adjusting entry recorded as a debit to Interest Receivable and a credit to Interest Revenue.

How does the debt to assets ratio indicate the degree of a company's debt risk? Who would normally be most interested in this ratio?

Indicate whether each of the following statements is true or false. If a company made the following journal entry, this entry would cause: _____ a) Cash to decrease. _____ b) Total assets to remain the same. _____ c) Liabilities to decrease. _____ d) Cash flows from operating activities to increase. _____ e) Net income to decrease.

Indicate the effect of debits or credits on the balance of the following accounts.

Select the true statement (note: an answer may be true even if it does not identify all accounts that have debit balances).

The year for which companies prepare their financial statements is their fiscal year.

The employees of Acorn Company have worked the last two weeks of 2013, but the employees' wages have not been paid or recorded as of December 31, 2013. The adjusting entry that Acorn should make for these unpaid wages on December 31, 2013 is:

What effect do debits have on asset accounts? On liability accounts?

The Lazarus Company recorded the following adjustment in general journal form: Which of the following choices accurately reflects how this event would affect the company's financial statements?

Any error in the accounting system will cause the trial balance to be out of balance.

An adjusting entry can never be an asset exchange transaction.

The right side of a T-account is known as the

For each of the following journal entries, describe the event that would have prompted the entry. The first has been completed for you as an example.

The information in the following T-accounts indicates that

Which of the following is increased with a debit?

An increase to a liability account is recorded with a credit entry.

What business event is represented by this journal entry?