Chapter 2 Analyzing and Recording Transactions

1. A debit entry: A. Increases asset and expense accounts. B. Decreases liability and equity accounts. C. Increases the owner's withdrawals account. D. Decreases revenue accounts. E. All of these answers are correct.

2. A credit entry: A. Increases asset and expense accounts, or decreases liability, equity, and revenue accounts. B. Is recorded on the left side of a T-account. C. Decreases asset and expense accounts, or increases liability, equity, and revenue accounts. D. Decreases asset, expense and revenue accounts. E. Increases the withdrawals account.

3. A list of all accounts used by a company, including the identification number assigned to each account, is called a: A. Ledger. B. Journal. C. Trial balance. D. Chart of accounts. E. General Journal.

4. An asset created by a payment for economic benefits that does not expire until some later time is: A. Recorded as a debit to an unearned revenue account. B. Recorded as a debit to a prepaid expense account. C. Recorded as a credit to an unearned revenue account. D. Recorded as a credit to a prepaid expense account. E. Not recorded in the accounting records.

5. A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is: A. Recorded as a debit to an unearned revenue account. B. Recorded as a debit to a prepaid expense account. C. Recorded as a credit to an unearned revenue account. D. Recorded as a credit to a prepaid expense account. E. Not recorded in the accounting records.

6. On May 31, Don Company had an Accounts Payable balance of $57,000. During the month of June, total credits to Accounts Payable were $34,000, which resulted from purchases on credit. The June 30 Accounts Payable balance was $32,000. What was the amount of payments made during June? A. $32,000. B. $34,000. C. $57,000. D. $59,000. E. $84,000.

7. On June 30, the Cash account of Lutness Company had a normal balance of $4,300. During July the account was debited for a total of $3,400 and credited for a total of $3,600. What was the balance in the Cash account on August 1? A. $-0. B. $4,100 debit. C. $3,400 credit. D. $3,400 debit. E. $4,100 credit.

8. During the month of November, Cornish Company had cash receipts of $3,500 and paid out $1,000 for expenses. The November 30th cash balance was $4,300. What was the cash balance on November 1? A. $1,800. B. $2,800. C. $4,300. D. $5,800. E. $7,300.