Section A. Multiple Choice Questions IKN2 SK1. SK2: 10 marks - 10 x 1 mark) AL- Choose the correct answer: 1. A credit to a liability account a indicates a decrease in the amount owed to creditors. b. is an error. e. indicates an increase in the amount owed to creditors. d. must be accompanied by a debit to an asset account. 2. When three or more accounts are required in one journal entry, the entry as a a. compound entry. b. triple entry. c. multiple entry. d. simple entry. 3. Assets normally show a. credit balances. b. debit and credit balances. c. debit or credit balances. d. debit balances. 4. An account will have a debit balance if the a. credits exceed the debits. b. first transaction entered was a credit. c. last transaction entered was a credit. d. debits exceed the credits. 5. Adjusting entries are a. not necessary if the accounting system is operating properly. b. usually required before financial statements are prepared. c. made whenever management desires to change an account balance. d. made to balance sheet accounts only. 6. For the basic accounting equation to stay in balance, each transaction recorded must . affect two or less accounts. . affect two or more accounts. . always affect exactly two accounts. - affect the same number of asset and liability accounts. 7. Which one of the following is not a part of an account? a. Credit side b. Trial balance c. Debit side d. Title 8. On January 31, Flowers. Company purchased furniture of $30,000 on account. The entry to record the purchase will include a. a debit to Furniture and a credit to Cash. b. a debit to Furniture Expense and a credit to Accounts Receivable. c. a debit to Accounts Receivable and a credit to Furniture. d. a debit to Furniture and a credit to Accounts Payable. 9. Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. d. Debits decrease liabilities and decrease assets. 10. Prepaid expenses are a. paid and recorded in an asset account after they are used or consumed. . paid and recorded in an asset account before they are used or consumed. - incurred but not yet paid or recorded. incurred and already paid or recorded