Accounting 1 Chapter 2

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1 Accounting 1 Chapter 2 True/False Indicate whether the statement is true or false. 1. An accounting device used to analyze transactions is a T account. 2. The normal balance side of an asset account is based on the location of the account in the accounting equation. 3. Each asset account has a normal debit balance. 4. Each liability account has a normal credit balance. 5. Before a transaction is recorded in the records of a business, it is analyzed to determine which accounts are changed and how. 6. Each transaction changes the balances in at least two accounts. 7. A list of accounts used by a business is a chart of accounts. 8. Cash is an asset account with a normal credit balance. 9. When cash is paid for supplies, the supplies account is increased by a debit. 10. Common accounting practice is to record withdrawals as debits directly in the owner's capital account. 11. The left side of an asset account is the credit side because assets accounts are on the left side of the accounting equation. 12. A drawing account is decreased by debits and increased by credits. 13. The total debits and credits for a transaction do not have to equal. 14. Increases in expense accounts are recorded directly in the owner's capital account. 15. Increases in expense accounts are recorded as debits because they decrease the owner's capital account. 16. The normal balance side of an accounts payable account is a credit. 17. Accounts receivable accounts are increased with a debit. 18. Accounts payable accounts are increased with a debit. 19. Advertising Expense is increased with a debit. 20. Christine Jones, Drawing is decreased with a credit. Multiple Choice Identify the choice that best completes the statement or answers the question. 1. A record summarizing all the information pertaining to a single item in the accounting equation is. A. a debit C. an account B. a credit D. a T account 2. In a T account, the debit side is. A. the left side C. both A and B B. the right side D. neither A nor B 3. The right side of a T account is the.

2 A. debit side C. normal balance side B. credit side D. equity side 4. If an amount is recorded on the side of a T account opposite the normal balance side, the account balance is. A. increased C. unaffected B. decreased D. correct 5. The normal balance side of an asset account is the. A. debit side C. decrease side B. credit side D. right side 6. When the owner invests cash in a business, the owner's capital account is. 7. When a business buys an asset on one date and agrees to pay on a later date, the transaction is. A. delayed C. increased B. on account D. none of the above 8. When a business pays cash on account, a liability account is. 9. When a business receives revenue, Sales is. 10. The amount paid for rent is recorded as a debit to. A. Miscellaneous Expense C. Supplies B. Rent Expense D. Cash 11. The values of all things owned (assets) are on the accounting equation's. A. left side C. credit side B. right side D. none of the above 12. An amount recorded on the left side of a T account is. A. a debit C. normal balance B. a credit D. none of the above 13. The normal balance side of any liability account is. A. the debit side C. the left side 14. Debits must equal credits. A. in a T account C. on the equation's right side B. in the equation's left side D. in all transactions 15. Decreases in any liability account are shown on a T account's. A. debit side C. right side B. credit side D. none of the above 16. Increases in a revenue account are shown on a T account's. A. debit side C. left side B. credit side D. none of the above 17. The normal balance side of any revenue account is. A. the debit side C. the left side 18. The normal balance side of any expense account is. A. the debit side C. the right side

3 19. When $1, cash is received on account,. A. Sales is increased with a credit and Cash is increased with a credit B. Accounts Receivable is increased with a debit and Cash is increased with a credit C. Accounts Receivable is decreased with a credit and Cash is increased with a debit D. Accounts Receivable is decreased with a debit and Cash is increased with a debit 20. A sale on account. A. increases an owner's equity account and increases an asset account B. increases a liability account and increases an asset account C. increases an owner's equity account and increases a liability account D. increases an owner's equity account and decreases a liability account

4 Accounting 1 Chapter 2 Answer Section TRUE/FALSE 1. ANS: T PTS: 1 2. ANS: T PTS: 1 3. ANS: T PTS: 1 4. ANS: T PTS: 1 5. ANS: T PTS: 1 6. ANS: T PTS: 1 7. ANS: T PTS: 1 8. ANS: F PTS: 1 9. ANS: T PTS: ANS: F PTS: ANS: F PTS: ANS: F PTS: ANS: F PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: 1 MULTIPLE CHOICE 1. ANS: C PTS: 1 2. ANS: A PTS: 1 3. ANS: B PTS: 1 4. ANS: B PTS: 1 5. ANS: A PTS: 1 6. ANS: B PTS: 1 7. ANS: B PTS: 1 8. ANS: C PTS: 1 9. ANS: B PTS: ANS: B PTS: ANS: A PTS: ANS: A PTS: ANS: B PTS: ANS: D PTS: ANS: A PTS: ANS: B PTS: ANS: B PTS: ANS: A PTS: 1

5 19. ANS: C PTS: ANS: A PTS: 1

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