Recording Transactions: A Comprehensive Guide for Accounting Students

Question 1

In the accounting cycle, what is the initial step for recording financial transactions?

Accepted Answer

Recording transactions in a journal

Answer

Preparing a trial balance

Answer

Posting transactions to ledger accounts

Answer

Preparing financial statements

Question 2

Which of the following is the correct accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Assets = Liabilities - Equity

Answer

Assets + Liabilities = Equity

Question 3

What type of account increases with a debit and decreases with a credit?

Accepted Answer

Asset

Answer

Liability

Answer

Equity

Answer

Revenue

Question 4

What is the first step in the accounting cycle?

Accepted Answer

Journalizing transactions

Answer

Posting to ledger accounts

Answer

Preparing a trial balance

Answer

Preparing financial statements

Question 5

What is the primary purpose of a journal entry?

Accepted Answer

To record a business transaction in the accounting system

Answer

To correct an accounting error

Answer

To prepare financial statements

Answer

To close the accounting records

Question 6

Which account is used to record the owner's initial investment in the business?

Accepted Answer

Capital account

Answer

Revenue account

Answer

Expense account

Answer

Liability account

Question 7

Explain the difference between a debit and a credit.

Accepted Answer

Debits increase assets and expenses, while credits increase liabilities and revenues

Answer

Debits decrease assets and revenues, while credits decrease liabilities and expenses

Answer

Debits increase liabilities and expenses, while credits decrease assets and revenues

Answer

There is no difference between a debit and a credit

Question 8

What is the purpose of posting to ledger accounts?

Accepted Answer

To summarize transactions by account

Answer

To prepare financial statements

Answer

To correct accounting errors

Answer

To close the accounting records

Question 9

Provide an example of a contra account.

Accepted Answer

Accumulated depreciation

Answer

Sales revenue

Answer

Accounts payable

Answer

Cash

Question 10

What is the primary purpose of a trial balance?

Accepted Answer

To verify the equality of debits and credits in the accounting system

Answer

To prepare financial statements

Answer

To correct accounting errors

Answer

To close the accounting records

Question 11

To start recording a business transaction, the first step is:

Accepted Answer

Identifying the accounts affected

Answer

Determining the transaction amount

Answer

Preparing a journal entry

Answer

Posting to ledger accounts

Question 12

The basic accounting equation is:

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

Liabilities - Assets = Owner's Equity

Answer

Assets + Liabilities = Owner's Equity

Answer

Owner's Equity - Assets = Liabilities

Question 13

What is the primary purpose of a journal entry?

Accepted Answer

Recording a business transaction in chronological order

Answer

Summarizing transactions by account

Answer

Transferring balances to the ledger

Answer

Preparing financial statements

Question 14

Which of these is not a type of accounting journal?

Accepted Answer

Trial balance

Answer

General journal

Answer

Cash receipts journal

Answer

Sales journal

Question 15

Explain the difference between a debit and a credit:

Accepted Answer

Debit: Increases asset, Credit: Increases liability

Answer

Debit: Increases expense, Credit: Increases revenue

Answer

Debit: Decreases asset, Credit: Decreases liability

Answer

Debit: Decreases expense, Credit: Decreases revenue

Question 16

Which of these is considered a temporary account?

Accepted Answer

Supplies

Answer

Cash

Answer

Accounts Receivable

Answer

Owner's Capital

Question 17

What is the primary purpose of an adjusting entry?

Accepted Answer

To record revenues and expenses not yet recorded

Answer

To rectify accounting errors

Answer

To transfer account balances

Answer

To close the accounting period

Question 18

In a journal entry, the total amount of the debits must be:

Accepted Answer

Equal to the total amount of the credits

Answer

Less than the total amount of the credits

Answer

Greater than the total amount of the credits

Answer

Double the total amount of the credits

Question 19

The process of transferring journal entries to ledger accounts is known as:

Accepted Answer

Posting

Answer

Journalizing

Answer

Balancing

Answer

Summarizing

Question 20

A trial balance is a report that:

Accepted Answer

Summarizes ledger account balances

Answer

Lists all journal entries

Answer

Shows the difference between debits and credits

Answer

Identifies errors in recording transactions

Question 21

What is the primary purpose of a journal entry?

Accepted Answer

To record a financial transaction in the accounting system

Answer

To summarize transactions for a particular period

Answer

To post transactions to ledger accounts

Answer

To prepare financial statements

Question 22

Which type of account is typically increased with a debit?

Accepted Answer

Asset

Answer

Liability

Answer

Equity

Answer

Revenue

Question 23

What is a trial balance?

Accepted Answer

A list of all ledger accounts and their balances at a specific point in time

Answer

A summary of all transactions for a specific period

Answer

A report that shows the financial performance of a business

Answer

A worksheet used to prepare financial statements

Question 24

Which of the following is NOT a key element of the double-entry accounting system?

Accepted Answer

Cash flow statement

Answer

Debits and credits

Answer

Assets, liabilities, and equity

Answer

Trial balance

Question 25

What is the primary purpose of a journal entry?

Accepted Answer

Categorize and summarize transactions by account.

Answer

Record financial transactions chronologically.

Answer

Adjust account balances at the end of a period.

Answer

Transfer balances from the journal to the ledger.

Question 26

Which account type is NOT typically reported on a balance sheet?

Accepted Answer

Supplies Expense

Answer

Accounts Payable

Answer

Inventory

Answer

Retained Earnings

Question 27

Express the fundamental accounting equation as a mathematical formula.

Accepted Answer

Assets + Liabilities = Owner's Equity

Answer

Assets = Liabilities - Owner's Equity

Answer

Owner's Equity - Assets = Liabilities

Answer

Liabilities = Assets - Owner's Equity

Question 28

Which step initiates the accounting cycle?

Accepted Answer

Journalizing transactions

Answer

Posting to ledger accounts

Answer

Preparing financial statements

Answer

Adjusting account balances

Question 29

Identify an example of a contra asset account.

Accepted Answer

Accumulated Depreciation

Answer

Cash

Answer

Accounts Receivable

Answer

Owner's Equity

Question 30

Explain the fundamental distinction between debits and credits.

Accepted Answer

Debits increase assets and expenses, while credits increase liabilities and revenues.

Answer

Debits decrease assets and expenses, while credits increase liabilities and revenues.

Answer

Debits increase liabilities and revenues, while credits increase assets and expenses.

Answer

Debits decrease liabilities and revenues, while credits decrease assets and expenses.

Question 31

Which transaction would result in a debit entry for the Cash account?

Accepted Answer

Depositing money in the bank

Answer

Purchasing supplies on account

Answer

Paying rent expense

Answer

Withdrawing money from the bank

Question 32

A company buys inventory with a cash payment of $2,000. What's the journal entry?

Accepted Answer

Debit Inventory $2,000, Credit Cash $2,000

Answer

Debit Cash $2,000, Credit Inventory $2,000

Answer

Debit Inventory $2,000, Credit Accounts Payable $2,000

Question 33

What is the main purpose of a trial balance, and how does it help ensure the accuracy of recorded transactions?

Accepted Answer

To verify that total debits equal total credits, maintaining the accounting equation's balance.

Answer

To summarize transactions for a specific accounting period.

Answer

To identify specific errors in transaction recording.

Answer

To provide a comprehensive analysis of an organization's financial performance.

Question 34

What is the primary purpose of a journal entry?

Accepted Answer

To summarize transactions in chronological order for analysis and reporting.

Answer

To record transactions in a permanent ledger for safekeeping.

Answer

To post transactions to individual ledger accounts for tracking.

Answer

To prepare financial statements for external stakeholders.

Question 35

When debiting an account, which side of the account typically increases?

Accepted Answer

Left

Answer

Right

Answer

Both sides

Answer

It depends on the account type

Question 36

What is the process of transferring summarized journal entries to individual ledger accounts called?

Accepted Answer

Posting

Answer

Journalizing

Answer

Balancing

Answer

Summarizing

Question 37

Which type of transaction typically results in a debit to Cash and a credit to Accounts Receivable?

Accepted Answer

Selling goods or services on credit

Answer

Receiving cash from a customer

Answer

Paying an expense in cash

Answer

Borrowing money from a bank

Question 38

Which type of account is typically found on an income statement?

Accepted Answer

Sales Revenue

Answer

Accounts Receivable

Answer

Inventory

Answer

Supplies

Question 39

What is the main purpose of making closing entries at the end of an accounting period?

Accepted Answer

To transfer balances from temporary to permanent accounts.

Answer

To prepare the accounting records for the next period.

Answer

To correct errors in the accounting records.

Answer

To adjust accounts to their fair market values.

Question 40

What is a key difference between a trial balance and a balance sheet?

Accepted Answer

The trial balance lists all accounts and their balances, while the balance sheet shows only assets and liabilities.

Answer

The balance sheet lists all accounts and their balances, while the trial balance shows only assets and liabilities.

Answer

The trial balance is a summary of the journal entries, while the balance sheet is a financial statement.

Answer

There is no difference between the trial balance and the balance sheet.

Question 41

Classify the following accounts into their correct types: Cash, Accounts Payable, Sales Revenue, Rent Expense, and Owner's Equity

Accepted Answer

Cash: Asset, Accounts Payable: Liability, Sales Revenue: Revenue, Rent Expense: Expense, Owner's Equity: Equity

Answer

Cash: Revenue, Accounts Payable: Asset, Sales Revenue: Expense, Rent Expense: Liability, Owner's Equity: Equity

Answer

Cash: Asset, Accounts Payable: Expense, Sales Revenue: Revenue, Rent Expense: Asset, Owner's Equity: Equity

Answer

Cash: Liability, Accounts Payable: Asset, Sales Revenue: Equity, Rent Expense: Expense, Owner's Equity: Revenue

Question 42

When recording a debit to an account, you will:

Accepted Answer

Increase an asset or expense account

Answer

Increase a liability or equity account

Answer

Decrease an asset or expense account

Answer

Decrease a liability or equity account

Question 43

The primary purpose of a journal entry is to:

Accepted Answer

Record a business transaction chronologically

Answer

Summarize transactions by account

Answer

Check the accuracy of accounting records

Answer

Prepare financial statements

Question 44

The double-entry accounting system ensures:

Accepted Answer

Accuracy of financial records

Answer

Prevention of fraud and errors

Answer

Tracking of money flow in and out of a business

Answer

Simplification of the accounting process

Question 45

The process of transferring journal entries to ledger accounts is called:

Accepted Answer

Posting

Answer

Journalizing

Answer

Summarizing

Answer

Balancing

Question 46

Which of the following is an example of an expense ledger account?

Accepted Answer

Utilities Expense

Answer

Accounts Payable

Answer

Inventory

Answer

Retained Earnings

Question 47

The Trial Balance is used to:

Accepted Answer

Check the accuracy of ledger account balances

Answer

Prepare financial statements

Answer

Record adjusting entries

Answer

Close temporary accounts

Question 48

Which accounting principle requires recording transactions as they occur?

Accepted Answer

Timeliness

Answer

Materiality

Answer

Consistency

Answer

Good Faith

Question 49

What is the accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

Equity - Liabilities = Assets

Answer

Income - Expenses = Net Income

Answer

Assets - Liabilities = Net Worth

Question 50

What is the first step in the accounting cycle?

Accepted Answer

Recording transactions in a journal

Answer

Closing the books

Answer

Adjusting the ledger accounts

Answer

Preparing financial statements

Question 51

What is the purpose of posting to ledger accounts?

Accepted Answer

To organize and summarize transactions

Answer

To calculate financial ratios

Answer

To update the trial balance

Question 52

What financial statement summarizes the revenues, expenses, and profits of a company over a period of time?

Accepted Answer

Income Statement

Answer

Statement of Cash Flows

Answer

Balance Sheet

Question 53

Which of the following is a temporary account?

Accepted Answer

Revenue

Answer

Common Stock

Answer

Building

Answer

Cash

Question 54

What is the purpose of closing entries?

Accepted Answer

To transfer balances from temporary accounts to permanent accounts

Answer

To update the trial balance

Answer

To prepare financial statements