Accounting Theory

1. In recording transactions

a. the word debit means increase and the word credit means decrease
b. assets, expenses, and drawing accounts are debited for increases
c. liabilities, revenue, and drawing accounts are debited for increases
d. assets, expenses, and capital accounts are debited for increases

2. Which is false concerning the rules of debit and credit

a. the left side of an account is always the debit side and the right side is always the credit side
b. increases in assets and expenses are debit entries, and increases in liabilities, equity and revenue are credit entries.
c. the normal balance of any account appears on the side for recording increases
d. the word debit means to increase and the word credit means to decrease

3. Debits

a. increases assets and decrease expenses , liabilities, revenue, and equity
b. increase assets and expenses and decrease liabilities, revenue and equity
c. increase assets and equity and decrease liabilities, expenses and revenue
d. decrease assets and expenses and increase liabilities , revenue, and equity

4. In accrual accounting system

a. all accounts have normal debit balances
b. a debit entry is recorded on the left-hand side of an account
c. liabilities, share capital, and dividends all have normal credit balances
d. revenues are recorded only when cash is received

5. Which of the following is not considered a book of original entry

a. general journal
b. general ledger
c. sales journal
d. purchases journal

6. A simple journal entry

a. consists of one debit and one credit
b. consists of two debits and one credit
c. consists of one debit and two credits
d. is a memorandum entry

7. A journal entry that contains more than two accounts is called

a. a posted journal entry
b. an adjusting journal entry
c. an erroneous journal entry
d. a compound journal entry

8. What function do accounting journals serve in the accounting process

a. recording
b. classifying
c. summarizing
d. reporting

9. Which of the following is correct

a. retained earnings account normally has a debit balance
b. retained earnings account normally has a credit balance
c. retained earnings account is closed at the end of the fiscal year
d. retained earnings account is a nominal account

10. Which of the following accounts would be increased by a debit

a. share capital
b. notes payable
c. accounts payable
d. dividends

Answer:
1.b
2.d
3.b
4.b
5.b
6.a
7.d
8.a
9.b
10.d


1.  Which is falls concerning use of special journal

a. only sales of merchandise on account are recorded in the sales journal. Cash sales are recorded in the cash receipts journal
b. Purchases on any items on account are recorded in the purchases journal. Acquisitions of any items for cash are recorded in the cash disbursements journal
c. transactions that cannot be appropriately recorded in a special journal are recorded in the general journal
d. only cash purchases are recorded in the cash disbursements journal

2. If a firm uses special journal, in which journal would the sale of merchandise for cash be recorded

a. sales journal
b. cash receipts journal
c. general journal
d. cash disbursements journal

3. A firm that uses special journals acquired merchandise by giving a note payable. In which journal would transaction be recorded

a. invoice register
b. sales journal
c. general journal
d. cash disbursements journal

4. When special journals are used, which of the following is true

a. a general journal is used
b. all sales receipts should be recorded in the cash receipts journal
c. all cash receipts should be recorded in the cash receipts journal
d. all purchase transactions should be recorded in the purchase journal

5. When special journals are used, adjusting and closing entries are generally recorded in the

a. cash disbursements journal
b. cash receipts journal
c. general journal
d. purchases journal

Answer:
a.d
2.b
3.c
4.c
5.c