Principles of Accounting

1. Principles of Accounting Asst.Prof.Dr. Panchat Akarak p.thipnew1@hotmail.com School of Accounting Chaingrai Rajabhat University Accounting I

2. ExercisesVocabularyMatchingTrue-False questionsMultiple choice questions

3. Vocabulary • Put (/) in the appropriate column.

4. Vocabulary • Put (/) in the appropriate column.

5. Matching • Referring to the terms listed in the left and right column, place the appropriate letter next to the corresponding description. Journalizing Cross-indexing Simple journal entry Charge Posting Compound journal entry Trial balance h. Double entry i. Journal j. Real accounts k. Nominal accounts l. Debit side m. Credit side n. Expenses

6. Matching …… …… …… …… …… 1. Entry involving more than one debit and/or credit. 2. Recording in the ledger the information contained in the journal. 3. This procedure is related to the duality concept indicating that every transaction has a two- side effect. 4. Synonym for debit. 5. Provides a proof of the arithmetic accuracy of the recording process by listing the ledger accounts and their debit or credit balances.

7. Matching …… …… …… 6. Entry involving only one debit and one credit. 7. Is a chronological record of all business transactions and may also be called the book of original entry. 8. Placing of the ledger account numbers in the positing reference column of the journal and placing the journal page number in the posting reference column of the ledger account.

8. Matching …… …… …… …… 9. Entering of a transaction in the book of original entry. 10. The right side of an account. 11. Cost of the use of services or things for the purpose of generating revenue. 12. Revenue and expense accounts that appear on the income statement.

9. Solutions-Matching

10. True-False Questions • Indicate whether the following statements are true or false by inserting in the blank space provided a capital “T” for True or “F” for false. 1. Cash and land normally have a debit balance. A……….. 2. A general journal entry having two debits and a credit is a simple entry. A………..

11. True-False Questions 3. Account numbers are entered in the posting reference column of the two column general journal at the time the transactions are recorded in the journal. A………..

12. True-False Questions 4. The trial balance would locate the following error: Land was purchased for cash but instead of crediting cash, the credit was made to accounts Receivable. A………..

13. True-False Questions 5. A debit to the owner’s drawing account would indicate an increase in expenses. A……….. 6. Transactions are recorded in the journal in chronological order. A………..

14. True-False Questions 7. Assets are recorded at cost for accounting purposes because cost is objective and value is subjective. A……….. 8. One of the purposes of the ledger is to record the complete effect of a transaction in one place. A………..

15. True-False Questions 9. A purchase of land or equipment for cash would cause total assets to increase by the cost of the land or equipment. A……….. 10. The fact that an expense in recognized on the income statement indicates that an equivalent outlay of cash has been made in the same period. A………..

16. True-False Questions • 11. A liability account normally has a debit balance. A……….. • 12. The primary function of the general ledger is to store transactions by account classification and to provide a balance for each account. A………..

17. True-False Questions • 13. Expense accounts usually have debit balances and show the cost associated with producing revenue during an accounting period. A……….. • 14. Liabilities represent claims against the company’s assets and may be in the form of accounts payable or notes payable. A………..

18. True-False Questions • 15. All of the accounts of a specific business enterprise are referred to as a ledger. A……….. • 16. A trial balance proves that no errors were made in recording transactions, posting, and in preparing the trial balance. A………..

19. True-False Questions • 17. A journal aids in the division of labor by allowing one person to journalize entries while another individual may post these entries. A……….. • 18. Every transaction always affects two or more accounts in a double-entry accounting system. A………..

20. True-False Questions • 19. if only two liability accounts are affected by a transaction, the balance of one account must be increased and the balance of the other decreased in recording this transaction. A……….. • 20. A journal provides a complete collection of all of the accounts of an entity. A………..

21. True-False Questions • 21. Revenue is the difference between the selling price of a service and the cost of providing such service. A……….. • 22. The double-entry system of accounting requires that the debits and credits of each entry are equal. Therefore, since a particular entry has equal debits and credits, this entry must be correct. A………..

22. True-False Questions • 23. Journalizing a transaction requires more knowledge than posting a transaction. A……….. • 24. The purchase of an asset for immediate consumption that will not be paid for until next mount would cause liabilities to increase and owner’s equity to decrease. A………..

23. True-False Questions • 25. A cash expenditure for insurance and utilities would cause assets to be increased but owner’s equity to decreased. A………..

24. Solutions-True-False Questions

25. Multiple Choice Questions • 1. Which of the following would not fall under the definition of an asset? a. Land b. Debtors c. Machinery d. Owner’s equity For each of the following questions, indicate the single, best answer by circling the appropriate letter.

26. Multiple Choice Questions • 2. Which one of the following items would fall under the definition of a liability ? a. Cash b. Debtors c. Owner’s equity d. Tax owed For each of the following questions, indicate the single, best answer by circling the appropriate letter.

27. Multiple Choice Questions • 3. Which of the following statements are false? a. A liability is a debt for your business. b. Debtors are a debt for your business. c. The accounting equation shows how much of your assets belong to the owner, and how much ‘belong’ to people outside the business. d. If you cannot work out a value for an item that will bring you future benefits then you cannot keep this as an asset in your records. For each of the following questions, indicate the single, best answer by circling the appropriate letter.

28. Multiple Choice Questions • 4. A business has the following items in it: -Land $1,000,000 -Cash $10,000 -Machinery $20,000 -Debt $0 -Owner’s equity? What is the value of the Owner’s equity? a. $1,000,000 b. $1,020,000 c. $1,010,000 d. S1,030,000 For each of the following questions, indicate the single, best answer by circling the appropriate letter.

29. Multiple Choice Questions • 5. A business has the following items in it: Land $1,000,000 -Cash $10,000 -Machinery $20,000-Loan $500,000 -Owner’s equity? What is the value of the Owner’s equity? a. $ 500,000 b. $1,000,000 c. $ 530,000 d. S1,030,000 For each of the following questions, indicate the single, best answer by circling the appropriate letter.

30. Multiple Choice Questions • 6. A business has the follow items in it: -Owners equity $600,000 -Total Liabilities $1,400,000 -Assets ? What is the value of the assets in this business? a. $ 600,000 b. $ 800,000 c. $1,400,000 d. $2,000,000 For each of the following questions, indicate the single, best answer by circling the appropriate letter.

31. Multiple Choice Questions • 7. A business has the following items in it:? -Land $1,500,000-Cash $20,000 -Machinery $80,000 -Loan $500,000 -Owner’s equity $900,000 -Creditors ? What is the value of the Creditors ? a. $ 200,000 b. $ 700,000 c. $ 800,000 d. S1,100,000 For each of the following questions, indicate the single, best answer by circling the appropriate letter.

32. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 8. A business has the following items in it: -Land ? -Cash $30,000 -Vehicles $600,000 -Loan $500,000 -Owner’s equity $1,000,000 -Creditors $50,000 -Debtors $30,000 What is the value of the Creditors ? a. $ 1,000,000 b. $ 1,550,000 c. $ 800,000 d. S 750,000

33. Multiple Choice Questions • 9. Which of the following statements are true? a. A business whose liabilities are greater than its assets has a had financial position. b. A business whose liabilities are greater than its owner’s equity has a bad financial position. c. A business whose assets are greater than its owner’s equity has a bad financial position. d. a and b For each of the following questions, indicate the single, best answer by circling the appropriate letter.

34. Multiple Choice Questions • 10. Mr. Art commenced business with cash. The Journal entry is: a. Dr. Capital Cr. Cash b. Dr. Cash Cr. Mr. Art c. Dr. Cash Cr. Capital Mr.Art d. Dr. Capital Cr. Mr.Art For each of the following questions, indicate the single, best answer by circling the appropriate letter.

35. SOLUTIONS • Multiple Choice Questions

36. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • The determination of periodic net income involves • (1) the revenue recognized during the period and • (2) the expenses to be allocated to the period. • This is frequently referred to as: • a. Matching of revenues and expenses. • b. Cost accounting. • c. Balancing the accounts. • e. None of these.

37. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • If $500 cash and a $2,000 note are given in • exchange for a delivery truck for use in a business. • a. The owner’s equity is increased. • b. Total assets are decreased. • c. Total liabilities are decreased. • e. None of the above is true.

38. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 3. Purchased office equipment and office supplies on • credit from Doug Equipment Company. • What is the entry?’ • Debit office equipment, debit office supplies on • Hand; credit accounts payable • b. Debit equipment; credit office supplies expense. • c. Debit office equipment and office supplies on Hand; • credit cash • d. Debit office Equipment; credit Doug Equipment Company

39. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 4. Returned for credit a portion of the office supplies • purchased in question 3 above. What entry is • required? • a. Debit office Supplies on Hand; and Office Equipment • b. Debit Cash; Credit Office Supplies on Hand • and Office Equipment • c. Debit Accounts Payable; credit Office Supplies on Hand • d. Debit Office Equipment; credit Doug Equipment Company

40. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 5. Which of the following is not a business asset? • a. Plant equipment • b. Accounts receivable • c. Owner’s capital • d. Cash in bank • e. All of the above are business assets.

41. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 6. Expenses for an accounting period are: • The costs of goods and/ or services consumed in • the earning of the revenue of the period. • b. Assets whose usefulness expired this period in the • earning of revenues. • Only the amounts actually pain for services used • up during the period. • d. A and B, but not C.

42. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 7. Completed legal work for public Service Company • on credit. What entry should be made? • a. Debit Revenue from Legal Fees; credit Cash • b. Debit Cash; credit Ben Ball, Capital • c. Debit Cash; Credit Public Service Company • d. Debit Accounts Receivable; Credit Revenues from • legal Fees

43. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 8. Which of the following statements about the • accounting equation is Not true? A transaction • involving only two items may: • a. Add to two items on the same side of the equation. • b. Subtract from both side of the equation. • Transfer an amount between the items on one side • of the equation and have no effect on the other • side of the equation. • e. Add to both sides of the equation.

44. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • A $150 debit of Office Equipment was entered in • the account as a $150 credit. This caused the trial • balance to be out of balance by: • a. $150 • b. $300 • c. $75 • d. $450 • e. None of these.

45. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 10. Owner’s equity is the term applies to which of • the following? • Amount of cash the owner invested in the company • 10 years ago • Residual claim against the assets of the business after the • total liabilities are deducted • c. Is also referred to as capital, proprietorship. And net worth • Residual cash of the business after the total liabilities • are deducted • e. B and C are correct.

46. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 11. The accounting concept of “asset” has may • attributes. Which of the following are attributes • of an asset? • a. It is something that is scarce. • b. It has value in exchange for future use. • c. It is owned and/or under the control of • the business. • d. A and B, but not C. • e. A, B, and C are all correct.

47. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 12. Received $550 for services performed in the • current period. What is the entry? • a. Cash 550 • Revenue 550 • b. Cash 550 • Accounts Payable 550 • c. Revenue 550 • Accounts Receivable 550 • d. Accounts Receivable 550 • Cash 550 • e. None of the above

48. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 13. Debit entries: • Decrease assets and expenses and increase liabilities, revenue, • and owner’s equity. • Decrease assets and revenue and increase expenses, liabilities, • and owner’s equity • Increase assets and expenses and decrease liabilities, revenue, • and owner’s equity • Increase assets and owner’s equity and decrease expenses, revenue • and owner’s equity • Increase assets and decrease expenses, liabilities, revenue, • and owner’s equity

49. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 14. Purchased equipment for $1,000 cash; the journal • entry to record this is: • a. Equipment 1,000 • Accounts payable 1,000 • b. Cash1,000 • Equipment 1,000 • c. Supplies 1,000 • Cash 1,000 • e. Equipment 1,000 • Capital 1,000

50. Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. • 15. Ben Smith wrote a check on his law practice bank • account in payment of the rent on his personal apartment. • What entry should be made? • a. Debit Cash; credit rent Expense • b. Debit Ben Smith, Drawing; credit Cash • c. Debit Rent Expense; credit Ben Smith, Drawing • d. Debit Tent Expense; credit Cash