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Exam 2: Analyzing and Recording Transactions

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Question 31

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All of the following statements accurately describe the debt ratio except.

A) It is of use to both internal and external users of accounting information.
B) A relatively high ratio is always desirable.
C) The dividing line for a high and low ratio varies from industry to industry.
D) Many factors such as a company's age,stability,profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
E) The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.

F) A) and D)
G) B) and D)

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Question 32

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Debits increase asset and expense accounts.

A) True
B) False

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Question 33

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A company's ledger is:

_____________________________ requires that each transaction affect,and be recorded in,at least two accounts.It also means that total amounts debited must equal total amounts credited for each transaction.

The journal is known as a book of original entry.

Crediting an expense account decreases it.

ABC Catering received $800 cash from a customer for catering services to be provided next month.Given the choices below,determine the general journal entry that ABC Catering will make to record this transaction.

An account used to record the owner's investments in a business is called a(n) :

A business's source documents may include all of the following except:

Which financial statement reports an organization's financial position at a single point in time?

Which of the following is not a step in the accounting process?

Golddigger Services Inc.provides services to clients.On May 1,a client prepaid Golddigger Services $60,000 for 6-months services in advance.Golddigger Services' general journal entry to record this transaction will include a:

The following transactions occurred during July: 1.Received $900 cash for services provided to a customer during July. 2) Received $2,200 cash investment from Bob Johnson,the owner of the business. 3) Received $750 from a customer in partial payment of his account receivable which arose from sales in June. 4) Provided services to a customer on credit,$375. 5) Borrowed $6,000 from the bank by signing a promissory note. 6) Received $1,250 cash from a customer for services to be rendered next year. What was the amount of revenue for July?

_______________ is the process of transferring journal entry information from the journal to the ledger.

Mary Sunny began business as Sunny Law Firm on November 1.Record the following November transactions by making entries directly to the T-accounts provided.Then,prepare a trial balance,as of November 30. a)Mary invested $15,000 cash and a law library valued at $6,000. b)Purchased $7,500 of office equipment from John Bronx on credit. c)Completed legal work for a client and received $1,500 cash in full payment. d)Paid John Bronx.$3,500 cash in partial settlement of the amount owed. e)Completed $4,000 of legal work for a client on credit. f)Mary withdrew $2,000 cash for personal use. g)Received $2,500 cash as partial payment for the legal work completed for the client in (e). h)Paid $2,500 cash for the legal secretary's salary.

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

The posting process is the link between the _______________ and the _____________. Answers can be recorded in either order.

The general journal is known as the book of final entry because financial statements are prepared from it.

Withdrawals by the owner are a business expense.

Increases in liability accounts are recorded as debits.