Chapter 2 Practice MaterialsChapter 2 Practice Materials.docVIP

Chapter 2—Analyzing Transactions MULTIPLE CHOICE 1. Accounts a. do not reflect money amounts b. are not used by entities that manufacture products c. are records of increases and decreases in individual financial statement items d. are only used by large entities with many transactions ANS: C DIF: Easy OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 2. A group of related accounts that comprise a complete unit is called a a. journal b. liability c. ledger d. transaction ANS: C DIF: Easy OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 3. Accounts are classified in the ledger a. chronologically b. alphabetically c. in accordance with their appearance in the financial statements d. so that accounts used most often are listed first ANS: C DIF: Moderate OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 4. Revenue should be recognized when a. cash is received b. the service is performed c. the customer places an order d. the customer charges an order ANS: B DIF: Moderate OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 5. Which of the following accounts is an owners equity account? a. Cash b. Accounts Payable c. Prepaid Insurance d. Julia Davis, Capital ANS: D DIF: Easy OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 6. The gross increases in owners equity attributable to business activities are called a. assets b. liabilities c. revenues d. net income ANS: C DIF: Easy OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 7. A chart of accounts is a. the same as a balance sheet b. usually a listing of accounts in alphabetical order c. usually a listing of accounts in financial statement order d. used in place of a ledger ANS: C DIF: Moderate OBJ: 02-01 NAT: AACSB Analytic | AICPA FN-Measurement 8. The debit side of an account a. depends on whether the account is an asset, liability or owners equity b. can be either side of the account depending on how the accountant set up the system