Accounting 1 Chapter 2
True/False
Indicate whether the statement is true or false.
____
1. An accounting device used to analyze transactions is a T account.
____
2. The normal balance side of an asset account is based on the location of the account in the accounting
equation.
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3. Each asset account has a normal debit balance.
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4. Each liability account has a normal credit balance.
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5. Before a transaction is recorded in the records of a business, it is analyzed to determine which accounts are
changed and how.
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6. Each transaction changes the balances in at least two accounts.
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7. A list of accounts used by a business is a chart of accounts.
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8. Cash is an asset account with a normal credit balance.
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9. When cash is paid for supplies, the supplies account is increased by a debit.
____ 10. Common accounting practice is to record withdrawals as debits directly in the owner's capital account.
____ 11. The left side of an asset account is the credit side because assets accounts are on the left side of the accounting
equation.
____ 12. A drawing account is decreased by debits and increased by credits.
____ 13. The total debits and credits for a transaction do not have to equal.
____ 14. Increases in expense accounts are recorded directly in the owner's capital account.
____ 15. Increases in expense accounts are recorded as debits because they decrease the owner's capital account.
____ 16. The normal balance side of an accounts payable account is a credit.
____ 17. Accounts receivable accounts are increased with a debit.
____ 18. Accounts payable accounts are increased with a debit.
____ 19. Advertising Expense is increased with a debit.
____ 20. Christine Jones, Drawing is decreased with a credit.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. A record summarizing all the information pertaining to a single item in the accounting equation is ____.
A. a debit
C. an account
B. a credit
D. a T account
2. In a T account, the debit side is ____.
A. the left side
C. both A and B
B. the right side
D. neither A nor B
3. The right side of a T account is the ____.
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4.
____
5.
____
6.
____
7.
____
8.
____
9.
____ 10.
____ 11.
____ 12.
____ 13.
____ 14.
____ 15.
____ 16.
____ 17.
____ 18.
A. debit side
C. normal balance side
B. credit side
D. equity side
If an amount is recorded on the side of a T account opposite the normal balance side, the account balance is
____.
A. increased
C. unaffected
B. decreased
D. correct
The normal balance side of an asset account is the ____.
A. debit side
C. decrease side
B. credit side
D. right side
When the owner invests cash in a business, the owner's capital account is ____.
A. increased by a debit
C. decreased by a debit
B. increased by a credit
D. decreased by a credit
When a business buys an asset on one date and agrees to pay on a later date, the transaction is ____.
A. delayed
C. increased
B. on account
D. none of the above
When a business pays cash on account, a liability account is ____.
A. increased by a debit
C. decreased by a debit
B. increased by a credit
D. decreased by a credit
When a business receives revenue, Sales is ____.
A. increased by a debit
C. decreased by a debit
B. increased by a credit
D. decreased by a credit
The amount paid for rent is recorded as a debit to ____.
A. Miscellaneous Expense
C. Supplies
B. Rent Expense
D. Cash
The values of all things owned (assets) are on the accounting equation's ____.
A. left side
C. credit side
B. right side
D. none of the above
An amount recorded on the left side of a T account is ____.
A. a debit
C. normal balance
B. a credit
D. none of the above
The normal balance side of any liability account is ____.
A. the debit side
C. the left side
B. the credit side
D. none of the above
Debits must equal credits ____.
A. in a T account
C. on the equation's right side
B. in the equation's left side
D. in all transactions
Decreases in any liability account are shown on a T account's ____.
A. debit side
C. right side
B. credit side
D. none of the above
Increases in a revenue account are shown on a T account's ____.
A. debit side
C. left side
B. credit side
D. none of the above
The normal balance side of any revenue account is ____.
A. the debit side
C. the left side
B. the credit side
D. none of the above
The normal balance side of any expense account is ____.
A. the debit side
C. the right side
B. the credit side
D. none of the above
____ 19. When $1,500.00 cash is received on account, ____.
A. Sales is increased with a credit and Cash is increased with a credit
B. Accounts Receivable is increased with a debit and Cash is increased with a credit
C. Accounts Receivable is decreased with a credit and Cash is increased with a debit
D. Accounts Receivable is decreased with a debit and Cash is increased with a debit
____ 20. A sale on account ____.
A. increases an owner's equity account and increases an asset account
B. increases a liability account and increases an asset account
C. increases an owner's equity account and increases a liability account
D. increases an owner's equity account and decreases a liability account
Accounting 1 Chapter 2
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
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T
T
T
T
T
T
T
F
T
F
F
F
F
F
T
T
T
F
T
T
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1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
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1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
MULTIPLE CHOICE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
ANS:
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ANS:
C
A
B
B
A
B
B
C
B
B
A
A
B
D
A
B
B
A
19. ANS: C
20. ANS: A
PTS: 1
PTS: 1