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The balance sheet reports the financial position of a company at a point in time.

A) True
B) False

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A company's ledger is:


A) A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item.
B) A journal in which transactions are first recorded.
C) A collection of documents that describe transactions and events entering the accounting process.
D) A list of all accounts a company uses with an assigned identification number.
E) A record containing all accounts and their balances used by the company.

F) A) and E)
G) All of the above

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List the steps in processing transactions.

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Business transactions and events are the...

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Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.

A) True
B) False

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An account's balance is the difference between the total debits and total credits for the account, including any beginning balance.

A) True
B) False

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The record of all accounts and their balances used by a business is called a:


A) Journal.
B) Book of original entry.
C) General Journal.
D) Balance column journal.
E) Ledger.

F) All of the above
G) C) and D)

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A journal entry that affects no more than two accounts is called a compound entry.

A) True
B) False

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A balanced trial balance is proof that no errors were made in journalizing transactions, posting to the ledger, and preparing the trial balance.

A) True
B) False

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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:


A) Debit to Unearned Management Fees for $60,000.
B) Credit to Management Fees Earned for $60,000.
C) Credit to Cash for $60,000.
D) Credit to Unearned Management Fees for $60,000.
E) Debit to Management Fees Earned for $60,000.

F) A) and E)
G) C) and D)

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Preparation of a trial balance is the first step in processing a financial transaction.

A) True
B) False

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Given each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice. b. $1,900 credit to Sales was posted as a $190 credit. c. $5,000 debit to Office Equipment was debited to Office Supplies. d. $625 debit to Prepaid Insurance was posted as a $62.50 debit. e. $520 credit to Accounts Payable was not posted. Error Amount Out of Balance Column Having Larger Total a. b. c. d. e.

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Identify the statement that is incorrect.


A) Higher financial leverage involves higher risk.
B) Risk is higher if a company has more liabilities.
C) Risk is higher if a company has higher assets.
D) The debt ratio is one measure of financial risk.
E) Lower financial leverage involves lower risk.

F) C) and E)
G) D) and E)

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Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided. Which of the following general journal entries will Trimble Graphic Design make to record this transaction?


A)  Cash 1,500 Accounts Receivable 1,500\begin{array} { | l | r | r | } \hline \text { Cash } & 1,500 & \\\hline \text { Accounts Receivable } & & 1,500 \\\hline\end{array}
B)  Cash 1,500 Unearned Design Revenue 1,500\begin{array} { | l | r | r | } \hline \text { Cash } & 1,500 & \\\hline \text { Unearned Design Revenue } & & 1,500 \\\hline\end{array}
C)  Accounts Receivable 1,500 Unearned Design Revenue 1,500\begin{array} { | l | r | r | } \hline \text { Accounts Receivable } & 1,500 & \\\hline \text { Unearned Design Revenue } & & 1,500 \\\hline\end{array}
D)  Cash 1,500 Design Revenue 1,500\begin{array} { | l | r | r | } \hline \text { Cash } & 1,500 & \\\hline \text { Design Revenue } & & 1,500 \\\hline\end{array}
E)  Accounts Receivable 1,500 Cash 1,500\begin{array} { | l | r | r | } \hline \text { Accounts Receivable } & 1,500 & \\\hline \text { Cash } & & 1,500 \\\hline\end{array}

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

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A transaction that credits an asset account and credits a liability account must also affect one or more other accounts.

A) True
B) False

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J. Brown Consulting paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.


A)  Utilities Expense 500 Cash 500\begin{array} { | l | r | r | } \hline \text { Utilities Expense } & 500 & \\\hline \text { Cash } & & 500 \\\hline\end{array}
B)  Cash 500 Utilities Expense 500\begin{array} { | l | r | r | } \hline \text { Cash } & 500 & \\\hline \text { Utilities Expense } & & 500 \\\hline \hline\end{array}
C)  Cash 500 Accounts Payable 500\begin{array} { | l | r | r | } \hline \text { Cash } & 500 & \\\hline \text { Accounts Payable } & & 500 \\\hline\end{array}
D)  Utilities Expense 500 Accounts Payable 500\begin{array} { | l | r | r | } \hline \text { Utilities Expense } & 500 & \\\hline \text { Accounts Payable } & & 500 \\\hline\end{array}
E)  Prepaid Utilities 500 Accounts Payable 500\begin{array} { | l | r | r | } \hline \text { Prepaid Utilities } & 500 & \\\hline \text { Accounts Payable } & & 500 \\\hline\end{array}

F) All of the above
G) None of the above

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Funky Music purchased $25,000 of equipment for cash. The Equipment asset account is _______________ for $25,000 and the cash account is _______________ for $25,000. Answers need to appear in the order as shown above

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Identify the account used by businesses to record the transfer of assets from a business to its owner for personal use:


A) A revenue account.
B) The dividends account.
C) The common stock account.
D) An expense account.
E) A liability account.

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

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HH Consulting & Design provided $800 of consulting work and $100 of design work to the same client. It billed the client for the total amount and is expecting to collect from the customer next month. Which of the following general journal entries will HH Consulting & Design make to record this transaction?


A)  Design Revenue 100 Consulting Revenue 800 Accounts Receivable 900\begin{array} { | l | r | r | } \hline \text { Design Revenue } & 100 & \\\hline \text { Consulting Revenue } & 800 & \\\hline \text { Accounts Receivable } & & 900 \\\hline\end{array}
B)  Accounts Payable 800 Design Revenue 100 Consulting Revenue 800\begin{array} { | l | r | r | } \hline \text { Accounts Payable } & 800 & \\\hline \text { Design Revenue } & & 100 \\\hline \text { Consulting Revenue } & & 800 \\\hline\end{array}
C)  Cash 900 Consulting Revenue 800 Design Revenue 100\begin{array} { | l | r | r | } \hline \text { Cash } & 900 & \\\hline \text { Consulting Revenue } & & 800 \\\hline \text { Design Revenue } & & 100 \\\hline\end{array}
D)  Cash 900 Design Revenue 100 Consulting Revenue 800\begin{array} { | l | r | r | } \hline \text { Cash } & 900 & \\\hline \text { Design Revenue } & & 100 \\\hline \text { Consulting Revenue } & & 800 \\\hline\end{array}
E)  Accounts Receivable 900 Consulting Revenue 800 Design Revenue 100\begin{array} { | l | r | r | } \hline \text { Accounts Receivable } & 900 & \\\hline \text { Consulting Revenue } & & 800 \\\hline \text { Design Revenue } & & 100 \\\hline\end{array}

F) A) and B)
G) A) and E)

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Explain the debt ratio and its use in analyzing a company's financial condition.

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The debt ratio is calculated by dividing...

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_________________ documents identify and describe transactions and events and provide objective evidence and amounts for recording.

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