Self-test

True-false

Indicate whether each of the following statements is true or false.

  1. All of the steps in the accounting cycle are performed only at the end of the accounting period.
  2. A transaction must be journalized in the journal before it can be posted to the ledger accounts.
  3. The left side of any account is the credit side.
  4. Revenues, liabilities, and capital stock accounts are increased by debits.
  5. The dividends account is increased by debits.
  6. If the trial balance has equal debit and credit totals, it cannot contain any errors.


Multiple-choice

Select the best answer for each of the following questions.

  1. When the stockholders invest cash in the business:
    1. Capital Stock is debited and Cash is credited.
    2. Cash is debited and Dividends is credited.
    3. Cash is debited and Capital Stock is credited.
    4. None of the above.

  2. Assume that cash is paid for insurance to cover a three-year period. The recommended debit and credit are:
    1. Debit Insurance Expense, credit Cash.
    2. Debit Prepaid Insurance, credit Cash.
    3. Debit Cash, credit Insurance Expense.
    4. Debit Cash, credit Prepaid Insurance.

  3. A company received cash from a customer in payment for future delivery services. The correct debit and credit are:
    1. Debit Cash, credit Unearned Delivery Fees.
    2. Debit Cash, credit Delivery Fee Revenue.
    3. Debit Accounts Receivable, credit Delivery Fee Revenue.
    4. None of the above.

  4. A company performed delivery services for a customer for cash. The correct debit and credit are:
    1. Debit Cash, credit Unearned Delivery Fees.
    2. Debit Cash, credit Delivery Fee Revenue.
    3. Debit Accounts Receivable, credit Delivery Fee Revenue.
    4. None of the above.

  5. A cash dividend of USD 500 was declared and paid to stockholders. The correct journal entry is:
    1. Capital stock 500 Cash 500
    2. Cash 500 Dividends 500
    3. Dividends 500 Cash 500
    4. Cash 500 Capital stock 500