| · Burton Company purchased goods for resale. Burton Company paid some cash for the purchase and the remainder was put on the company’s credit accounts with its suppliers.
What is the effect of this transaction on the accounting equation?
| o Inventory DOWN, Cash DOWN, Accounts Payable DOWN
o Inventory UP, Cash UP, Accounts Payable DOWN
o Inventory DOWN, Cash UP, Accounts Payable UP
o Inventory UP, Cash DOWN, Accounts Payable UP
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Dridge Company sold inventory for cash. The selling price was more than the original cost of the inventory.
What is the effect of this transaction on the accounting equation?
| o Cash UP, Inventory DOWN, Retained Earnings DOWN
o Cash UP, Inventory UP, Retained Earnings DOWN
o Cash UP, Inventory UP, Retained Earnings UP
o Cash UP, Inventory DOWN, Retained Earnings UP
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Lyman Company paid cash for employee wages.
What is the effect of this transaction on the accounting equation?
| o Cash UP, Retained Earnings DOWN
o Cash DOWN, Retained Earnings DOWN
o Cash UP, Retained Earnings UP
o Cash DOWN, Retained Earnings UP
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Ogden Company purchased a building. Ogden paid part of the purchase price in cash and signed a note payable agreeing to pay the remainder in the future.
What is the effect of this transaction on the accounting equation?
| o Cash DOWN, Building DOWN, Note Payable DOWN
o Cash DOWN, Building DOWN, Note Payable UP
o Cash DOWN, Building UP, Note Payable UP
o Cash UP, Building DOWN, Note Payable DOWN
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Layton Company borrowed cash from a local bank.
What is the effect of this transaction on the accounting equation?
| o Cash UP, Loan Payable DOWN
o Cash DOWN, Loan Payable UP
o Cash UP, Loan Payable UP
o Cash DOWN, Loan Payable DOWN
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What is the proper way to record an increase in an asset account and an increase in an equity account?
| o Asset, debit; equity, debit
o Asset, debit; equity, credit
o Asset, credit; equity, debit
o Asset, credit; equity, credit
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How are revenues typically recorded with debits and credits?
| o A credit, representing a reduction in assets
o A debit, representing an increase in assets
o A debit, representing a reduction in equity
o A credit, representing an increase in equity
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Why are dividends recorded with debits?
| o They represent an equity decrease.
o They represent a liability decrease.
o They represent an equity increase.
o They represent an asset increase.
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What is the proper way to record a decrease in an asset account and a decrease in a liability account?
| o Asset, debit; liability, credit
o Asset, credit; liability, credit
o Asset, debit; liability, debit
o Asset, credit; liability, debit
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How are expenses typically recorded with debits and credits?
| o A credit, representing a reduction in assets
o A debit, representing a reduction in equity
o A debit, representing an increase in assets
o A credit, representing an increase in equity
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What is a general ledger?
| o A collection of all balance sheets for a company for the past 10 years
o A schedule reconciling the sum of assets with the sum of liabilities and equities
o A chronological record of all transactions of a business
o A collection of accounts
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What is involved in posting?
| o Creating a schedule reconciling the sum of assets with the sum of liabilities and equities
o Sifting through all transactions to identify those involving cash to be included in the statement of cash flows
o Sorting all journal entry amounts by account and copying those amounts to the appropriate account
o Preparing a chronological record of all transactions of a business
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What is a trial balance?
| o A schedule reconciling the sum of the revenues with the sum of expenses and dividends
o A listing of all of the ledger accounts and their balances
o A summary document containing assets, liabilities, and equities and comprising one of the three primary financial statements
o An initial transaction analysis performed whenever inventory is sold on credit
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What is contained in a company’s journal?
| o A chronological record of all transactions of a business
o A collection of all balance sheets for a company for the past 10 years
o A collection of accounts
o A schedule reconciling the sum of assets with the sum of liabilities and equities
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With respect to a company’s trial balance, which one of the following statements is true?
| o The total credit balances are always greater than the total debit balances.
o The total debit balances are equal to the company’s total assets.
o The total credit balances are equal to the company’s total liabilities.
o The total debit balances and the total credit balances should be equal.
o The total debit balances are always greater than the total credit balances.
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