ACC 231- Exam 1 Questions with
complete solution 2025/2026
Liability accounts are increased
a. By debits
b.By credits
c.On the left side
d.Below the balance line - correct answer ✔b.By credits
A company's retained earnings balance would decrease by
a.The declaration and payment of dividends
b.Sales
c.Investments by owners
d.Net income - correct answer ✔a.The declaration and payment of dividends
Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the
purchase of equipment is
a.Cash 20,000 Equipment 20,000
b.Equipment 20,000 Accounts Payable 20,000
c.Equipment 20,000 Cash 20,000
d.Accounts Payable 20,000 Equipment 20,000 - correct answer ✔c.Equipment 20,000 Cash 20,000
Owners' equity accounts are decreased with
a.Debit entries
b.Credit entries
c.Liabilities
, d.Assets - correct answer ✔a.Debit entries
Revenues
a.Decrease assets
b.Decrease owners' equity
c.Increase liabilities
d.Increase owners' equity - correct answer ✔d.Increase owners' equity
A system of accounting in which revenues and expenses are recorded as they are earned and incurred, is
called
a.Revenue recognition accounting
b.Accrual-basis accounting
c.Realization accounting
d.Cash-basis accounting - correct answer ✔b.Accrual-basis accounting
A system of accounting in which revenues and expenses are recorded only when cash is received or
paid, is called
a. Revenue recognition accounting
b.Accrual-basis accounting
c.Realization accounting
d.Cash-basis accounting - correct answer ✔d.Cash-basis accounting
Which of the following statements about adjusting entries is NOT true?
a.They are recorded on a daily basis as transactions occur.
b.They are posted at the end of an accounting period.
c.They do not affect the cash account.
complete solution 2025/2026
Liability accounts are increased
a. By debits
b.By credits
c.On the left side
d.Below the balance line - correct answer ✔b.By credits
A company's retained earnings balance would decrease by
a.The declaration and payment of dividends
b.Sales
c.Investments by owners
d.Net income - correct answer ✔a.The declaration and payment of dividends
Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the
purchase of equipment is
a.Cash 20,000 Equipment 20,000
b.Equipment 20,000 Accounts Payable 20,000
c.Equipment 20,000 Cash 20,000
d.Accounts Payable 20,000 Equipment 20,000 - correct answer ✔c.Equipment 20,000 Cash 20,000
Owners' equity accounts are decreased with
a.Debit entries
b.Credit entries
c.Liabilities
, d.Assets - correct answer ✔a.Debit entries
Revenues
a.Decrease assets
b.Decrease owners' equity
c.Increase liabilities
d.Increase owners' equity - correct answer ✔d.Increase owners' equity
A system of accounting in which revenues and expenses are recorded as they are earned and incurred, is
called
a.Revenue recognition accounting
b.Accrual-basis accounting
c.Realization accounting
d.Cash-basis accounting - correct answer ✔b.Accrual-basis accounting
A system of accounting in which revenues and expenses are recorded only when cash is received or
paid, is called
a. Revenue recognition accounting
b.Accrual-basis accounting
c.Realization accounting
d.Cash-basis accounting - correct answer ✔d.Cash-basis accounting
Which of the following statements about adjusting entries is NOT true?
a.They are recorded on a daily basis as transactions occur.
b.They are posted at the end of an accounting period.
c.They do not affect the cash account.
