Test Bank – Fundamental Accounting
Principles, 24th Edition (Wild), Latest
Revised Version 2025 with Complete
Practice Questions and Solutions
1
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
Fundamental Accounting Principles, 24e (Wild)
Chapter 2 Analyzing and Recording Transactions
1) Business transactions and events are the starting points of financial statements.
2) Preparation of a trial balance is the first step in processing a financial transaction.
3) Source documents identify and describe transactions and events entering the accounting
process.
4) Items such as sales receipts, bank statements, checks, and purchase orders are examples
of a
business's source documents.
5) An account is a record of increases and decreases in a specific asset, liability, equity,
revenue,
or expense item.
6) A customer's promise to pay on credit is classified as an account payable by the seller.
7) Withdrawals by the owner are a business expense.
8) The purchase of land and buildings will generally be recorded in the same ledger account.
9) Unearned revenues are classified as liabilities.
10) Cash withdrawn by the owner for personal expenses should be treated as an expense of
the
business.
11) When a company provides services for which cash will not be received until some
future
date, the company should record the amount billed as accounts receivable.
12) Owner withdrawals always decrease equity.
13) Expenses always decrease equity.
14) Revenues always increase equity.
15) Owner investments always decrease equity.
16) Unearned revenue is a liability that is settled in the future when a company delivers its
products or services.
17) A company's chart of accounts is a list of all the accounts used and includes an
identification
,number assigned to each account.
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Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
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written consent of McGraw-Hill Education.
18) An account's balance is the difference between the total debits and total credits for the
account, including any beginning balance.
19) The right side of an account is called the debit side.
20) In a double-entry accounting system, total debits must equal total credits for all entries,
and
total debit account balances in the ledger must equal total credit account balances.
21) Increases in liability accounts are recorded as debits.
22) Debits increase asset and expense accounts.
23) Credits always increase account balances.
24) An expense account normally has a credit balance.
25) A revenue account normally has a debit balance.
26) Asset accounts are decreased by debits.
27) Debit means increase and credit means decrease for all accounts.
28) Asset accounts normally have debit balances and revenue accounts normally have
credit
balances.
29) An owner's withdrawal account normally has a debit balance.
30) A debit entry always increases an account.
31) A transaction that credits an asset account and credits a liability account must also
affect one
or more other accounts.
32) A transaction that decreases a liability and increases an asset must also affect one or
more
other accounts.
33) If insurance coverage for the next two years is paid for in advance, the amount of the
payment is debited to an asset account called Prepaid Insurance.
34) The purchase of supplies on credit should be recorded with a debit to Supplies and a
credit to
Accounts Payable.
35) If a company purchases equipment paying cash, the journal entry to record this
transaction
will include a debit to Cash.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
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Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
36) If a company provides services to a customer on credit, the company providing the
service
should credit Accounts Receivable.
37) When a company bills a customer for $700 for services performed, the journal entry to
record this transaction will include a $700 debit to Services Revenue.
38) The debt ratio helps to assess the risk a company has of failing to pay its debts and is
helpful
to both its owners and creditors.
39) The higher a company's debt ratio, the lower the risk of a company not being able to pay
its
debts.
40) The debt ratio is calculated by dividing total assets by total liabilities.
41) A company that finances a relatively large portion of its assets with liabilities is said to
have
a high degree of financial leverage.
42) If a company is highly leveraged, this means that it has relatively high risk of not being
able
to repay its debt.
43) Stark Co. has liabilities of $105 million and total assets of $350 million. Its debt ratio is
40.0%.
44) A journal entry that affects only two accounts is called a compound entry.
45) Posting is the transfer of journal entry information to the ledger.
46) Transactions are recorded first in the ledger and then transferred to the journal.
47) A general journal gives a complete record of each transaction in one place, and shows
the
debits and credits for each transaction.
48) The general journal is a collection of all accounts and their balances.
49) At a given point in time, a trial balance is a list of all ledger accounts and their balances.
50) Errors made in journalizing transactions, posting to the ledger, and preparing the trial
balance
can still exist in a balanced trial balance.
51) The trial balance can serve as a replacement for the balance sheet, since total debits
must
equal total credits.
52) A balanced trial balance is proof that no errors were made in journalizing transactions,
posting to the ledger, and preparing the trial balance.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
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Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
53) If cash was incorrectly debited for $100 instead of correctly debiting accounts
receivable for
$100, assuming no other errors, the trial balance will balance.
54) The financial statement that summarizes how equity changes over the reporting period
is
called the balance sheet.
55) An income statement reports revenues earned minus expenses incurred over a period
of time.
56) The detail of individual revenue and expense accounts is reported on the balance sheet.
57) The heading on every financial statement lists the three W's—Who (the name of the
business); What (the name of the statement); and Where (the organization's address).
58) If an owner's capital account had a $10,000 credit balance at the beginning of the
period, and
during the period, the owner invests an additional $5,000, the balance in the capital account
listed on the trial balance will be equal to a debit balance of $5,000.
59) Owner's withdrawals are not reported on a business's income statement.
60) An income statement reports the revenues earned minus expenses incurred by a
business
over a period of time.
61) The balance sheet reports the financial position of a company at a point in time.
62) The same four basic financial statements are prepared by both U.S. GAAP and IFRS.
63) Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.
64) The amount of net income is added on the statement of owner's equity.
65) The accounting process begins with:
A) Analysis of business transactions and source documents.
B) Preparing financial statements and other reports.
C) Analysis of prepared financial statements.
D) Presentation of financial information to decision-makers.
E) Preparation of the trial balance.
66) Which of the following statements is not true:
A) Accounts receivable are held by a seller.
B) Accounts receivable arise from credit sales.
C) Accounts receivable are increased by customer payments.
D) Accounts receivable are classified as assets.
E) Accounts receivable are increased by billings to customers.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
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Principles, 24th Edition (Wild), Latest
Revised Version 2025 with Complete
Practice Questions and Solutions
1
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
Fundamental Accounting Principles, 24e (Wild)
Chapter 2 Analyzing and Recording Transactions
1) Business transactions and events are the starting points of financial statements.
2) Preparation of a trial balance is the first step in processing a financial transaction.
3) Source documents identify and describe transactions and events entering the accounting
process.
4) Items such as sales receipts, bank statements, checks, and purchase orders are examples
of a
business's source documents.
5) An account is a record of increases and decreases in a specific asset, liability, equity,
revenue,
or expense item.
6) A customer's promise to pay on credit is classified as an account payable by the seller.
7) Withdrawals by the owner are a business expense.
8) The purchase of land and buildings will generally be recorded in the same ledger account.
9) Unearned revenues are classified as liabilities.
10) Cash withdrawn by the owner for personal expenses should be treated as an expense of
the
business.
11) When a company provides services for which cash will not be received until some
future
date, the company should record the amount billed as accounts receivable.
12) Owner withdrawals always decrease equity.
13) Expenses always decrease equity.
14) Revenues always increase equity.
15) Owner investments always decrease equity.
16) Unearned revenue is a liability that is settled in the future when a company delivers its
products or services.
17) A company's chart of accounts is a list of all the accounts used and includes an
identification
,number assigned to each account.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
mynursytest.store
2
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
18) An account's balance is the difference between the total debits and total credits for the
account, including any beginning balance.
19) The right side of an account is called the debit side.
20) In a double-entry accounting system, total debits must equal total credits for all entries,
and
total debit account balances in the ledger must equal total credit account balances.
21) Increases in liability accounts are recorded as debits.
22) Debits increase asset and expense accounts.
23) Credits always increase account balances.
24) An expense account normally has a credit balance.
25) A revenue account normally has a debit balance.
26) Asset accounts are decreased by debits.
27) Debit means increase and credit means decrease for all accounts.
28) Asset accounts normally have debit balances and revenue accounts normally have
credit
balances.
29) An owner's withdrawal account normally has a debit balance.
30) A debit entry always increases an account.
31) A transaction that credits an asset account and credits a liability account must also
affect one
or more other accounts.
32) A transaction that decreases a liability and increases an asset must also affect one or
more
other accounts.
33) If insurance coverage for the next two years is paid for in advance, the amount of the
payment is debited to an asset account called Prepaid Insurance.
34) The purchase of supplies on credit should be recorded with a debit to Supplies and a
credit to
Accounts Payable.
35) If a company purchases equipment paying cash, the journal entry to record this
transaction
will include a debit to Cash.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
mynursytest.store
,3
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
36) If a company provides services to a customer on credit, the company providing the
service
should credit Accounts Receivable.
37) When a company bills a customer for $700 for services performed, the journal entry to
record this transaction will include a $700 debit to Services Revenue.
38) The debt ratio helps to assess the risk a company has of failing to pay its debts and is
helpful
to both its owners and creditors.
39) The higher a company's debt ratio, the lower the risk of a company not being able to pay
its
debts.
40) The debt ratio is calculated by dividing total assets by total liabilities.
41) A company that finances a relatively large portion of its assets with liabilities is said to
have
a high degree of financial leverage.
42) If a company is highly leveraged, this means that it has relatively high risk of not being
able
to repay its debt.
43) Stark Co. has liabilities of $105 million and total assets of $350 million. Its debt ratio is
40.0%.
44) A journal entry that affects only two accounts is called a compound entry.
45) Posting is the transfer of journal entry information to the ledger.
46) Transactions are recorded first in the ledger and then transferred to the journal.
47) A general journal gives a complete record of each transaction in one place, and shows
the
debits and credits for each transaction.
48) The general journal is a collection of all accounts and their balances.
49) At a given point in time, a trial balance is a list of all ledger accounts and their balances.
50) Errors made in journalizing transactions, posting to the ledger, and preparing the trial
balance
can still exist in a balanced trial balance.
51) The trial balance can serve as a replacement for the balance sheet, since total debits
must
equal total credits.
52) A balanced trial balance is proof that no errors were made in journalizing transactions,
posting to the ledger, and preparing the trial balance.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
mynursytest.store
, 4
Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior
written consent of McGraw-Hill Education.
53) If cash was incorrectly debited for $100 instead of correctly debiting accounts
receivable for
$100, assuming no other errors, the trial balance will balance.
54) The financial statement that summarizes how equity changes over the reporting period
is
called the balance sheet.
55) An income statement reports revenues earned minus expenses incurred over a period
of time.
56) The detail of individual revenue and expense accounts is reported on the balance sheet.
57) The heading on every financial statement lists the three W's—Who (the name of the
business); What (the name of the statement); and Where (the organization's address).
58) If an owner's capital account had a $10,000 credit balance at the beginning of the
period, and
during the period, the owner invests an additional $5,000, the balance in the capital account
listed on the trial balance will be equal to a debit balance of $5,000.
59) Owner's withdrawals are not reported on a business's income statement.
60) An income statement reports the revenues earned minus expenses incurred by a
business
over a period of time.
61) The balance sheet reports the financial position of a company at a point in time.
62) The same four basic financial statements are prepared by both U.S. GAAP and IFRS.
63) Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.
64) The amount of net income is added on the statement of owner's equity.
65) The accounting process begins with:
A) Analysis of business transactions and source documents.
B) Preparing financial statements and other reports.
C) Analysis of prepared financial statements.
D) Presentation of financial information to decision-makers.
E) Preparation of the trial balance.
66) Which of the following statements is not true:
A) Accounts receivable are held by a seller.
B) Accounts receivable arise from credit sales.
C) Accounts receivable are increased by customer payments.
D) Accounts receivable are classified as assets.
E) Accounts receivable are increased by billings to customers.
DOWNLOAD THE Test Bank for Fundamental Accounting Principles 24th
Edition Wild
mynursytest.store
5
