Intermediate Accounting Stice 18th Edition Test Bank

In an accrual accounting system, A. all accounts have normal debit balances. B. a debit entry is recorded on the left-hand side of an account. C. liabilities, owner's capital, and dividends all have normal credit balances. D. revenues are recorded only when cash is received. 2. A common business transaction that would not affect the amount of owners' equity is A. signing a note payable to purchase equipment. B. payment of property taxes. C. billing of customers for services rendered. D. payment of dividends. 3. Failure to record the expired amount of prepaid rent expense would not A. understate expense. B. overstate net income. C. overstate owners' equity. D. understate liabilities. 4. On June 30, a company paid $3,600 for insurance premiums for the current year and debited the amount to Prepaid Insurance. At December 31, the bookkeeper forgot to record the amount expired. The omission has the following effect on the financial statements prepared December 31: A. overstates owners' equity. B. overstates assets. C. understates net income. D. overstates both owners’ equity and assets. 5. A chart of accounts is a A. subsidiary ledger. B. listing of all account titles. C. general ledger. D. general journal.