Deck 2: The Recording Process

Question 1

Transaction information may be entered directly into the accounts without using a journal.

Answer 1

True

Question 2

The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for assets.

Answer 2

False

Question 3

Under the double-entry system, revenues must always equal expenses.

Answer 3

False

Question 4

All accounts reported in the statement of financial position are increased by using debits on the left-hand side of the T-account.

Question 5

Debit and credit can be interpreted to mean increase and decrease, respectively.

Question 6

The normal balance of all accounts is a debit.

Question 7

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

Question 8

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

Question 9

An account is often referred to as a T-account because of the way it is constructed.

Question 10

If a revenue account is credited, the revenue account is increased.

Question 11

Companies report share capital-ordinary and dividends in the equity section of the statement of financial position.

Question 12

The recording process becomes more efficient and informative if all transactions are recorded in one account.

Question 13

A debit to an account indicates an increase in that account.

Question 14

When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.

Question 15

The dividends account is a subdivision of the retained earnings account and appears as an expense on the income statement.

Question 16

A credit balance in a liability account indicates that an error in recording has occurred.

Question 17

A new account is opened for each transaction entered into by a business firm.

Question 18

Business documents can provide evidence that a transaction has occurred.

Question 19

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

Question 20

Revenues are a subdivision of retained earnings.

Question 21

Transactions are entered in the ledger accounts and then transferred to journals.

Question 22

Posting is the process of proving the equality of debits and credits in the trial balance.

Question 23

Entries that impact the income statement are called simple entries, whereas entries that impact the statement of financial position are called compound entries.

Question 24

The account titles used in journalizing transactions need not be identical to the account titles in the ledger.

Question 25

When debits do not equal credits on the trial balance, this indicates that the company has net income that needs to be transferred to the retained earnings account.

Question 26

The complete effect of a transaction on the accounts is disclosed in the journal.

Question 27

Transactions are recorded in alphabetic order in a journal.

Question 28

Errors on the statement of financial position are called transpositions and errors on the income statement are called irregularities.

Question 29

After a transaction has been posted, the reference column in the journal should not be blank.

Question 30

A general ledger should be arranged in the order in which accounts are presented in the financial statements, beginning with the statement of financal position accounts.

Question 31

A simple journal entry requires only one debit to an account and one credit to an account.

Question 32

The trial balance lists accounts and their balances at a given point in time in the order in which they appear on the statement of financial position.

Question 33

A journal is also known as a book of original entry.

Question 34

The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises.

Question 35

Posting involves transferring the journalized debits and credits to the statement of financial position.

Question 36

A compound journal entry requires several debits to one account and several credits to one account.

Question 37

All business transactions must be entered first in the general ledger.

Question 38

The general ledger contains all the accounts that are reported on the statement of financial position, whereas the general journal contains all the accounts that are reported on the income statement.

Question 39

The chart of accounts lists accounts and the account numbers that identify their location in the ledger starting with the accounts that are reported on the income statement.

Question 40

The chart of accounts is a special ledger used in accounting systems.

Question 41

The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction.

Question 42

The normal balance of an expense is a credit.

Question 43

An account consists of

A) one part.
B) two parts.
C) three parts.
D) four parts.

Question 44

The journal provides a chronological record of transactions.

Question 45

The trial balance will not balance when incorrect account titles are used in journalizing or posting.

Question 46

The chart of accounts is a listing of the accounts and the account numbers which identify their location in the ledger.

Question 47

A debit to an asset account indicates

A) an error.
B) a credit was made to a liability account.
C) a decrease in the asset.
D) an increase in the asset.

Question 48

The right side of an account

A) is the correct side.
B) reflects all transactions for the accounting period.
C) shows all the balances of the accounts in the system.
D) is the credit side.

Question 49

The primary purpose of a trial balance is to prove the mathematical equality of the debits and credits after posting.

Question 50

Credits

A) decrease both assets and liabilities.
B) decrease assets and increase liabilities.
C) increase both assets and liabilities.
D) increase assets and decrease liabilities.

Question 51

An account is a part of the financial information system and is described by all except which one of the following?

A) An account has a debit and credit side.
B) An account is a source document.
C) An account may be part of a manual or a computerized accounting system.
D) An account has a title.

Question 52

The general rules of debit and credit, and the steps in the recording process-the journal, ledger, and chart of accounts-are the same under both GAAP and IFRS.

Question 53

An account consists of

A) a title, a debit balance, and a credit balance.
B) a title, a left side, and a debit balance.
C) a title, a debit side, and a credit side.
D) a title, a right side, and a debit balance.

Question 54

A T-account is

A) a way of depicting the basic form of an account.
B) what the computer uses to organize bytes of information.
C) a special account used instead of a trial balance.
D) used for accounts that have both a debit and credit balance.

Question 55

Currency signs are typically used only in the trial balance and the financial statements.

Question 56

The left side of an account is

A) blank.
B) a description of the account.
C) the debit side.
D) the balance of the account.

Question 57

A trial balance does not prove that all transactions have been recorded or that the ledger is correct.

Question 58

The ledger is merely a bookkeeping device and therefore does not provide much useful data for management.

Question 59

Which one of the following is not a part of an account?

A) Credit side
B) Trial balance
C) Debit side
D)

Question 60

The normal balance of any account is the

A) left side.
B) right side.
C) side which increases that account.
D) side which decreases that account.

Question 61

Which account below is not a subdivision of retained earnings?

A) Dividends
B) Revenues
C) Expenses
D) Share Capital-Ordinary

Question 62

An accountant has debited an asset account for $1,000 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?

A) Credit an asset account for $500.
B) Credit another liability account for $500.
C) Credit an equity account for $500.
D) Debit an equity account for $500.

Question 63

The Dividends account

A) appears on the income statement along with the expenses of the business.
B) must show transactions every accounting period.
C) is increased with debits and decreased with credits.
D) is not a proper subdivision of retained earnings.

Question 64

An accounting convention is best described as

A) an absolute truth.
B) an accounting custom.
C) an optional rule.
D) something that cannot be changed.

Question 65

The double-entry system requires that each transaction must be recorded

A) in at least two different accounts.
B) in two sets of books.
C) in a journal and in a ledger.
D) first as a revenue and then as an expense.

Question 66

Assets normally show

A) credit balances.
B) debit balances.
C) debit and credit balances.
D) debit or credit balances.

Question 67

The best interpretation of the word credit is the

A) offset side of an account.
B) increase side of an account.
C) right side of an account.
D) decrease side of an account.

Question 68

For the basic accounting equation to stay in balance, each transaction recorded must

A) affect two or less accounts.
B) affect two or more accounts.
C) always affect exactly two accounts.
D) affect the same number of asset and liability accounts.

Question 69

An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?

A) A debit balance in the dividends account
B) A credit balance in an expense account
C) A credit balance in a liabilities account
D) A credit balance in a revenue account

Question 70

When a company pays dividends

A) the dividend doesn't have to be cash, it could be another asset.
B) the dividends account will be increased with a credit.
C) the retained earnings account will be directly increased with a debit.
D) the dividends account will be decreased with a debit.

Question 71

If a company has overdrawn its bank balance, then

A) its cash account will show a debit balance.
B) its cash account will show a credit balance.
C) the cash account debits will exceed the cash account credits.
D) it cannot be detected by observing the balance of the cash account.

Question 72

An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?

A) Nothing further must be done.
B) Debit an equity account for $500.
C) Debit another asset account for $500.
D) Credit a different asset account for $500.

Question 73

Which of the following accounts does not have a normal credit balance?

A) Share Capital-Ordinary
B) Revenue account
C) Liability account
D) Dividends

Question 74

Which one of the following represents the expanded basic accounting equation?

A) Assets = Liabilities + Share Capital-Ordinary account + Retained Earnings + Dividends - Revenue - Expenses.
B) Assets + Dividends + Expenses = Liabilities + Share Capital-Ordinary + Retained Earnings + Revenues.
C) Assets - Liabilities - Dividends = Share Capital-Ordinary + Retained Earnings + Revenues - Expenses.
D) Assets = Revenues + Expenses - Liabilities.

Question 75

An account will have a credit balance if the

A) credits exceed the debits.
B) first transaction entered was a credit.
C) debits exceed the credits.
D) last transaction entered was a credit.

Question 76

Which of the following is not true of the terms debit and credit?

A) They can be abbreviated as Dr. and Cr.
B) They can be interpreted to mean increase and decrease.
C) They can be used to describe the balance of an account.
D) They can be interpreted to mean left and right.

Question 77

Which of the following correctly identifies normal balances of accounts?

Question 78

A debit is not the normal balance for which account listed below?

A) Dividends
B) Cash
C) Accounts Receivable
D) Service Revenue

Question 79

In recording an accounting transaction in a double-entry system

A) the number of debit accounts must equal the number of credit accounts.
B) there must always be entries made on both sides of the accounting equation.
C) the amount of the debits must equal the amount of the credits.
D) there must only be two accounts affected by any transaction.

Question 80

Which of the following statements is true?

A) Debits increase assets and increase liabilities.
B) Credits decrease assets and decrease liabilities.
C) Credits decrease assets and increase liabilities.
D) Debits decrease liabilities and decrease assets.