Question 1

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

Accepted Answer

This is possible with the use of a computerized accounting system where transactions can be entered directly into the appropriate accounts without the need for a journal. However, in a manual accounting system, transactions are first recorded in a journal before being transferred to the appropriate accounts.

Question 2

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

Accepted Answer

The rules for debit and credit and the normal balance of Share Capital-Ordinary are the same as for equity accounts, which have a credit normal balance.

Question 3

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

Accepted Answer

Under the double-entry system, revenues must always be equal to or greater than expenses in order to result in a profit.

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.

Accepted Answer

This is a false statement. While some accounts are increased by debits, others are increased by credits. The rule for debits and credits is not based on position, but on account type. For example, assets, expenses, and dividends are increased by debits, while liabilities, equity, and revenue are increased by credits.

Question 5

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

Accepted Answer

The answer of Debit and credit can be interpreted to...

Question 6

The normal balance of all accounts is a debit.

Accepted Answer

The normal balance of some accounts is a credit, such as revenue, equity, and liability accounts.

Question 7

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

Accepted Answer

The double-entry system of accounting refers to the concept of every transaction having two equal and opposite effects in different accounts. It does not relate to the placement of lines on a page.

Question 8

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

Accepted Answer

Transactions are first analyzed to determine their effect on the accounts and then they are recorded in the ledger.

Question 9

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

Accepted Answer

An account is named a T-account because it is constructed with a horizontal line at the top representing the account name, and a vertical line extending down that splits into two lines, resembling the letter "T". This layout allows for easy recording of debits and credits.

Question 10

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

Accepted Answer

When a revenue account is credited, it means an amount has been credited to the account, which increases the account balance and therefore increases the revenue.

Question 11

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

Accepted Answer

The answer of Companies report share capital-ordinary and dividends in...

Question 12

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

Accepted Answer

Recording all transactions in one account can often lead to confusion and inaccurate information. It is important to have separate accounts for different types of transactions (e.g. sales, expenses, payroll) to ensure proper tracking and analysis.

Question 13

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

Accepted Answer

A debit represents a decrease in an account, while a credit represents an increase in an account.

Question 14

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

Accepted Answer

Journals and ledgers are specifically designed to organize and manage large volumes of transactions efficiently by categorizing them into different accounts for easy tracking and reporting, whereas a simple tabular form might lack the structure to handle complex accounting needs effectively.

Question 15

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

Accepted Answer

The dividends account is not an expense, but rather a distribution of earnings to shareholders. It appears as a separate line item on the statement of changes in stockholders' equity.

Question 16

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

Accepted Answer

A credit balance in a liability account can indicate various things such as an overpayment by a customer or a credit memo received from a vendor. It is not necessarily an indication of an error in recording.

Question 17

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

Accepted Answer

A business firm does not open a new account for each transaction entered into. Instead, transactions are recorded in existing accounts such as cash, accounts receivable, accounts payable, etc.

Question 18

Business documents can provide evidence that a transaction has occurred.

Accepted Answer

Business documents such as receipts, invoices, and contracts can serve as evidence that a transaction has occurred between parties.

Question 19

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

Accepted Answer

Before a transaction can be recorded in a journal, it must be analyzed to determine its impact on the accounts involved. This analysis helps to ensure that the transaction is recorded correctly and that the accounts are updated accurately.

Question 20

Revenues are a subdivision of retained earnings.

Accepted Answer

The answer of Revenues are a subdivision of retained earnings....

Quiz 2: The Recording Process