Question 1

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

Accepted Answer

This is true. Before a transaction is recorded in a journal, it is important to analyze its effect on the affected accounts to ensure accurate and appropriate recording.

Question 2

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

Accepted Answer

A credit balance in a liability account is not always indicative of an error in recording. It could simply mean that there are more credits than debits in that particular account. For example, a credit balance in a loan payable account could indicate that more payments have been made towards the loan than the loan amount itself.

Question 3

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 statement is not entirely true. Assets, expenses, and dividends accounts are increased with debits, while liabilities, equity, and revenue accounts are increased with credits. The statement could be revised to say that accounts that fall under one category are generally increased with the same type of entry (debit or credit), but not all accounts are increased with debits.

Question 4

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 in terms of their effect on accounts and then entered into the ledger.

Question 5

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

Accepted Answer

This is true. Direct entry into accounts without the use of a journal is called "posting." It is a common method of recording transactions in computerized accounting systems.

Question 6

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 7

Revenues are a subdivision of retained earnings.

Accepted Answer

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

Question 8

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 make the process messy and disorganized. It is best practice to have separate accounts for different types of transactions to ensure accurate and informative recording.

Question 9

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

Accepted Answer

When a revenue account is credited, it means that there has been an increase in revenue, and therefore the balance of the revenue account increases.

Question 10

The normal balance of all accounts is a debit.

Accepted Answer

The normal balance of some accounts is a debit (such as assets and expenses), while the normal balance of other accounts is a credit (such as liabilities, equity, and revenue).

Question 11

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

Accepted Answer

A debit to an account actually indicates a decrease in that account. This is because a debit refers to a transaction that takes money out of an account, while a credit indicates a transaction that adds money to an account.

Question 12

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 13

Business documents can provide evidence that a transaction has occurred.

Accepted Answer

Business documents such as invoices, receipts, and contracts serve as evidence that a transaction has taken place between two parties.

Question 14

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 for Share Capital-Ordinary are different from those for assets. Share Capital-Ordinary is a type of equity, so it has a credit normal balance and is increased with credit entries and decreased with debit entries. Assets, on the other hand, have a debit normal balance and are increased with debit entries and decreased with credit entries.

Question 15

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 16

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

Accepted Answer

Under the double-entry system, revenues must equal credits and expenses must equal debits. However, this does not necessarily mean that revenues must always equal expenses, as there may be periods where a company incurs more expenses than revenue or vice versa.

Question 17

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

Accepted Answer

An account is referred to as a T-account because of its shape, which looks like the letter "T".

Question 18

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

Accepted Answer

A new account is not necessarily opened for each transaction. Transactions may be recorded in existing accounts.

Question 19

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 method of recording financial transactions where every transaction has equal and opposite effects in at least two different accounts. It does not refer to the placement of a double line at the end of a column of figures.

Question 20

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 a subdivision of the retained earnings account. Instead, it is a separate account that reduces retained earnings when dividends are declared and paid out to shareholders. Dividends also do not appear as an expense on the income statement; rather, they are reported as a separate line item in the statement of changes in equity or footnotes to the financial statements.

Quiz 2: The Recording Process