Question 1

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

Accepted Answer

The recording process becomes more efficient and informative if transactions are recorded in multiple accounts, each representing a different category or type of transaction. This allows for better organization and analysis of financial information.

Question 2

Asset accounts are increased with credits.

Accepted Answer

Asset accounts are increased with debits, not credits. Credits decrease asset accounts.

Question 3

The normal balance of an asset account is a debit.

Accepted Answer

The normal balance of an asset account is a debit. This means that when a transaction increases an asset, it is debited, and when a transaction decreases an asset, it is credited.

Question 4

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 practice of recording each financial transaction in two different accounts, with a debit entry on one side and a corresponding credit entry on the other side. It is not just the placement of a double line at the end of a column of figures.

Question 5

Revenues are part of owner's capital.

Accepted Answer

The answer of Revenues are part of owner's capital....

Question 6

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

Accepted Answer

Under the double-entry system, revenues and expenses are recorded as separate accounts and may not always equal each other. The difference between them is the net income or net loss of the business.

Question 7

Liability accounts are increased with credits..

Accepted Answer

Liability accounts have a normal credit balance, meaning they are increased with credits and decreased with debits.

Question 8

The double-entry system of recording means that debits must equal credits.

Accepted Answer

The fundamental principle of double-entry bookkeeping is that every financial transaction has equal and opposite effects in at least two different accounts. This means that debits (left side of an account) must always equal credits (right side of an account) for the accounting equation to remain in balance. Therefore, the statement is true.

Question 9

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 that the company owes money to other people or entities, which is a normal part of business operations. It only indicates an error in recording if the credit balance is unexpected or inconsistent with normal account balances.

Question 10

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

Accepted Answer

A business can have multiple transactions under the same account. It is not necessary to open a new account for each transaction.

Question 11

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 12

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, while a credit to an account indicates an increase. This can be a confusing concept, as the terms "debit" and "credit" can have different meanings in different contexts (e.g. in banking vs. accounting), but in accounting, the rules for debits and credits are consistent.

Question 13

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

Accepted Answer

A T-account resembles the letter 'T', with the account title or name at the top, the left side showing debits, and the right side showing credits.

Question 14

The normal balance of all accounts is a debit.

Accepted Answer

The normal balance of some accounts is debit and some accounts is credit. For example, the normal balance of asset and expense accounts is debit, while the normal balance of liability, equity, and revenue accounts is credit.

Question 15

The normal balance of a liability account is a credit.

Accepted Answer

The normal balance of a liability account is a credit because a liability represents an obligation to pay out funds, which decreases the company's assets and increases its liabilities. Therefore, the balance is increased by credits and decreased by debits.

Question 16

The normal balance of an asset account is a credit.

Accepted Answer

The normal balance of an asset account is a debit.

Question 17

The normal balance of Owner's Capital is a debit.

Accepted Answer

The normal balance of Owner's Capital is a credit, not a debit.

Question 18

The normal balance of a liability account is a debit.

Accepted Answer

The normal balance of a liability account is a credit.

Question 19

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

Accepted Answer

When a revenue account is credited, it means that a credit entry has been made to the account, which increases the account balance. This represents an increase in revenue for the business.

Question 20

The drawing account is part of owner's capital and appears as an expense on the income statement.

Accepted Answer

The drawing account is a contra equity account that is used to track withdrawals made by the owner from the company's assets. It is not an expense and does not appear on the income statement.

Quiz 3: The Recording Process: Debits and Credits

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

Asset accounts are increased with credits.

The normal balance of an asset account is a debit.

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

Revenues are part of owner's capital.

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

Liability accounts are increased with credits..

The double-entry system of recording means that debits must equal credits.

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

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

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

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

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

The normal balance of all accounts is a debit.

The normal balance of a liability account is a credit.

The normal balance of an asset account is a credit.

The normal balance of Owner's Capital is a debit.

The normal balance of a liability account is a debit.

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

The drawing account is part of owner's capital and appears as an expense on the income statement.