Question 1

In a double-entry accounting system, the total dollar amount debited must always equal the total dollar amount credited.

Accepted Answer

This is the fundamental principle of double-entry accounting, known as the accounting equation: Assets = Liabilities + Equity. Each transaction must have at least one debit and one credit entry, and the total debits must equal the total credits. This ensures that the accounting records are accurate and balanced.

Question 2

Source documents provide evidence of business transactions and are the basis for accounting entries.

Accepted Answer

Source documents such as invoices, receipts, and payroll records are used to support the recording of transactions in accounting systems. Without these documents, it would be difficult to accurately record and track financial transactions.

Question 3

The right side of an account is called the debit side.

Accepted Answer

The right side of an account is called the credit side.

Question 4

Crediting an expense account decreases it.

Accepted Answer

Crediting an expense account is equivalent to recording a payment or reduction in the expense, which decreases the balance of the expense account.

Question 5

Dividends paid to the stockholders are a business expense.

Accepted Answer

Dividends paid to stockholders are not considered a business expense. They are a distribution of profits to the owners of the company.

Question 6

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

Accepted Answer

This is the definition of an account in accounting.

Question 7

The purchase of land and buildings will generally be recorded in the same ledger account.

Accepted Answer

Land and buildings are two different types of assets and should be recorded in separate ledger accounts.

Question 8

When a company provides services for which cash will not be received until some future date, the company should record the amount charged as accounts receivable.

Accepted Answer

This is because accounts receivable represent amounts owed to the company by customers for goods or services that have been provided but not yet paid for. When a company provides services for which payment is not received immediately, it creates an account receivable which represents the amount owed by the customer.

Question 9

The first step in the processing of a transaction is to analyze the transaction and source documents.

Accepted Answer

Analyzing the transaction and source documents is the initial step in the transaction processing cycle.

Question 10

An account's balance is the difference between the total debits and total credits for the account, including any beginning balance.

Accepted Answer

This is correct. The account's balance is calculated by subtracting the total credits from the total debits, including any beginning balance.

Question 11

Cash paid to stockholders by the business of a corporation and used for personal expenses, should be treated as an expense of the business.

Accepted Answer

Cash paid to stockholders for personal expenses is not a legitimate business expense and should not be treated as such. It is important to establish clear procedures and guidelines for how and when stockholders can receive payments or distributions from the business.

Question 12

Increases in liability accounts are recorded as debits.

Accepted Answer

The answer of Increases in liability accounts are recorded as...

Question 13

Preparation of a trial balance is the first step in processing a financial transaction.

Accepted Answer

The preparation of a trial balance occurs after financial transactions have been recorded in the general ledger.

Question 14

A company's chart of accounts is a list of all the accounts used and includes an identification number assigned to each account.

Accepted Answer

A company's chart of accounts is indeed a list of all accounts used which includes a unique identification number for each account.

Question 15

Unearned revenues are classified as liabilities.

Accepted Answer

Unearned revenues are payments received in advance for goods or services that have not yet been provided. These payments are liabilities because the company has an obligation to provide the goods or services in the future, and the customer still has the right to receive them. Once the goods or services have been provided, the liability is reduced and the revenue is recognized on the income statement.

Question 16

Debits increase asset and expense accounts.

Accepted Answer

Debits are the left-hand side of an accounting entry and increase asset and expense accounts.

Question 17

A revenue account normally has a debit balance.

Accepted Answer

A revenue account normally has a credit balance, as it represents the income earned by a business.

Question 18

Credits always increase account balances.

Accepted Answer

The answer of Credits always increase account balances....

Question 19

Items such as sales tickets, bank statements, checks, and purchase orders are examples of a business's source documents.

Accepted Answer

Source documents are the original records of transactions in a business, and they include sales tickets, bank statements, checks, and purchase orders.

Question 20

A customer's promise to pay on credit is classified as an account payable by the seller.

Accepted Answer

A customer's promise to pay on credit is classified as an account receivable by the seller, not an account payable.

Quiz 2: Analyzing for Business Transactions