Question 1

The ____________ is a book or file containing the activity by accounts of a business.

Accepted Answer

The general ledger is the primary bookkeeping tool used to record all financial transactions of a business. It contains information such as accounts payable, accounts receivable, expenses, and revenues. The journal and trial balance are also important accounting documents, but they are typically used in conjunction with the general ledger. The income statement summarizes the financial performance of a business over a period of time, but it does not contain the detailed transactional information that is included in the general ledger.

Question 2

Posting involves

Accepted Answer

Posting involves transferring information from the journal (where transactions are initially recorded) to the ledger (where transactions are organized by account).

Question 3

In a manual system, it is not proper to split a journal entry at the bottom of a page.

Accepted Answer

Splitting a journal entry at the bottom of a page in a manual system can cause confusion and errors, so it is not recommended. Instead, the entry should be continued on the next page and appropriately cross-referenced.

Question 4

A $1,500 payment for Rent Expense was incorrectly journalized and posted as a debit to Rent Expense for $5,100 and a credit to Cash for $5,100. The correcting entry, using the one-step method, would include a

Accepted Answer

The correcting entry should reverse the incorrect entry, so Rent Expense should be credited for the full amount of $5,100 and Cash should be debited for the correct amount of $1,500. This can be accomplished with a credit to Rent Expense for $3,600 ($5,100 - $1,500) and a debit to Cash for $1,500. Therefore, option B is the correct answer.

Question 5

There are two methods for correcting errors, the

Accepted Answer

The ruling method and the correcting entry method are both valid methods for correcting errors in accounting. The manual method could refer to either of these methods, so it is not a clear option. The deletion method is not commonly used in accounting as it does not provide a clear audit trail.

Question 6

Which of the following is correct?

Accepted Answer

The manual ruling method involves drawing a line through the incorrect entry in the ledger and writing the correct entry above it. This can be done after the entry has been posted. Therefore, option C is correct. Option A is incorrect as the manual ruling method can be used after posting as well. Option B is incorrect as the correcting entry method can be completed in more than two steps. Option D is incorrect as only option C is correct.

Question 7

A $800 payment for Rent Expense was incorrectly journalized and posted as a debit to Wages Expense for $800 and a credit to Cash for $800. The correcting entry, using the one-step method, would include a

Accepted Answer

The correct entry to correct the mistake involves crediting Wages Expense for $800 to reverse the incorrect entry and debiting Rent Expense for the same amount to record the expense in the correct account.

Question 8

What is the effect of the following error? $360 was received on account from customer. The accountant debited cash for $360 and credited Professional Fees for $360.

Accepted Answer

The effect of debiting cash and crediting professional fees for a payment received on account is that revenue is overstated. This is because the entry should have debited accounts receivable (an asset) and credited revenue. By debiting cash instead, the entry is essentially treating the payment as if it came from a non-customer source, which inflates revenue.

Question 9

Which of the following is true concerning posting?

Accepted Answer

All of the statements listed are true concerning posting. The date of the transaction should be written in the account's Date column, the page number of the journal should be written in the Post.Ref. column of the ledger account, and the amount of the transaction should be recorded in either the debit or credit column. Additionally, the ledger account number should be recorded in the Post.Ref. column of the journal.

Question 10

The process of writing a transaction in a ledger is called journalizing.

Accepted Answer

The process of writing a transaction in a ledger is called posting. Journalizing is the process of recording transactions in a journal before they are posted to a ledger.

Question 11

A $4,500 payment for Rent Expense was incorrectly journalized and posted as a debit to Rent Expense for $5,400 and a credit to Cash for $5,400. The correcting entry, using the one-step method, would include a

Accepted Answer

The error resulted in an overstatement of both Rent Expense and Cash by $900 ($5,400 - $4,500). To correct this, Cash should be debited (increased) by $900 to offset the previous overstatement.

Question 12

Kaufman Company had a beginning normal balance of $15,000 in the accounts payable account. The accountant posted a $5,000 credit on May 6, a $2,500 credit on May 14, and a $8,000 debit on May 26. What is the balance of accounts payable in the general ledger?

Accepted Answer

The beginning balance is a $15,000 credit. Credits increase accounts payable, and debits decrease it. After posting a $5,000 credit and a $2,500 credit, the balance increases by $7,500 to $22,500. The $8,000 debit decreases it to $14,500 credit.

Question 13

Irena Company had a beginning normal balance of $35,000 in the cash account. The accountant posted a $2,000 credit on June 2, a $350 credit on June 4, and a $5,250 debit on June 20. What is the balance of cash in the general ledger?

Accepted Answer

The beginning balance is $35,000.
Then, a credit of $2,000 was posted on June 2, so the new balance is: 
$35,000 - $2,000 = $33,000
Another credit of $350 was posted on June 4, so the new balance is: 
$33,000 - $350 = $32,650
Finally, a debit of $5,250 was posted on June 20, so the new balance is: 
$32,650 - $5,250 = $27,400
Since the ending balance is a debit, the answer is C) $37,900 debit.

Question 14

What is the effect of the following error? The owner withdrew $3,000 for personal use. The accountant debited Wages Expense for $3,000 and credited Cash for $3,000.

Accepted Answer

The error caused an increase in Wages Expense, which reduces Net Income, thus understating it.

Question 15

In the general journal, all liability accounts and owner's equity accounts must be indented.

Accepted Answer

In the general journal, the specific formatting such as indenting is not a requirement for liability accounts and owner's equity accounts; the focus is on recording the date, accounts affected, and amounts of transactions.

Question 16

Which of the following is correct concerning correcting errors on the computer?

Accepted Answer

When correcting errors on the computer, it is important to make a correcting entry with a brief explanation of what was corrected. This provides an audit trail and helps track any changes made to the data. Deleting an error entry is not recommended as it destroys the audit trail. While computer programs can help reduce errors, they are not foolproof and errors can still occur. Therefore, it is important to correct errors and make a corresponding entry to document the changes made.

Question 17

The official list of all the accounts is called the chart of accounts.

Accepted Answer

The chart of accounts is the official list of all the accounts used in a company's accounting system.

Question 18

A $500 payment for Wages Expense was incorrectly journalized and posted as a debit to Rent Expense for $500 and a credit to Cash for $500. The correcting entry, using the one-step method, would include a

Accepted Answer

The correcting entry for mistakenly classifying a payment for wages as a payment for rent would be to debit the Rent Expense account (which was incorrectly credited) for $500 and credit the Wages Expense account (which was incorrectly left out) for $500. A debit to Cash for $500 or a credit to Supplies Expense for $500 would not be relevant to this correcting entry. A credit to Cash for $500 would also be incorrect because the original entry already credited Cash for $500.

Question 19

The explanation for a transaction in the general journal in a manual system is indented under the credit part of the entry.

Accepted Answer

In a manual system, the explanation for a transaction in the general journal is indented under the credit part of the entry. This helps to provide a clear and concise record of the transaction being recorded.

Question 20

Which of the following is true concerning the trial balance?

Accepted Answer

The trial balance is a statement that lists all of the accounts and their balances in either debit or credit format. It is used to prove the mathematical accuracy of the ledger by showing that the total of all debit balances is equal to the total of all credit balances. However, it does not guarantee that there are no errors in the recording of journal entries as errors can still occur even if the trial balance balances. Therefore, option A is incorrect. Option B is also incorrect as the trial balance is prepared after posting. Option C is incorrect as the trial balance lists both the names of the accounts and their balances.

Quiz 3: The General Journal and the General Ledger