Accounting final exam TF

Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less

false

Cash is an asset account with a normal credit balance.

false

Common accounting practice is to record withdrawals as debits directly in the owner's capital account.

false

Component percentages on an income statement are calculated by dividing sales and total expense by net income.

false

Dollars and cents signs and decimal points should be used when writing amounts on ruled accounting paper.

false

Examples of source documents include checks, sales invoices, memorandums, and letters.

false

If the difference between the totals of Debit and Credit columns on a worksheet can be evenly divided by 9, then the error is most likely in addition.

false

If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.

false

Increases in revenue accounts are recorded as debits because they increase the owner's capital account.

false

Information needed to prepare an income statement comes from the trial balance columns and the income statement columns of a worksheet

false

Journals, ledgers, and worksheets are considered permanent records.

false

Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime.

false

Net income on a worksheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total.

false

A calculator tape is the source document for daily sales.

true

A check is a source document used when items are paid in cash.

true

A check mark in parentheses below a General Debit column total indicates that the total is not posted.

true

A check that contains errors must be marked with the word VOID and another check must be written.

true

A check with a blank endorsement can be cashed by anyone who has possession of the check.

true

A component percentage is the percentage relationship between one financial statement item and the total that includes that item.

true

A list of accounts used by a business is a chart of accounts.

true

A receipt is the source document for cash received from transactions other than sales.

true

A sale for which cash will be received at a later date is called a charge sale.

true

A withdrawal decreases owner's equity.

true

Accounting is the language of business.

true

Accounts receivable accounts are increased with a debit.

true

After each transaction, the accounting equation must remain in balance.

true

All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts.

true

An accounting period is known as a fiscal period.

true

An expense is a decrease in owner's equity resulting from the operation of a business.

true

An important aspect of cash control is verifying that the information on a bank statement and a checkbook are in agreement.

true

An income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or net loss.

true

An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.

true

Anytime a payment is made from the petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.

true

Assets such as cash and supplies have value because they can be used to acquire other assets or be used to operate a business.

true

At the end of a fiscal period, the balances of temporary accounts are summarized and transferred to the owner's capital account.

true

Banks deduct service charge s from customer's checking accounts without requiring customers to write a check for the amount.

true

Because an account form has columns for the debit and credit balance of an account, it is often referred to as the balance-ruled account form.

true

Before a transaction is recorded in the records of a business, it is analyzed to determine which accounts are changed and how.

true

Businesses use accounts to summarize all the information pertaining to a single item.

true

Businesses use petty cash when writing a check is not time or cost effective.

true

Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.

true

Double lines across column totals mean that the totals have been verified as correct.

true

Double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct.

true

Each liability account has a normal credit balance.

true

Errors in general ledger accounts should never be erased.

true

If errors are found on a work sheet, they must be erased and corrected before any further work is completed.

true

If there are errors in the work sheet's Trial Balance columns, it might be because not all general ledger account balances were copied in the Trial Balance column correctly.

true

Increases in expense accounts are recorded as debits because they decrease the owner's capital account

true

Information in a journal includes the debit and credit parts of each transaction recorded in one place.

true

Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.

true

Keeping personal and business records separate is an application of the business entity concept.

true

Most errors occur in doing arithmetic.

true

Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account as well.

true

Withdrawals are assets taken out of a business for the owner's personal use.

true

A balance sheet reports information about the elements of the accounting equation.

true

A balance sheet reports financial information on a specific date that includes the assets, liabilities, and owner's equity.

True

Asset accounts increase on the credit side.

false

A drawing account is decreased by debits and increased by credits.

false

A memorandum is the source document for the entry to record establishing a petty cash fund.

false

A source document is prepared for adjusting entries.

false

A transaction for the sale of goods or services results in a decrease in owner's equity

false

Accounts payable accounts are increased with a debit.

false

All companies should have a total expense component percentage that is not more than 80.0%.

false

All owner's equity accounts are increased on the credit side because the owner's capital account has a normal balance on the credit side.

false

An amount recorded on the left side of a T account is a credit.

false

An amount written in parentheses on a financial statement indicate an estimate.

false

Recording business costs in terms of hours required to complete projects is an application of the unit of measurement concept.

false

Sandra Stern, Capital is decreased with a credit.

false

Separate amounts in general amount columns are not posted individually.

false

Separate amounts in special amount columns are posted individually.

false

TechKnow Consulting arranges expense accounts in chronological order in its general ledger.

false

TechKnow Consulting maintains a petty cash fund for making large cash payments without writing checks.

false

The accounting concept Consistent Reporting is being applied when a delivery business reports the number of deliveries made on year and the amount of revenue received for deliveries made the next year.

false

The accounting equation does not have to be in balance to be correct.

false

The accounting equation is most often stated as: Assets + Liabilities = Owner's Equity.

false

The best way to prevent errors is to use a calculator.

false

The capital account is the owner's liability account.

false

The cash account is the first asset account and is numbered 100.

false

The drawing account is a permanent account.

false

The four questions asked when analyzing an adjustment are: Why? Where? When? and How?

false

The income statement for a service business have five sections: heading, revenue, expenses, net income or loss, and capital.

false

The income summary account has a normal debit balance.

false

The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.

false

The last two digits in a 3-digit account number indicate the general ledger division of the account.

false

The left side of a liability account is the normal balance side because liabilities are on the left side of the accounting equation.

false

The net income on an income statement is verified by checking the balance sheet.

false

The only reason for the Post. Ref. columns of the journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interrupted.

false

The owner's capital amount reported on a balance sheet is calculated as: capital account balance plus drawing account balance less net income.

false

The second division of TechKnow Consulting chart of accounts is the owner's equity division.

false

The source document for all cash payments is a sales invoice.

false

The source document sales invoice is abbreviated SI in a journal entry.

false

The sum of the assets and liabilities of a business always equal the investment of the business owner.

false

The totals of special amount columns in journal are not posted.

false

The two accounts affected by the adjustment for insurance are Prepaid Insurance Expense and Insurance.

false

The two steps for opening an account are writing the account title and recording the balance.

false

There are four types of endorsements commonly used: blank, special, original, and restrictive.

false

Total assets are the amount the owner has invested in the business.

false

When a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue.

false

When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage.

false

When a company receives cash from a customer for a prior sale, the transaction increases the cash account balance and increases the accounts receivable balance.

false

When cash is paid for expenses, the business has more equity.

false

When cash is paid on account, a liability is increased.

false

When the petty cash fund is replenished, the balance of the petty cash account increases.

false

Preparing a worksheet at the end of each fiscal period to summarize the general ledger information needed to prepare financial statements is an application of the accounting concept Accounting Period Cycle.

true

Sandra Stern, Drawing is decreased with a credit.

true

Single lines ruled across an amount column of an income statement indicated that amounts are to be added.

true

Stakeholders are any persons or groups who will be affected by an action.

true

Temporary accounts must start each fiscal period with a zero balance.

true

The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.

true

The Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period.

true

The accounting concept Realization of Revenue is applied when revenue is recorded at the time goods or services are sold.

true

The amount of a check is written twice on each check.

true

The asset division accounts for TechKnow Consulting are numbered in the 100s.

true

The balance of an account decreases on the side opposite the normal balance side.

true

The balances of the expense accounts must be reduced to zero to prepare the accounts for the next fiscal period.

true

The capital account is an owner's equity account.

true

The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.

true

The first digit of account numbers for accounts in the owner's equity ledger division is 3.

true

The income statement account balances are obtained from the worksheet's Income Statement columns.

true

The journal columns used to record paying cash for rent are general debit and cash credit.

true

The journal columns used to record paying cash to owner for personal use are general debit and cash credit.

true

The journal columns used to record receiving cash from sales are cash debit and sales credit.

true

The normal balance side of an accounts payable account is a credit.

true

The objective Evidence accounting concept requires that there be proof that a transaction did occur.

true

The owner's equity section of a balance sheet may report different kinds of details about owner's equity, depending on the need of the business.

true

The position of the total asset line on the balance sheet is determined after the equities section is prepared.

true

The relationship among assets, liabilities, and owner's equity can be written as an equation.

true

The source document for a debit card purchase is a memorandum.

true

The source document for an electronic funds transfer is a memorandum.

true

The source document used when supplies are bought on account is a memorandum.

true

The source document used when supplies bought on account are paid for is a check.

true

The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.

true

To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to tis balance,.

true

To prove a journal page, the total debit amount are compared with the total credit amounts to be sure they are equal.

true

Totaling and ruling the Adjustments columns of a worksheet is necessary to prove the equality of debits and credits.

true

Two financial statements are prepared from the information on the worksheet.

true

When a deposit is made in a bank account, the bank issues a receipt.

true

When adding a new expense account between accounts numbered 510 and 520, the new account is assigned the account number 515

true

When an owner withdraws cash from the business, the transaction affects both assets and owner's equity.

true

When cash is received from a sale, the total amount of both assets and owner's equity is increased.

true

When financial records for a business and for its owner's personal belongings are not mixed, this is an application of the Business Entity accounting concepts.

true

When items are bought and paid for later this is referred to as buying on account.

true

When two assets accounts are changed in a transaction, there must be an increase and a decrease.

true

When two column totals are not in balance on the worksheet, the difference between the two totals is calculated and checked.

true

When writing a check, the first step is to prepare the check stub.

true

With the exception of the totals lines, the Post Ref column is completely filled in with either an account number or a check mark.

true