Accounting True and False Chapters 1-8

When two column totals are not in balance, the first step is to subtract the smaller total from the larger total to find the difference.

True

The balance sheet accounts are the revenue, expenses, and owner's equity accounts.

False

The ending account balances of permanent accounts for one fiscal period are "zeroed out" for the next fiscal period.

False

The maximum the IRS will allow for a petty cash account is $100.00

False

The revenue earned and the expenses incurred to earn that revenue are not reported in the same fiscal period;expenses are reported as they are paid.

False

Used to make snall purchases, a petty cash account is an expense to the business.

False

When an account is no longer needed , it is removed from the general ledger and the chart of accounts; the unused number cannot be reassigned.

False

When you prove a ornal at the end of each month, the difference between the totals of the debit and credit columns is the amount of profit earned during the month.

False

Temporary accounts begin a new fiscal period with the ending balance from the previous fiscal period.

False

A bank's service charge is billed to the business; the entry before it is paid is a bedti to miscellaneous expense and a credit to accounts payable.

False

A business form giving written acknowledgment for cash received is called a sales invoice.

False

A business paid cash on account. This transaction is recorded by debiting cash and crediting accounts payable.

False

A each item in an account or a journal entry is verified, draw a line through it so that anyone looking at the records will know that it is complete and correct.

False

A journal entry must be made for each individual petty cash purchase with petty cash slips used as a source documents.

False

A journal shows all the changes in a single account.

False

A revenue account has a normal debit balance.

False

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

False

Accounts in a general ledger are arranged in the same order as they appear on financial statements.

False

Accounts used to accumulate information until it is transferred to the owner's capital account are called real accounts

False

All businesses in similar industries use the same chart of accounts

False

Although the temporary account are closed and have zero balances, they still appear on a post-closing trial balance to prove that they've been "zeroed out"

False

An account balance is a term applied when both sides of the accounting equation are equal, or ,in balance.

False

An example of a slide is $45 written as $54

False

Because a worksheet is used as a permanent record, it is prepared in pen or saved on the computer.

False

Because expenses decrease owner's equity, increases in expenses are recorded as credits.

False

Checks are listed on a deposit slip in amount order from least to greatest.

False

Dollars and cents signs and decimals points are always used when writing amounts on ruled accounting paper so as not to be confusing.

False

Every transaction must affect accounts on both sides of the accounting equation

False

Financial rights to the assets of a business are called liens.

False

If a business had poor available assets and many liabilities, that business is financially strong.

False

If a business incurs a net loss, the closing entry is a credit to the owner's capital account and a debit to the income summary account.

False

If an account has no balance, its account title is not listed on the trial balance.

False

In a T account, amounts recorded on the left side are called credits.

False

Inaccurate accounting records is used to make the business appear to be more successful than it really is, and thereby can help the business really succeed.

False

No journalized entry is needed for deposits.

False

On a balance sheet, owner's equity should equal total assets plus total liabilities.

False

Ownership of a check can be transferred only once.

False

Revenue increases owners equity and decreases cash.

False

Suppliers that extend credit to a business and institution have no stake in that organization's success or failure.

False

A balance sheet can be prepared for any date or period of time.

True

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder is called a debit card.

True

A business received cash from owner as an investment. This transaction is recorded by debiting cash and crediting Capital.

True

A correcting entry is an additional journal entry to correct a transaction that was improperly journalized and posted to the ledger.

True

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

True

A general ledger contains all accounts needed to prepare financial statements.

True

A separate form for each account is used to summarize all the changes to a single account.

True

A trail balance prepared after the closing entries are posted is called a post-closing trial balance.

True

A withdrawal account has a normal debit balance.

True

Account balances increase on the normal balance side of an account.

True

Adjusting entries are recordeed on the next journal page following the page on which the last daily transactions for the month are recorded.

True

All accounting transactions are recorded in the accounting equation.

True

All journal entry amounts are posted to the general ledger from the general ournal.

True

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

True

Before a transaction is recorded in a journal, that transaction is analyzed into its debit and credit parts.

True

Before the worksheet is complete, net income mst e calculated and the worksheet must be totaled and ruled.

True

Each part of the accounting equation consists of one or more accounts

True

Errors in permanent records should never be erased.

True

For a component percentage to be useful, a business owner or manager should be familiar with what's acceptable for businesses similar to theirs.

True

If a business's financial condition is not strong, adverse changes in the economy might cause the business to fail.

True

If you find an incorrect amount on a worksheet erase the error and replace it with the correct amount.

True

Information for each transaction recorded in a journal is called an entry

True

Managers and owners use the general ledger to make their business decisions.

True

Many businesses use electronic funds transfer to pay vendors.

True

Nominal accounts are also known as temporary accounts.

True

ONly general ledger accounts with balances are included on a post-closing trial balance.

True

On an income statement, component percentages are calculated by dividing the amount of each component by the total amount of.

True

Temporary accounts show changes in the owner's caital for a single fiscal period.

True

The account used to summarize the owner's equity in in a business is called capital

True

The endorser guarantees payment of the check; that is, she is liable for payment.

True

The owner's capital account is on the right side of the accounting equation and has a normal credit balance.

True

The posting reference is always recorded a sthe last step in the posting procedure.

True

The total amounts on the left side of the accounting equation must always equal the total amounts on the right side.

True

To calculate the ending balance of owner's equity, you should subtract the value of owner drawing accounts.

True

To prepare an income statement, account titles are obtained from the worksheet's Account Title column and account balances are obtained from the worksheet's Income Statement columns.

True

To prove a jornal age, you must verify that the total debits on the page equal the total credits.

True

To prove a journal page, you must verify that the total debits on the page equal the total credits.

True

Understanding accounting helps managers and owners make better business decisions.

True

When a business pays cash for an expense in on fiscal period, but the expense isn't used until a later period, the expense should be reported in the same dical period that is is used to produce revenue.

True