Accounting chapter 3
A T account has three parts: the title, the debit side, and the credit side.
T
A credit increases liabilities and owner's equity.
T
A trial balance is a list of all accounts showing the title and balance of each account.
T
A trial balance is taken periodically to check the equality of the debits and credits.
T
An account is a form or record used to keep track of the increases or decreases in the individual assets, liabilities, owner's equity, revenues, and expenses of a business entity.
T
An increase or decrease in any asset, liability, owner's equity, revenue, or expense is always accompanied by an offsetting change within the basic accounting elements.
T
Asset accounts normally have debit balances.
T
At least two accounts are affected by every transaction.
T
Craig deposits $6,000 in an account to start a new business. He should debit Cash and credit his capital account.
T
If services for the month total $3,300 in cash and $700 on account, Accounts Receivable increases $700.
T
If services for the month total $7,000 in cash and $1,500 on account, the revenue account increases $8,500.
T
Increases in owner's equity are entered as credits.
T
Jesse purchased a supply of computer printer cartridges to last for about three months; this transaction increased Supplies and decreased Cash.
T
John received $350 for delivery services; this transaction increased Cash and revenue.
T
Owner's equity includes four types of accounts: Owner's Capital, Revenues, Expenses, and Owner's Drawing.
T
Payment of rent decreases the Cash account.
T
Prepaid insurance and supplies are assets because they will provide benefits for more than one month.
T
The accounting equation must remain in balance.
T
The balance of a T account is on the side with the larger footing.
T
The owner's capital account normally has a credit balance.
T
The sum of the debits must equal the sum of the credits on the trial balance.
T
The trial balance is used in preparing financial statements
T
To debit an account is to enter an amount on the left side of the account.
T
When debits equal credits for a transaction, the accounting equation is in balance.
T
When services are performed for which payment will be received later, accounts receivable increases.
T
Withdrawals of cash and other assets by the owner for personal reasons decrease owner's equity.
T
difference between the footings of an account is called the balance.
T
The purchase of a supply of markers for three months should be recorded as an increase in revenue and a decrease in cash.
F
A trial balance is a formal business report.
F
Elysa paid $135 for utilities for her office; this transaction increased Cash and the expense account.
F
If services for the month total $3,300 in cash and $700 on account, the cash account increases $700.
F
Kate made a $475 payment on her company van. She should credit Accounts Payable and debit the automobile account.
F
Liability accounts normally have debit balances.
F
Mandy withdraws $600 from her business. This transaction increases cash but decreases owner's equity.
F
Prepaid Insurance is an expense account.
F
Revenue accounts normally have debit balances.
F
Revenues decrease owner's equity.
F
Services on account increase a revenue account and increase the cash account.
F
The fact that each transaction has a dual effect on the accounting elements provides the basis for what is called complex-entry accounting.
F