Accounting True and False

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

True

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

True

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

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

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

True

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

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

False

Separate amount 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 in its general ledger

False

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

False

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 buisness

True

Banks deduct service charges from customers' checking accounts without 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

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

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 the column totals have been verified

True

Errors in general ledger accounts should never be erased

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 calculator tape is the source document for daily sales

True

The capital account is an owner's equity account

True

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

True

The income statement's account balances are obtained from the work sheet'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 the 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

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

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 check

True

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

True

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

True

Totaling and ruling the Adjustments columns of a work sheet is necessary to prove the equality of debits and credits

True

Two financial statements are prepared from the information on the work sheet

True

When a deposit is made in a bank account, the bank issues a reciet

True

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

True

If the difference between the totals of Debit and Credit columns on a worksheet can be evenly distributed 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

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

False

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

False

An amount written in parentheses on a financial statement indicates an estimate

False

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

False

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

False

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

False

Examples of source documents include checks, sales invoice, memorandums, and letters

False

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

False

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

False

The best way to prevent errors is to use a calculator

False

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

False

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

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

False

The only reason for the post reference columns of the journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interuptedd

False

The owner's capital amount reported on a balance sheet is determined after the equities section is prepared

False

The second division of TechKnow Consulting's 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 as SI in a journal entry

False

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

False

The totals of special amount columns in a 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

To correct an error in a journal, simply erase the incorrect item and write the correct item in the same place

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

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

True

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

True

A check is the 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 the sum

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 buisness

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 also known as a fiscal period

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

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

True

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

True

Information is a journal includes the debit and credit parts of each transaction recorded on one place

True

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

True

Most errors occur in doing arithmatic

True

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

True

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

True

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

True

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

True

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

True