True/False
Component percentages on an income statement are calculated by dividing sales and total expenses by net income.
False
If the difference between the totals of Debit and Credit columns on a work sheet can be evenly divided by 9, then the error is most likely in addition.
False
Net income on a work sheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total
False
Separate amounts in general amount columns are not posted individually.
False
Separate amounts in special amount columns are posted individually.
False
The accounting concept Consistent Reporting is being applied when a word processing service business reports revenue per page one year and revenue per hour the next year.
False
The accounting equation is most stated as: Assets + Liabilities = Owner's Equity
False
The balance of the supplies account plus the value of the supplies on hand equals the up-to-date balance of the supplies account.
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 column total of the General Debit column is posted.
False
The current capital to be reported on a balance sheet is calculated as: the capital account balance plus net income equals current capital.
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 petty cash fund is a liability with a normal debit balance.
False
The posting reference should always be recorded in the journal's Post Ref. column before amounts are recorded in the ledger.
False
The procedure of arranging accounts in a general ledger, assigning account numbers, and keeping records currents is posting.
False
The steps for posting are to write the date, journal page number, amount, and balance.
False
The two steps for opening an account are writing the account title and recording the balance.
False
The year and the month is written on each journal page only for the first entry.
False
To correct an error in a journal, simply erase the incorrect term and write the correct item in the same place.
False
If the previous account balance and the current entry posted to an account are both debits, the new account balance is a debit.
True
The source document for an electronic funds transfer is a memorandum.
True
The source document for cash payment transactions is a check.
True
Transactions are recorded in a journal in chronological order.
True
Withdrawals are assets taken out of a business for the owner's personal use.
True
A balance sheet reports financial information over a specific period of time.
False
An amount written in parentheses on a financial statement indicates an estimate.
False
Asset accounts increase on the credit side.
False
Information needed to prepare an income statement comes from the trial balance columns and the income statement columns of a work sheet.
False
The drawing account is a permanent account.
False
The income summary account has a normal debit balance.
False
The left side of an asset account is the credit side because asset accounts are on the left side of the accounting equation.
False
The normal balance side of an accounts receivable is a credit.
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
When a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue.
False
Journal entries used to prepare temporary accounts for a new fiscal period are closing entries.
True
Preparing a work sheet 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
Temporary accounts must start each fiscal period with a zero balance.
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 balances of the expense accounts must be reduced to zero to prepare the accounts for the next fiscal period.
True
The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.
True
The formula for calculating net income is total revenue minus total expenses equals net income.
True
The formula for calculating the total expenses component percentage is: total expenses divided by total sales equals total expenses component percentage.
True
The journal columns used to record paying cash for rent 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 most common type of withdrawal by an owner from a business is the withdrawal of cash.
True
The net income calculated for the income statement and the net income on the work sheet must be the same.
True
The source document for a debit card purchase is a memorandum.
True
To close a temporary account, an amount equal to its balance is recorded in the account on the side opposite to its balance.
True
To summarize withdrawal information separately from the other records, owner withdrawal transactions are recorded in the owner's capital account.
False
Total assets are the amount the owner has invested in the business
False
Each asset account has a normal debit balance
True
When financial records for a business and for it's owner's personal belongings are not mixed, this is an application of the Business Entity accounting concept.
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
Increases to liability accounts are recorded on the debit side.
False
Journals, ledgers, and work sheets are considered permanent records.
False
On an income statement, double lines are ruled across both amount columns to indicate that debits equal credits.
False
Ownership of a check cannot be transferred.
False
Financial information may be reported any time a business needs it.
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
A balance sheet has three sections: heading, assets, and liabilities.
False
When petty cash is replenished, Petty Cash is debited and Cash is credited.
False
A bank requires that the signature of the person authorized to sign checks be on the signature card.
True
A check mark in parentheses below a General Debit column total indicates that the total is not posted.
True
A check with a blank endorsement can be cashed by anyone who has the check
True
A component percentage is the percentage relationship between one financial statement item and the total that includes that item.
True
A group of accounts is called a ledger.
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
Increases in expense accounts are recorded as debits because they decrease the owner's capital account.
True
Making adjustments to general ledger accounts is na application of the Matching Expenses with Revenue accounting concept.
True
Only the column totals for special amount columns in a journal are posted.
True
Payments for advertising, equipment repairs, utilities, and rent are expense transactions.
True
Prepaid insurance is decreased with a credit.
True
The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition.
True
The account number is placed in the Post. Ref. column of the journal as the last step in the posting procedure.
True
The balance of an account increases on the same side as the normal balance side.
True
The financial condition of a business refers to its financial strength.
True
When an owner withdraws cash from the business, the transaction affects both assets and owner's equity
True
When cash is paid for supplies, the supplies account is increased by debit.
True
When items are bought and paid for at a future date another way to state this is to say these items are bought on account.
True
The two accounts affected by the adjustment for insurance are Prepaid Insurance Expense and Insurance.
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
A balance sheet reports financial information on a specific date and includes the assets, liabilities, and owner's equity.
True
A post-closing trial balance verifies the equality of debits and credits in a general ledger after the closing entries are posted.
True
Account numbers may be assigned by 10s so that new accounts can be added easily.
True
Advertising expense is increased with a debit.
True
After each transaction, the accounting equation must remain in balance.
True
Two financial statement are prepared from the information on the work sheet.
True
Using a memorandum as the source document for a dishonored check is an application of the accounting concept Objective Evidence.
True
Voided checks should be recorded in the journal.
True
When adding a new expense account between accounts numbered 510 and 520, the new account is assigned the account number 515.
True
When two assets are the amount the owner has invested in the business.
True
A withdrawal is an expense.
False
An accounting device used to analyze transactions is a T account.
True
An expense is a decrease in owner's equity resulting from the operation of a business.
True
An income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or a net loss.
True
The capital account's new balance after all closing entries are posted is verified by checking it with the amount of capital shown on the balance sheet at the end of the fiscal period.
Ture
An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.
True
At the end of a fiscal period, the balances of temporary accounts are summarized and transferred to the owner's capital accounts.
True
Cash is always proved at the end of a month.
True
Detailed information about changes in owner's equity is needed by owners and managers to make sound business decisions.
True
Double lines are ruled across a journal's amount column to indicate that the totals have been verified as correct.
True
Each liability account has a normal credit balance
True
Each transaction changes the balances in at least two accounts.
True
For a service business, the revenue reported on an income statement includes components for total expenses and net income.
True
If a business has only two asset accounts, Cash and Supplies, the two accounts are numbered 110 and 120.
True
If an amount is written in an incorrect column on a work sheet, the error should be erased and the amount should be written in the correct column.
True
If the Trial Balance columns are not equal and the difference is $50.00, the error most likely is a $25.00 amount written in the wrong column.
True
Cash is increased with a credit.
False
Common accounting practice is to record withdrawals as debits directly in the owner's capital account.
False
A complete entry consists of the date, the debut amount, and the credit amount.
False
A drawing account is decreased by debits and increased by credits.
False
A journal page number is written in the Post. Ref. column of an account to show that posting of the entry is completed.
False
A journal shows in one place all the changes in a single account.
False
Accounts payable are increased with a debit.
False
An amount recorded on the left side of a T account is a credit.
False