CHAPTER 2: ANALYZING TRANSACTIONS
1.
Accounts are records of increases and decreases in individual financial statement items.
a.
True
b.
False
2.
A chart of accounts is a listing of accounts that make up the journal.
a.
True
b.
False
3.
The chart of accounts should be the same for each business.
a.
True
b.
False
Chapter 2: Analyzing Transactions
4.
Accounts payable are accounts that you expect will be paid to you.
a.
True
b.
False
5.
Consuming goods and services in the process of generating revenues results in expenses.
a.
True
b.
False
6.
Prepaid expenses are an example of an expense.
a.
True
b.
False
Chapter 2: Analyzing Transactions
7.
The Unearned Revenues account is an example of a liability.
a.
True
b.
False
8.
The Drawings account is an example of an expense.
a.
True
b.
False
9.
Accounts in the ledger are usually maintained in alphabetical order.
a.
True
b.
False
Chapter 2: Analyzing Transactions
10.
Depending on the account title, the right side of the account is referred to as the credit side.
a.
True
b.
False
11.
To determine the balance in an account, always subtract credits from debits.
a.
True
b.
False
12.
An account in its simplest form has three parts to it: a title, an increase side, and a decrease side.
a.
True
b.
False
Chapter 2: Analyzing Transactions
13.
The T account got its name because it resembles the letter “T.”
a.
True
b.
False
14.
The right hand side of a T account is known as a debit and the left hand side is known as a credit.
a.
True
b.
False
15.
Debiting the cash account will increase the account.
a.
True
b.
False
Chapter 2: Analyzing Transactions
16.
A credit to the cash account will increase the account.
a.
True
b.
False
17.
The cash account will always be debited.
a.
True
b.
False
18.
The recording of cash receipts to the cash account will be done by debiting the account.
a.
True
b.
False
Chapter 2: Analyzing Transactions
19.
The recording of cash payments from the cash account is done by entering the amount as a credit.
a.
True
b.
False
20.
The balance of the account can be determined by adding all of the debits, adding all of the credits, and adding
the
amounts together.
a.
True
b.
False
21.
Liabilities are debts owed by the business entity.
a.
True
b.
False
Chapter 2: Analyzing Transactions
22.
The accounts payable account is listed in the chart of accounts as an asset.
a.
True
b.
False
23.
A drawing account represents the amount of withdrawals made by the owner.
a.
True
b.
False
24.
Revenues are equal to the difference between cash receipts and cash payments.
a.
True
b.
False
Chapter 2: Analyzing Transactions
25.
Expenses result from using up assets or consuming services in the process of generating revenues.
a.
True
b.
False
26.
Owner’s equity will be reduced by the amount in the drawing account.
a.
True
b.
False
27.
When an owner invests assets in the business, the capital account increases due to revenue being earned.
a.
True
b.
False
Chapter 2: Analyzing Transactions
28.
When an account receivable is collected in cash, the total assets of the business increase.
a.
True
b.
False
29.
When an account payable is paid with cash, the owner’s equity in the business decreases.
a.
True
b.
False
30.
For a month’s transactions for a typical medium-sized business, the salary expense account is likely to have
only
credit entries.
a.
True
b.
False
Chapter 2: Analyzing Transactions
31.
A debit is abbreviated as Db and a credit is abbreviated as Cr.
a.
True
b.
False
32.
When a business receives a bill from the utility company, no entry should be made until the invoice is paid.
a.
True
b.
False
33.
For a month’s transactions for a typical medium-sized business, the accounts payable account is likely to have
only
credit entries.
a.
True
b.
False
Chapter 2: Analyzing Transactions
34.
Withdrawals decrease owner’s equity and are listed on the income statement as a deduction from revenue.
a.
True
b.
False
35.
The normal balance of revenue accounts is a credit.
a.
True
b.
False
36.
The normal balance of an expense account is a credit.
a.
True
b.
False
Chapter 2: Analyzing Transactions
37.
The normal balance of the drawing account is a debit.
a.
True
b.
False
38.
Expense accounts are increased by credits.
a.
True
b.
False
39.
The normal balance of a capital account is a debit.
a.
True
b.
False
Chapter 2: Analyzing Transactions
40.
Revenue accounts are increased by credits.
a.
True
b.
False
41.
Liability accounts are increased by debits.
a.
True
b.
False
42.
Journalizing transactions using the double-entry bookkeeping system will eliminate fraud.
a.
True
b.
False
Chapter 2: Analyzing Transactions
43.
Transactions are listed in the journal chronologically.
a.
True
b.
False
44.
Journalizing is the process of entering amounts in the ledger.
a.
True
b.
False
45.
The process of recording a transaction in the journal is called journalizing.
a.
True
b.
False
46.
Transactions are initially entered into a record called a journal.
a.
True
b.
False
Chapter 2: Analyzing Transactions
47.
The double-entry accounting system records each transaction twice.
a.
True
b.
False
48.
The increase side of an account is also the side of the normal balance.
a.
True
b.
False
49.
Journal entries include both debit and credit accounts for each transaction.
a.
True
b.
False
50.
A transaction that is recorded in the journal is called a journal entry.
a.
True
b.
False
Chapter 2: Analyzing Transactions
51.
Assets are increased with debits and decreased with credits.
a.
True
b.
False
52.
Liabilities are increased with debits and decreased with credits.
a.
True
b.
False
53.
Debits will increase Unearned Revenues and Revenues.
a.
True
b.
False
Chapter 2: Analyzing Transactions
54.
All owners’ equity accounts record increases to the accounts with credits.
a.
True
b.
False
55.
Journalizing always eliminates fraudulent activity.
a.
True
b.
False
56.
Journal entries can have more than two accounts as long as the debits equal the credits.
a.
True
b.
False
Chapter 2: Analyzing Transactions
57.
Normal account balances are on the increase side of the accounts.
a.
True
b.
False
58.
The process of transferring the data from the journal to the ledger accounts is called posting.
a.
True
b.
False
59.
The post reference notation used in the ledger is the account number.
a.
True
b.
False
Chapter 2: Analyzing Transactions
60.
The post reference notation used in the journal is the page number.
a.
True
b.
False
61.
A notation in the post reference column of the general journal indicates that the amount has been posted to
the
ledger.
a.
True
b.
False
62.
The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare
the
financial statements.
a.
True
b.
False