Accounting Principles True-False Statements

2-4 Test Bank for Accounting Principles, Eighth Edition TRUE-FALSE STATEMENTS 1. A new account is opened for each transaction entered into by a business firm. 2. The recording process becomes more efficient and informative if all transactions are recorded in one account. 3. When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers. 4. An account is often referred to as a T-account because of the way it is constructed. 5. A debit to an account indicates an increase in that account. 6. If a revenue account is credited, the revenue account is increased. 7. The normal balance of all accounts is a debit. 8. Debit and credit can be interpreted to mean increase and decrease, respectively. 9. The double-entry system of accounting refers to the placement of a double line at the end of a column of figures. 10. A credit balance in a liability account indicates that an error in recording has occurred. 11. The drawing account is a subdivision of the owner's capital account and appears as an expense on the income statement. 12. Revenues are a subdivision of owner's capital. 13. Under the double-entry system, revenues must always equal expenses. 14. Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts. 15. Business documents can provide evidence that a transaction has occurred. 16. Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal. 17. Transactions are entered in the ledger accounts and then transferred to journals. 18. All business transactions must be entered first in the general ledger. 19. A simple journal entry requires only one debit to an account and one credit to an account. 20. A compound journal entry requires several debits to one account and several credits to one account. 21. Transactions are recorded in alphabetic order in a journal. 22. A journal is also known as a book of original entry. The Recording Process 2-5 23. The complete effect of a transaction on the accounts is disclosed in the journal. 24. The account titles used in journalizing transactions need not be identical to the account titles in the ledger. 25. The chart of accounts is a special ledger used in accounting systems. 26. A general ledger should be arranged in the order in which accounts are presented in the financial statements, beginning with the balance sheet accounts. 27. The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises. 28. Posting is the process of proving the equality of debits and credits in the trial balance. 29. After a transaction has been posted, the reference column in the journal should not be blank. 30. A trial balance does not prove that all transactions have been recorded or that the ledger is correct. Additional True-False Questions 31. The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction. 32. The normal balance of an expense is a credit. 33. The journal provides a chronological record of transactions. 34. The ledger is merely a bookkeeping device and therefore does not provide much useful data for management. 35. The chart of accounts is a listing of the accounts and the account numbers which identify their location in the ledger. 36. The primary purpose of a trial balance is to prove the mathematical equality of the debits and credits after posting. 37. The trial balance will not balance when incorrect account titles are used in journalizing or posting. Answers to True-False Statements Item 1. 2. 3. 4. 5. 6. Ans. F F F T F T Item 7. 8. 9. 10. 11. 12. Ans. F F F F F T Item 13. 14. 15. 16. 17. 18. Ans. F F T T F F Item 19. 20. 21. 22. 23. 24. Ans. T F F T T F Item 25. 26. 27. 28. 29. 30. Ans. F T F F T T Item 31. 32. 33. 34. 35. 36. Ans. T F T F T T Item 37. Ans. F