The Role of Accounting Records
(T)
Books of accounts
1. Accounting records are also referred to as the books. (T)
The Journal
2 The general journal is used to record the events (transactions) of a business. (T)
23. The complete effect of a transaction on the accounts is disclosed in the journal. (T)
48. The journal includes both debit and credit accounts for each transaction. (T)
48. A journal gives a complete record of each transaction in one place, and shows the debits and
credits for each transaction. (T)
Book or original entry
47. The journal is known as a book of original entry. (T)
15. The journal is the book of original entry. (T)
22. A journal is also known as a book of original entry. (T)
7. A book of original entry is a chronological record of an entity’s transactions and how the
transactions affect the balances in pertinent accounts. (T)
5. Under International Financial Reporting Standards (IFRS) the "book of original entry" is also
known as the journal. (T)
46. Transactions are first recorded in the ledger. (F)
18. All business transactions must be entered first in the general ledger. (F)
49. The journal is known as the book of final entry because financial statements are prepared from
it. (F)
Chronological order
. A journal is the chronological record of transactions. (T)
. A journal provides a chronological record of transactions. (T)
33. The journal provides a chronological record of transactions.
. A journal shows a chronological listing of the accounting activities of a business. (T)
9. A general journal chronologically lists transactions and other events, expressed in terms of
debits and credits to accounts. (T)
20. A general journal chronologically lists transactions and other events, expressed in terms of
debits and credits to accounts. (T)
18. Transactions are listed in the journal chronologically. (T)
. Transactions are listed in chronological order in the journal. (T)
1 The general journal was developed to organize transactions by account. (F)
Special journals
65. Businesses may use several special journals in their accounting systems. (T)
The General Ledger
Book of final entry
. A ledger is called the book of final entry. (T)
1. A ledger is where the company initially records transactions and selected other events. (F)
20. The general ledger is sometimes called the book of original entry because it is the accounting
record where transactions are first recorded. (F)
1. A ledger is where the company initially records transactions and selected other events. (F)
Contents
. A company would review the ledger if an account balance was needed. (T)
. If a company wanted to know how much cash it had available, it would look in the journal. (F)
1. A ledger contains only balance sheet accounts kept up-to-date in a systematic way. (F)
34. The ledger is merely a bookkeeping device and therefore does not provide much useful data
for management. (F)
Format
. The three-column form of the ledger account is widely used in practice. (T)
19. If ledger accounts are maintained in three-column, running balance form, the journal should be
maintained in the same format. (F)
Sorting
9. Accounts are usually arranged in the ledger in financial statement order, that is, assets first,
followed by liabilities, owners' equity, expenses, and revenues. (F)
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. (T)
9. Accounts in the ledger are usually maintained in alphabetical order. (F)
. Accounts in the ledger are maintained in alphabetical order. (F)
Chart of Accounts
Nature
. A chart of accounts is the book (or printout) holding all of the company's accounts. (F)
25. The chart of accounts is a special ledger used in accounting systems. (F)
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. (F)
3. The chart of accounts should be the same for each business. (F)
. The chart of accounts would be the same for General Motors and Wal-Mart. (F)
Listing of all accounts
2 A listing of all accounts in numerical order is called a chart of accounts. (T)
15. The chart of accounts is a list of all the accounts used by a company and includes an
identification number assigned to each account. (T)
35. The chart of accounts is a listing of the accounts and the account numbers which identify their
location in the ledger. (T)
. The chart of accounts is a listing of the accounts and the account numbers which identify their
location in the ledger. (T)
2. A chart of accounts is a listing of accounts that make up the journal. (F)
Sequence
3. An account numbered 321 would be considered a stockholders’ equity account as it begins
with a 3. (T)
1. Account titles such as marketing expense and depreciation expense would be numbered
starting with a 3. (F)
. A chart of accounts is organized in the alphabetical order of the accounting equation—with
assets first, followed by expenses, liabilities, owners’ equity, and revenues—because using
numbers can be very complicated. (F)
The Characteristics & Uses of Accounts
. An account is the detailed record of the changes in a particular asset, liability, or owner’s
equity. (T)
17. An account is a summary record of the changes in a particular asset, liability, or owners'
equity. (T)
. An account is a record of changes in specific assets, liabilities, and owner’s equity items. (T)
6. An account is a record of increases and decreases in a specific asset, liability, equity, revenue,
or expense item. (T)
1. Accounts are records of increases and decreases in individual financial statement items. (T)
66. Once journal entries are posted to accounts, each account will show a new balance after each
entry. (T)
31. An account has three parts to it; a title, an increase side, and a decrease side. (T)
. An account must have a left or debit side and a right or credit side. (T)
1. The credit side of an account is the right side while the debit side is the left side. (T)
11. The left-hand side of an account is used for recording debits and the right-hand side for
recording credits. (T)
10. A credit to a ledger account refers to the entry of an amount on the right side of an account.
(T)
11. It is not necessary to keep separate accounts for all items of importance for business
decisions. (F)
10. Land and buildings are generally recorded in the same ledger account. (F)
24. The account titles used in journalizing transactions need not be identical to the account titles in
the ledger. (F)
1. A new account is opened for each transaction entered into by a business firm. (F)
T-account
6. A T-account is an analysis of an account. (T)
4. T accounts facilitate the preparation of financial statements at any instant if the account
balances are kept up-to-date. (T)
2 A T-account is a way to visualize the increases and decreases to the value of an account. (T)
. The T-account is a tool for visualizing business transactions and usually can be easily
prepared. (T)
2. T accounts focus on account balances while journal entries focus on transactions. (T)
4. An account is often referred to as a T-account because of the way it is constructed. (T)
32. The T account got its name because it resembles the letter “T” (T)
. To see how transactions affect a business, managers can go directly to T- accounts. (T)
. Managers who need information quickly can analyze the transaction by using T-accounts. (T)
. A T account is used for demonstration purposes. (T)
. The left hand side of a T account is the debit side and the right hand side is the credit side. (T)
33. The right hand side of a T account is known as a debit and the left hand side is known as a
credit. (F)
3. The right side of a T account always increases an account balance and the left side of a T
account always decreases an account balance. (F)
3. The running balance form or the T account form is typically used in the trial balance to display
the accounts and their amounts. (F)
5. T accounts can only be used for income statement accounts. (F)
Debit and Credit Entries
Determining the Balance of a T-account
16. An account balance is the difference between the debits and credits for an account including
any beginning balance. (T)
. The amount remaining in an account is called its balance. (T)
. The balance of an account is the difference between the account’s total debits and its total
credits. (T)
. The balance of an account can be determined by adding all of the debits, adding all of the
credits, and then subtracting the two amounts. (T)
11. To determine the balance in an account, always subtract credits from debits. (F)
40. The balance of the account can be determined by adding all of the debits, adding all of the
credits, and adding the amounts together. (F)
. If an account’s total debits exceed its total credits, the account would have a credit balance.
(F)
12. If the number of debit entries in an account is greater than the number of credit entries, the
account will have a debit balance. (F)
16. A business that is profitable and liquid will have more accounts with credit balances than with
 debit balances. (F)
24. The normal balance of the dividend account is a debit. (T)
Debit Balances in Asset Accounts
. Revenues and expenses are specialized shareholders’ equity accounts, all having debit
Credit Balances in Liability & Owner’s Equity Accounts balances. (F)

Normal balance
Definition
7 Normal balance refers to the positive increase of an account and identifies the side of the
account (Debit or Credit) to which this positive balance is recorded. (T)
55. Normal balances are the side that increases the account balance. (T)
. The side of an account that increases the balance is always the same as the normal balance
side. (T)
. An account that normally has a debit balance may occasionally have a credit balance. (T)
14. The increase side of all accounts is the normal balance. (T)
18. The normal balance for any account is the side of the account where increases are recorded.
(T)
17. Since revenues and expenses are associated with stockholders' equity, revenues and
expenses must have balances on the same side of a T account. (F)
Revenues
24. A revenue account normally has a debit balance. (F)
26. The normal balance of revenue accounts is a credit. (T)
Expenses
25. The normal balance of an expense account is a credit. (F)
Comprehensive
27. Asset accounts normally have credit balances and expense accounts normally have debit
balances. (F)
7. The normal balance of all accounts is a debit. (F)

. The normal balance for any account is always the side of the account (debit or credit) where , An account with a normal debit balance indicates that the account is a liability account. (F)
the largest amount is found. (F)
19. Assets, expenses and revenues have normal balances on the debit side of a T account. (F)
Debit balance
Credit balance Double-entry accounting
. An account with a normal credit balance is most often a liability or shareholders’ equity Dual effects of each transaction
account. (T) . In the United States, we use double entry accounting, which means we record the dual effects
of each transaction. (T)
Assets
Liabilities At least two accounts
Equity 1 Double-entry accounting requires that every business transaction impacts at least two different
28. A capital account normally has a debit balance. (F) accounts. (T)

26. The owner’s withdrawal account normally has a credit balance since it is an equity account. (F) . At least two accounts are affected in every transaction. (T)

23. The normal balance of a capital stock account is a debit. (F) 23. Double entry accounting requires that each transaction affects, and be recorded in, at least
 two accounts. bookkeeping. (F)

Debits & credits . Double-entry accounting records only those transactions affecting the income statement. (F)
. Every business transaction involves both debits and credits. (T)
. All business transactions involve an increase in at least one account and a decrease in at least
Total debit = total credit one other account. (F)
18. In a double-entry accounting system, total amount debited must always equal total amount
credited. (T) Debit & Credit Rules
Debit & credit
. The double-entry system of accounting refers to a method of recording which results in equal 8. Debit and credit can be interpreted to mean increase and decrease, respectively. (F)
debits and credits for each transaction. (T)
34. A debit is abbreviated as Db and a credit is abbreviated as Cr. (F)
31. The double-entry system is a logical method for recording transactions and results in equal
debits and credits for each transaction. (T) . Debit refers to the right side of the T-account, and credit refers to the left side. (F)

. Debits must always equal credits. (T) . The debit side of all accounts increases the balance and the credit side decreases all
accounts. (F)
Give & receive
2. Every transaction has two sides—you give something and you receive something. (T) 6. In general, debits refer to increases in account balances, and credits refer to decreases. (F)

At least two accounts, total debit = total credit Debit

. Double-entry accounting requires transactions to affect two or more accounts, and the total of Increases
the debits and credits must equal. (T) 20. Debits increase asset and expense accounts. (T)

Total debit = total credit, number of debit & credit entries may vary . Dividends and expenses are specialized shareholders’ equity accounts that are increased by
18. When a company uses the double-entry method, the total dollar amount of debits recorded debits. (T)
must equal the total dollar amount of credits, but the number of debit and credit entries may
differ. (T) . Assets, owners’ equity and dividends are all increased by debits. (F)

False statements 20. A debit increases the balance of assets and liabilities. (F)
13. The double-entry accounting system records each transaction twice. (F)
52. Debits will increase Unearned Revenues and Revenues. (F)
13. Under the double-entry system, revenues must always equal expenses. (F)
3 The debit (left) side of an account always indicates an increase in the value of the account. (F)
9. The double-entry system of accounting refers to the placement of a double line at the end of a
column of figures. (F) 5. A debit to an account indicates an increase in that account. (F)

12. Unless the transaction is compound, the dollar amount of the debits for each transaction is Decreases
equal to the dollar amount of the credits for that transaction, and thus the term double-entry 25. Accounts are normally decreased by debits. (F)
Increase and decrease . An asset account is increased by a debit. (T)
. Debits increase asset accounts and decrease liability accounts. (T)
Cash
False statements 35. Debiting the cash account, will increase the account. (T)
. The debit side is always the right side of the account. (F)
. Cash increases on the debit side of the account. (T)
17. Debit means the right-hand side of any account. (F)
36. A credit to the cash account will increase the account. (F)
21. Debit means increase. (F)
. The cash account is always debited. (F)
29. A debit entry is always favorable. (F)
37. The cash account will always be debited. (F)
Credit
Right side Supplies
. The credit side is always the right side of the account. (T) . The Supplies account is increased by a debit. (T)

10. Depending on the account title, the right side of the account is referred to as the credit side. Rules for liabilities
(F) 51. Liabilities are increase with debits and decrease with credits. (T)

Increases 19. Increases in liability accounts are recorded as debits. (F)

6 Accounts that increase on the credit side are liabilities, common stock, revenues and retained
earnings (LCR). (T) 20. Liability accounts are increased by debits. (F)

21. Credits always increase account balances. (F) 13. Liability accounts should only be debited and never credited. (F)

5 Accounts that increase on the credit side are assets, dividends and expenses (ADE). (F) Rules for equity
. An owner’s equity account is increased by a debit. (F)
Decreases
21. A credit decreases the balance of assets and expenses. (T) 53. Recording a credit to all stockholders’ equity accounts will increase the account. (F)

. Liabilities and revenues are decreased by credits. (F) Rules for liabilities & equity
10. All liability and equity accounts are increased on the credit side and decreased on the debit
Increases & decreases side. (T)
4 The credit (right) side of an account shows an increase or decrease depending upon the type
of account. (T) 7. The rules for debit and credit and the normal balance of Share Capital–Ordinary are the same
as for liabilities. (T)
Rules for assets
50. Assets are increased with debits and decrease with credits. (T) 5. All liability and stockholders’ equity accounts are increased on the credit side and decreased
 on the debit side. (F)
. Debits are always listed before credits in a journal entry. (T)
23. An increase in a liability is recorded by a credit; an increase in owners' equity by a debit. (F)
. A simple journal entry requires one debit to an account and one credit to an account. (T)
Rules for withdrawals
. Withdrawals increase on the debit side of the account. (T) 19. A simple journal entry requires only one debit to an account and one credit to an account. (T)

Rules for revenue . A compound journal entry affects more than two accounts in the transaction. (T)
22. Revenue accounts are increased by credits. (T)
. A transaction that involves more than one credit or more than one debit is called a compound
6. If a revenue account is credited, the revenue account is increased. (T) entry. (T)

24. Revenues increase owners' equity and are, therefore, recorded by crediting the revenues 54. Journal entries can have more than two accounts as long as the debits equal the credits. (T)
account. (T)
. Journal entries can have more than two accounts as long as the total debits equal the total
Rules for expenses credits. (T)
22. Crediting an expense account decreases it. (T)
15. When making a general journal entry, there can only be one debit and one credit. (F)
21. Expense accounts are increased by credits. (F)
. A compound entry is when more than one transaction occurs. (F)
Comprehensive
14. Increases in owners' equity are recorded by credits; increases in assets and in liabilities are 44. A compound journal entry affects no more than two accounts. (F)
recorded by debits. (F)
15. A compound entry is when two or more journal entries are made. (F)
6. On the income statement, debits are used to increase account balances, whereas on the
statement of financial position, credits are used to increase account balances. (F) 20. A compound journal entry requires several debits to one account and several credits to one
account. (F)
8. On the income statement, revenues are increased by a debit whereas on the statement of
financial position retained earnings is increased by a credit. (F) . A compound journal entry must always require several debits to one account and at least two
credits to another account. (F)
11. In general, debits refer to increases in account balances, and credits refer to decreases. (F)
10. Negative numbers are never used in the journal or the ledger; the effect on the account is
Double-Entry Accounting conveyed by the side on which the number appears. (T)
. In a journal entry, the sum of the debits must always equal the sum of the credits. (T)
. The debit is indented in a journal entry. (F)
Analyzing Transactions Using Business Documents & Chart of Accounts
Journalizing Transactions 9. Debits are always journalized after credits. (F)
Journalizing Process
. The date of the transaction is one of the items included in a journal entry. (T) . The credit part of the transaction is recorded first in the journal entry. (F)
 Downpayment + note payable
. When recording a transaction in a journal, the credit side is entered first, followed by the debit 16. The purchase of a building with a down payment of cash and the signing of a note payable for
side. (F) the remainder would include a debit to both the Building account and the Notes Payable
account, and a credit to the Cash account. (F)
Journal Entries
1. A journal entry is a record of an event that has a financial impact on the business that can be Sales
reliably measured. (T) Credit sales
36. When a company bills a customer for $600 for services rendered, the journal entry to record
49. A transaction that is recorded in the journal is called a journal entry.(T) this transaction will include a $600 debit to Services Revenue. (F)

. The journal entry presents only a part of the transaction. Information recorded in the ledger is 35. If a company provides services to a customer on credit the selling company should credit
necessary to complete the information about the transaction. (F) Accounts Receivable. (F)

Cash Expenses
38. The recording of cash receipts to the cash account will be done by debiting the account. (T) Cash expenses
. The entry to record office rent of $600, paid in cash for the week, is a debit to Rent Expense
39. The recording of cash payments to the cash account will be done by entering the amount as a and a credit to Cash $600. (T)
credit. (T)
. Cash is debited when the business makes a payment for utilities. (F)
Prepayments
Account debited Posting to the General Ledger
32. If insurance coverage for the next three years is paid for in advance, the amount of the 21. Each business transaction is initially recorded in a journal and later transferred to the
payment is debited to an asset account called Prepaid Insurance. (T) appropriate accounts in a general ledger. (T)

Purchase supplies on credit Comparison of T-Account & Four-Column Account

33. The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to
Accounts Payable. (T) Posting Process
Posting reference column
13. The purchase of office supplies on account would include a debit to accounts payable and a Cross-referencing
credit to office supplies. (F) 4. Cross-referencing is useful in assuring that the debits and credits are in balance. (F)

Property, plant & equipment General journal

Cash purchase 5 The posting reference column of the general journal will include the number of the account to
34. If a company purchases land paying cash, the journal entry to record this transaction will which the information is being posted. (T)
include a debit to Cash. (F)
62. A notation in the post reference column of the general journal indicates that the amount has
. The entry to record the purchase of a truck is to increase Truck expense and decrease Cash. been posted to the ledger. (T)
(F)
29. After a transaction has been posted, the reference column in the journal should not be blank.
(T)
. To show that you have posted to an account in the General Ledger, you use a checkmark. (F)
61. The post reference notation used in the journal is the page number. (F)
General ledger
6 The posting reference column of the general ledger shows the sources of the transferred
information. (T)
Balanced trial balance
. A trial balance that balances does not prove that all transactions have been recorded or that
the ledger is correct. (T)
69. Even when a trial balance is in balance, there may be errors in the individual accounts. (T)
5 If debits equal credits on the trial balance, it means that the trial balance is correct. (F)
54. A trial balance that is in balance is proof that no errors were made in journalizing the
transactions, posting to the ledger, and preparing the trial balance. (F)

60. The post reference notation used in the ledger is the account number. (F) Imbalanced trial balance
7 An entry could have been posted twice and the trial balance might still balance. (T)
Preparing the Trial Balance
. A trial balance is the list of all a company's accounts along with their account numbers. (F) 8 If a trial balance does not equal, redo the addition of the debit and credit columns. (T)

6 Once the trial balance is correct, the next step is to prepare the financial statements, beginning 15. The trial balance will not balance when a company debits two statement of financial position
with the income statement. (F) accounts and no income statement accounts. (F)

70. The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet Unposted entry
both show equality and balancing, and therefore should be equal. (F) 10. If a company fails to post one of its journal entries to its general ledger, the trial balance will
not show an equal amount of debit and credit balance accounts. (F)
72. If the trial balance is in balance, it can be assumed that all journal entries were posted
corrected and no errors were made. (F) Slide
74. The erroneous arrangement of digits, such as writing $45 as $54, is called a slide. (F)
Accounting Errors
Recording errors 77. The erroneous moving of an entire number one or more spaces to the right or left, such as
. If a sale on account is not recorded, the balance sheet reports no accounts payable and, writing $75 as $750, is called a transposition. (F)
therefore, assets are understated. (F)
Transposition error
Posting errors . When the trial balance is out of balance due to a transposition error, the difference between
Unposted payment total debits and total credits will be evenly divisible by 2. (F)
. If the payment of a utilities bill is not posted, assets will be overstated. (T)
Effect of Trial Balance Errors
Unposted debit entry 55. If cash was incorrectly debited for $100 instead of correctly credited for $100, the cash
39. If the credit portion of a journal entry is posted but the debit side is not, liabilities will always be account is out of balance by $100. (F)
overstated. (F)
Partial posting
Finding Trial Balance Errors 29. If the debit side of a journal entry is posted but the credit side is not, the trial balance will not
 balance. (T)

Unposted entry
30. If an entry involving only two assets is not posted, the trial balance will be out of balance. (F)

21. If a company fails to post one of its journal entries to its general ledger, the trial balance will
not show an equal amount of debit and credit balance accounts. (F)

Posting twice
76. Posting a transaction twice will cause the trial balance totals to be equal. (T)

Slide in Journalizing
75. Journalizing a transaction with both the debit and the credit for $69 instead of $96 will cause
the trial balance to be out of balance. (F)

Slide
. When the trial balance is out of balance due to a slide-type error, the difference between total
debits and total credits will be evenly divisible by 9. (T)

Incorrect posting of debit as a credit & vice versa

. When the trial balance is out of balance due to an incorrect posting of a debit as a credit, the
difference is evenly divisibly by 2. (T)

Incorrect posting to the wrong account

73. Posting a part of a transaction to the wrong account will cause the trial balance totals to be
unequal. (F)

Correcting Trial Balance Errors

78. The materiality concept implies that if an error is large enough or could affect the decisions of
its users, a correction is absolutely necessary. (T)

79. A correction entry is required for all errors that are discovered. (F)