Chapter 2—Analyzing Transactions [True/False]

1. The dollar amount of the debits for each transaction is equal to the dollar amount of the credits
for that transaction.
ANS: T DIF: 1 OBJ: 04

2. The order of the flow of accounting data is (1) recording in journal, (2) recording on trial balance,
(3) posting in ledger.
ANS: F DIF: 1 OBJ: 04

3. For a year's transactions for a typical small business, the cash account is likely to have both debit
and credit entries.
ANS: T DIF: 5 OBJ: 04

4. For a month's transactions for a typical medium-sized business, the salary expense account is
likely to have only debit entries.
ANS: T DIF: 5 OBJ: 04

5. For a month's transactions for a typical medium-sized business, the fees earned account is likely
to have only debit entries.
ANS: F DIF: 5 OBJ: 04

6. 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.
ANS: F DIF: 5 OBJ: 05

7. A proof of the equality of debits and credits in the ledger at the end of an accounting period is
called a proof balance.
ANS: F DIF: 1 OBJ: 05

8. The erroneous arrangement of digits, such as writing $45 as $54, is called a transposition.
ANS: T DIF: 1 OBJ: 06

9. Posting a transaction twice will cause the trial balance totals to be unequal.
ANS: F DIF: 5 OBJ: 06

10. The erroneous moving of an entire number one or more spaces to the right or left, such as writing
$75 as $750, is called a slide.
ANS: T DIF: 1 OBJ: 06

11. Horizontal analysis is used to compare financial statements from different periods.
ANS: T DIF: 1 OBJ: 07

12. Horizontal analysis is used to compare financial statements from different companies.
ANS: T DIF: 1 OBJ: 07

13. Horizontal analysis is good for comparing companies of different sizes for analysis purposes.
ANS: T DIF: 1 OBJ: 07

14. Horizontal analysis is useful for investors to analyze a company's performance during a period of
time.
ANS: T DIF: 1 OBJ: 07
15. In horizontal analysis, the base for computing changes is generally the oldest period.
ANS: T DIF: 1 OBJ: 07

16. Horizontal analysis is not in common usage today.

ANS: F DIF: 1 OBJ: 07