Accounting True or False – Flashcards

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Accounting is the language of business
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True
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Keeping personal and business records separate is an application of the business entity concept
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True
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Assets such as cash and supplies have value because the can be used to acquire other assets or be used to operate a business
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True
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The relationship among asserts, liabilities, and owner's equity can be written as an equation
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True
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The equation is called the accounting equation and does not have to be in balance to be correct
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False
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The sum of the assets and liabilities of a business always equal the investment of the business owner
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False
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Recording business costs in terms of hours required to complete projects and sales in terms of dollars is an application of the unit of measurement concept
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True
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The capital account is an owner's equity
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True
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If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance
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False
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When cash is paid on account, a liability is increased
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False
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The Going Concern accounting concept affects the way financial statements are prepared
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True
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On a balance sheet, a single line means that amounts are to be added or subtracted
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True
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A transaction for the sale of goods or services is an increase in owner's equity
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True
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When cash is received for services performed, the asset account Cash is increased and the owner's equity account is decreased
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False
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Accounts Receivable is a liability account
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False
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Regardless of when payment is made when services are sold, the revenue should be recorded at the time of the same
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True
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A transaction that increases accounts receivable and increases owner's equity is a sale on account
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True
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Owner's equity is decreased by a sale on account
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False
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When cash is paid for expenses, the business has less cash ; therefore, the assets account Cash is decreased and the owner's equity account is increased
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False
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Cash is increased by expenses
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False
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Recording an expense transaction in an accounting equation increases liabilities
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False
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When a company makes payments for advertising and charitable contributions, the company is paying expenses
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True
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When a company receives cash from a customer for a prior sale, the transaction decreases the cash account balance and increases the accounts receivable balance
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False
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A withdrawal is a transaction that decreases cash and decreases owner's equity
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True
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When cash is paid to the owner for personal use, assets decrease and owner's equity decreases
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True
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An owner may withdraw only cash from a business; other assets must remain in the business at all times for the accounting equation to be in balance
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False
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Three transactions that affect owner's equity are receiving cash on account, paying expenses, and paying for supplies bough ton account
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False
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A balance sheet may be prepared on any date
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True
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The accounts on the left side of the accounting equation are reported on the left side of the balance sheet
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True
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Few businesses need to prepare a balance sheet every day
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True
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The balance sheet reports the balanced of the asset, liability, and owner's equity accounts
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True
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The heading of a balance sheet contains the name of the business, name of the report, and date of the report
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True
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The accounts on the left side of the accounting equation include liabilities and owner's equity
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False
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The total of the left side of the balance sheet is equal to the right side, and these totals need not be on the same line
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False
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Asset accounts are shows on the right side of the balance sheet
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False
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Owner's equity accounts are presented above liability accounts on the balance sheet
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False
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When a company pays insurance premiums in advance to an insurer, it records the payment as a liability because the insurer owes future coverage
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True
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When items are bought and paid for later this is referred to as buying on account
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True
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Transactions are recorded in a journal in order by date and in one place
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True
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The Objective Evidence Accounting concept requires that there be proof that a transaction did occur
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True
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Examples of source documents include checks, sales invoices, memorandums, and letters
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False
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The source document for all cash payments is a sales invoice
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False
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A check is the source document used when items are paid in cash
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True
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A receipt is the source document for cash received from transactions other than sales
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True
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A calculator tape is the source document for daily sales
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True
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The source document used when supplies are bought on account is a memorandum
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True
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The source document used when supplies bought on account are paid for is a check
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True
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The journal columns used to record receiving cash from sales and cash debit and sales credit
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True
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The source document sales invoice is abbreviated as SI in a journal entry
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False
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The journal columns used to record paying cash to the owner for personal use are general debit and cash credit
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True
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To prove a journal page, the total debit amounts are compared with the total credit amounts to be sure they are equal
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True
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Double lines across column totals mean that the totals have been verified as correct
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True
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To correct an error in a journal, simply erase the incorrect item and write the correct item in the same place
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False
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Dollars and cents signs and decimal points should be used when writing amounts on ruled accounting pages
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False
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Because an account form has columns for the debit and credit balance of an account, it is often referred to as the balance-ruled account form
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True
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The asset division accounts for Encore Music are numbered in the 100s
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True
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The cash account is the first asset account and is numbered 100
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False
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The second division of Encore Music's chart of accounts is the owner's equity division
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False
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The first digit of account numbers for accounts in the owner's equity ledger division is 3
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True
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The last two digits in a 3-digit account number indicate the general ledger division of the new account
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False
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When adding a new expense account between accounts numbered 510 and 520, the new account is assigned the account number 515
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True
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Encore Music arranges accounts in chronological order in its general ledgers
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False
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The two steps for opening an account are writing the account title and recording the balance
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False
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Separate amounts in the special amount columns are posted individually
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False
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Separate amounts in the sales credit column are not posted individually
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True
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Separate amounts in general amount columns are not posted individually
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False
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The posting reference should always be recorded in the journal's post reference column before amounts are recorded in the ledger
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False
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The only reason for the post reference columns of the journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interrupted
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False
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The steps for posting are to write the date, journal page number, amount, and balance
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False
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The totals of general amount columns in a journal are not posted
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True
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The totals of special amount columns in a journal are not posted
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False
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A check mark in parenthesis below a general debit total indicates that the total is not posted
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True
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With the exception of the totals lines, the post reference column is completely filled in with either an account number or a check mark
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True
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Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting are less
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False
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When deposit is made in a bank account, the bank issues a receipt
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True
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There are four types of endorsements commonly used: blank, special, original, and restrictive
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False
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A check with a blank endorsement can be crashed by anyone who has the check
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True
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A check with a blank endorsement can be cashed by anyone who has the check
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True
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When writing a check, the first step is to prepare the check stub
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True
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Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime
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False
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The amount of a check is written twice on each check
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True
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A check that contains errors must be marked with the word VOID and another check must be written
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True
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An outstanding check is one that has been issued but not yet reported on a bank statement
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True
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An important aspect of cash control is verifying that the information on a bank statement and a checkbook are in agreement
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True
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Banks deduct service charges from customer's checking accounts without requiring customers to write a check from the account as well
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True
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Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account as well
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True
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The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check
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False
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The source document for a debit card purchase is memorandum
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True
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Encore Music maintains a petty cash fund for making large cash payments without writing checks
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False
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Using a petty cash fund usually decreases the number of checks that have to be written
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False
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A memorandum is the source document for the entry to record establishing a petty cash fund
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False
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Anytime a payment is made from the petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment
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True
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When the petty cash fund is replenished, the balance of the petty cash account increases
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False
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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
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False
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An accounting period is also known as a fiscal period
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True
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Journals, ledgers, and work sheets are considered permanent records
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False
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All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts
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True
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The two accounts affected by the adjustment for supplies are supplies and supplies expense
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True
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The two accounts affected by the adjustment for insurance are prepaid insurance expense ans insurance
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False
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Totaling and ruling the adjustments columns of a work sheet is necessary to prove the equality of debits and credits
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True
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Two financial statements are prepared from the information on the worksheet
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True
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Net income on a worksheet is calculated by subtracting the income statement credit column total from the income statement debit column total
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false
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if errors are found on a worksheet, they must be erased and corrected before any further work is completed
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True
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When two column totals are not in balance on the worksheet, the difference between the two totals is calculated and checked
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False
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If the difference between the totals of debit and credit columns on a worksheet can be evenly divided by 9, then the error is most likely in addition
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False
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If there are errors in the worksheets trial balance columns, it might be because not all general ledger account balanced were copied in the trial balance column correctly
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True
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Errors in general ledger accounts should never be erased
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True
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Most errors occur in doing arithmetic
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True
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Using a calculator will help prevent errors in accounting records, but not all errors are due to incorrect calculations
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True
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