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Chapter 2 T/F

Liability accounts are increased by debits.
F
The normal balance of the drawing account is a debit.
T
When an account receivable is collected in cash, the total assets of the business increase.
F
The journal includes both debit and credit accounts for each transaction.
T
Prepaid expenses are an example of an expense.
F
Debiting the cash account, will increase the account.
T
Liabilities are debts owned by the business entity.
T
To determine the balance in an account, always subtract credits from debits.
F
The cash account will always be debited.
F
Liabilities are increase with debits and decrease with credits.
F
The erroneous arrangement of digits, such as writing $45 as $54, is called a slide.
F
A proof of the equality of debits and credits in the ledger at the end of an accounting period is called a balance sheet.
F
Once journal entries are posted to accounts, each account will show a new balance after each entry.
T
The journal is the book of original entry.
T
For a month’s transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries.
F
The increase side of all accounts is the normal balance.
T
The process of transferring the data from the journal to the ledger accounts is posting.
T
The right hand side of a T account is known as a debit and the left hand side is known as a credit.
F
Even when a trial balance is in balance, there may be errors in the individual accounts.
T
Journal entries can have more than two accounts as long as the debits equal the credits.
T
The normal balance of a capital account is a debit.
F
When a business receives a bill from the utility company, no entry should be made until the invoice is paid.
F
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
A drawing account represents the amount of investments less withdrawals made by the owner.
T
Accounts in the ledger are usually maintained in alphabetical order.
F
The totals at the bottom of the trial balance and the totals at the bottom of the balance sheet both show equality and balancing, and therefore should be equal.
F
A group of related accounts that make up a complete unit is called a trial balance.
F
The T account got its name because it resembles the letter “T”
T
Accounts are records of increases and decreases in individual financial statement items.
T
A credit to the cash account will increase the account.
F
Consuming goods and services in the process of generating revenues results in expenses.
T
Recording a credit to all owner’s equity accounts will increase the account.
F
Expenses are assets that no longer have a value to the company.
T
Normal balances are the side that increases the account balance.
T
Journalizing transactions using the double-entry bookkeeping system will eliminate fraud.
F
The recording of cash receipts to the cash account will be done by debiting the account.
T
Unearned Revenues are an example of a liability.
T
Drawings are an example of an expense.
F
The right side of the account is referred to as the credit side.
T
Expense accounts are increased by credits.
F
The materiality concept implies that if an error is large enough or could effect the decisions of its users, a correction is absolutely necessary.
T
Journalizing is the process of entering amounts in the ledger.
F
A trial balance determines the accuracy of the numbers.
F
Posting a transaction twice will cause the trial balance totals to be equal.
T
Transactions are listed in the journal chronologically.
T
The chart of accounts should be the same for each business.
F
A transaction that is recorded in the journal is called a journal entry.
T
When an accounts payable account is paid in cash, the owner’s equity in the business decreases.
F
The post reference notation used in the journal is the page number.
F
Revenues is the difference between cash receipts and cash payments.
F
A correction entry is required for all errors that are discovered.
F
Businesses may use several special journals in their accounting systems.
T
When an owner invests assets in the business, the capital account increases due to revenue being earned.
F
Accounts payable are accounts that you expect will be paid to you.
F
If the trial balance is in balance, it can be assumed that all journal entries were posted corrected and no errors were made.
F
Owner’s capital will be reduced by the amount in the drawing account.
T
Posting a part of a transaction to the wrong account will cause the trial balance totals to be unequal.
F
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 transposition.
F
A notation in the post reference column of the general journal indicates that the amount has been posted to the ledger.
T
A chart of accounts is a listing of accounts that make up the journal.
F
Withdrawals decrease owner’s equity and are listed on the income statement as a deduction from revenue.
F
The double-entry accounting system records each transaction twice.
F
For a month’s transactions for a typical medium-sized business, the accounts payable account is likely to have only credit entries.
F
An account has three parts to it; a title, an increase side, and a decrease side.
T
The process of transferring the debits and credits from the journal entries to the accounts is known as “updating the accounts”.
F
Assets are increased with debits and decrease with credits.
T
The normal balance of an expense account is a credit.
F
Revenue accounts are increased by credits.
T
Debits will increase Unearned Revenues and Revenues.
F
The recording of cash payments to the cash account will be done by entering the amount as a credit.
T
Assets are owned by creditors or owners.
F
The normal balance of revenue accounts is a credit.
T
The process of recording a transaction in the journal is called journalizing.
T
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
The post reference notation used in the ledger is the account number.
F
The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal, (3) prepare the financial statements.
F
A debit is abbreviated as Db and a credit is abbreviated as Cr.
F
The accounts payable account is listed in the chart of accounts as an asset.
F
Unless the transaction is compound, the dollar amount of the debits for each transaction is equal to the dollar amount of the credits for that transaction, and thus the term double-entry bookkeeping..
F

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