Question 1

The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.

Accepted Answer

The double-entry system of accounting refers to a system in which every transaction is recorded in at least two accounts, resulting in a balancing of debits and credits. It does not refer to the placement of a double line at the end of a column of figures.

Question 2

A credit balance in a liability account indicates that an error in recording has occurred.

Accepted Answer

A credit balance in a liability account is not necessarily an error in recording. It can indicate that the company has received more funds from creditors than it owes, resulting in a credit balance.

Question 3

Business documents can provide evidence that a transaction has occurred.

Accepted Answer

Business documents such as invoices, receipts, and contracts can provide evidence that a transaction has indeed occurred. They can be used as proof in legal or financial disputes.

Question 4

A debit to an account indicates an increase in that account.

Accepted Answer

A debit to an account actually indicates a decrease in that account. This is because the term "debit" in accounting refers to the left-hand side of a transaction, which typically represents a decrease in assets or an increase in liabilities or equity. Conversely, a credit to an account indicates an increase in that account.

Question 5

The drawing account is a subdivision of the owner's capital account and appears as an expense on the income statement.

Accepted Answer

The drawing account is a contra account to the owner's equity and records the withdrawals made by the owner; it does not appear as an expense on the income statement but is instead deducted from the owner's equity.

Question 6

An account is often referred to as a T-account because of the way it is constructed.

Accepted Answer

The T-account gets its name from the T-shape created by the vertical line representing the account title and the horizontal line representing the balance of the account.

Question 7

If a revenue account is credited, the revenue account is increased.

Accepted Answer

When a revenue account is credited, it means that the account is receiving money, thus increasing the revenue.

Question 8

The normal balance of all accounts is a debit.

Accepted Answer

The normal balance of some accounts is a credit, such as revenue, liabilities, and equity accounts. The normal balance of other accounts is a debit, such as assets and expenses. Therefore, the statement is false.

Question 9

Revenues are a subdivision of owner's capital.

Accepted Answer

The answer of Revenues are a subdivision of owner's capital....

Question 10

All business transactions must be entered first in the general ledger.

Accepted Answer

All business transactions do not have to be entered first in the general ledger. They can also be recorded in subsidiary ledgers such as accounts receivable, accounts payable, and inventory before being summarized in the general ledger.

Question 11

When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.

Accepted Answer

Journals and ledgers are specifically designed to organize and manage large volumes of transactions efficiently by categorizing them into different accounts for easy tracking and reporting, whereas a simple tabular form might lack the structure to handle complex accounting needs effectively.

Question 12

Debit and credit can be interpreted to mean increase and decrease, respectively.

Accepted Answer

The answer of Debit and credit can be interpreted to...

Question 13

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

Accepted Answer

Transactions are first analyzed to determine their effect on the accounts, and then they are entered into the ledger.

Question 14

A new account is opened for each transaction entered into by a business firm.

Accepted Answer

A business firm does not necessarily have to open a new account for each transaction. Instead, a single account can be used for multiple transactions of the same type. However, if a new type of transaction occurs, a new account may need to be opened to properly track and categorize it.

Question 15

Under the double-entry system, revenues must always equal expenses.

Accepted Answer

Under the double-entry system, revenues are recorded as credits and expenses as debits. Therefore, revenues and expenses can have different totals and may not always equal each other. The equality in the double-entry system is between the debit and credit sides, which must always balance. This is known as the fundamental principle of accounting.

Question 16

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

Accepted Answer

Before recording a transaction in a journal, it is important to analyze its impact on the accounts involved to ensure that the entries are accurate and consistent with accounting principles. This process is called transaction analysis.

Question 17

A simple journal entry requires only one debit to an account and one credit to an account.

Accepted Answer

A simple journal entry involves only two accounts, one being debited and the other being credited. Therefore, it requires only one debit and one credit.

Question 18

The recording process becomes more efficient and informative if all transactions are recorded in one account.

Accepted Answer

Recording all transactions in one account can often lead to confusion and inaccurate information. It is important to have separate accounts for different types of transactions (e.g. sales, expenses, payroll) to ensure proper tracking and analysis.

Question 19

A compound journal entry requires several debits to one account and several credits to one account.

Accepted Answer

A compound journal entry involves multiple debits and/or credits to various accounts, not just several debits and credits to one account each.

Question 20

Transactions are entered in the ledger accounts and then transferred to journals.

Accepted Answer

Transactions are first recorded in journals and then transferred to ledger accounts.

Quiz 2: The Recording Process