True/False
Indicate whether the statement is true or
false.
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1.
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Expense accounts have normal debit balances.
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2.
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An owner's equity account has a normal debit balance.
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3.
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Revenue accounts have normal debit balances.
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4.
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Using a check as the source document for a cash payment transaction is an
application of the Historical Cost accounting concept.
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5.
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A special journal contains many different kinds of transactions.
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6.
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Decreases in expense accounts are recorded on the debit side.
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7.
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The two debit columns in the cash payments journal are General Debit and Cash
Debit.
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8.
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A check mark recorded in parentheses below the totals of the General Debit and
Credit columns in the Cash Payments journal show that these totals are not posted.
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9.
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Equities are financial rights to the assets of a business.
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10.
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Each journal entry must be supported by a source document proving that a
transaction occurred.
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Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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An account balance that is opposite the normal balance is called a(n)
____.
A. | contra balance | C. | liability | B. | opposite balance | D. | none of the
above |
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2.
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A group of accounts is called a(n) ____.
A. | journal | C. | ledger | B. | special journal | D. | none of the
above |
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3.
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A record summarizing all the information pertaining to a single item in the
accounting equation is called a(n) ____.
A. | ledger | C. | journal | B. | account | D. | none of the
above |
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4.
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An equation showing the relationship among assets, liabilities, and owner's
equity is called the ____.
A. | accounting equation | C. | journal equation | B. | financial equation | D. | none of the
above |
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5.
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The amount remaining after the value of all liabilities is subtracted from the
value of all assets is called ____.
A. | owner's balance | C. | owner's liability | B. | owner's
equity | D. | none of the
above |
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6.
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The recording of debit and credit parts of a transaction is called ____.
A. | the accounting equation | C. | double-entry
accounting | B. | posting | D. | none of the above |
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7.
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Anything of value that is owned is called a(n) ____.
A. | asset | C. | equity | B. | liability | D. | none of the
above |
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8.
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A form for recording transactions in chronological order is called a(n)
____.
A. | journal | C. | ledger | B. | special journal | D. | none of the
above |
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9.
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A ledger that contains all accounts needed to prepare financial statements is
called a(n) ____.
A. | special ledger | C. | subsidiary ledger | B. | general ledger | D. | none of the
above |
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10.
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An account that reduces a related account on a financial statement is called
a(n) ____.
A. | liability account | C. | credit account | B. | contra account | D. | none of the
above |
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11.
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Financial rights to the assets of a business are called ____.
A. | liabilities | C. | equities | B. | ownership rights | D. | none of the
above |
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12.
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A form prepared by the customer showing the price deduction taken by the
customer for returns and allowances is called a(n) ____.
A. | credit memorandum | C. | return memorandum | B. | debit memorandum | D. | none of the
above |
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13.
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The source document for most cash payments is a(n) ____.
A. | memorandum | C. | check | B. | invoice | D. | none of the
above |
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14.
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Information about business transactions is obtained from original business
papers called ____.
A. | journals | C. | invoices | B. | ledgers | D. | none of the
above |
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15.
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A deduction that a vendor allows on the invoice amount to encourage prompt
payment is called a(n) ____.
A. | cash discount | C. | good customer discount | B. | credit
discount | D. | none of the
above |
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