Chapter 4—Supplementary Questions
K/U
True and False
1. The terms account and ledger are the same and may be used interchangeably.
______
From a financial perspective, a debit entry always signifies a positive result
for a business.
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3.
A ledger may be kept on a computer hard drive.
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4.
The credit side of a T-account is always the right side.
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5.
The beginning balance for an asset account is placed on the right side of a Taccount.
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6.
The correct abbreviation for debit is DB.
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7.
Assets increase on the debit side.
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8.
Liabilities increase on the debit side.
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9.
For every business transaction, there must be at least one debit and one credit
entry.
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10.
Account balances are called pencil footings.
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11.
Pin totals are circled in the T-accounts.
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12.
In a normal situation, a debit balance indicates that the account is an asset
account.
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13.
An asset account cannot have a credit balance.
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14.
The Mortgage Payable account would normally have a credit balance.
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15.
Accounts Payable would normally have a debit balance.
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16.
Capital would normally have a credit balance.
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17.
Money received from a debtor to reduce the amount owed is called a receipt
on account.
______
When a trial balance is out of balance, it means there have been too many
debit or credit entries.
______
If a trial balance is in balance, you can be sure that the accounting process is
error free.
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20.
When cash is received, the Bank account is debited.
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21.
Accounting software, like Sage Simply Accounting software, has made
manual accounting unnecessary.
______
A trial balance produced with Sage Simply Accounting software will always
balance.
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2.
18.
19.
22.
K/U
Multiple Choice
23. Which of the following statements concerning a ledger is false?
A. It is a group or file of accounts.
B. It may be kept on a computer hard drive.
C. A ledger only keeps records for a time period of one year.
D. A balance sheet can be prepared from information in the ledger.
24. Which of the following is not true concerning ledger accounts?
A. The opening balance for an account is taken from the balance sheet.
B. All accounts increase on the same side.
C. When the opening amount is set up in a T-account, it is placed on the same side as it
appears on the balance sheet.
D. Every item on the balance sheet is a separate account in the ledger.
25. The rules of debit and credit state that
A. the left side is the credit side.
B. assets decrease on the debit side.
C. liability accounts decrease on the credit side.
D. Owner’s Equity decreases on the debit side.
26. According to the double-entry system of accounting,
A. every transaction affects exactly two accounts.
B. total debits must equal total credits.
C. a transaction can correctly be recorded as an increase in assets and a decrease in
liabilities.
D. None of the above statements is true.
27. Which of the following would result in an exceptional account balance?
A. The business owed $200 to a supplier but wrote a cheque for $20 000 as payment.
B. A business which has $3000 in the bank writes a cheque for $3500.
C. A customer who owes us $500 sends us a cheque for $550.
D. All the above would result in an exceptional balance.
28. Which of the following is not true concerning the debit side of an account?
A. It is the side on which assets increase.
B. It is the side where equity decreases.
C. It is the normal balance for a liability account.
D. It is the left side of an account.
29. Which of the following is not true concerning the credit side of an account?
A. It is the right side of an account.
B. It is an exceptional balance for a liability account.
C. It is the side on which capital increases.
D. It is the side on which assets decrease.
30. Taking off a trial balance
A. is the means of checking the accuracy of a ledger.
B. is normally done once every 3 months.
C. involves listing only the asset and liability accounts.
D. shows the accountant where a mistake has been made in the accounting process.
31. An accountant recorded a cash sale by debiting Bank and crediting Accounts Payable. As a
result of this error,
A. the trial balance will be out of balance.
B. the Bank account will be overstated.
C. the Owner’s Equity account will be understated.
D. the Accounts Payable account will be accurate.
32. The S. Fitz account has a debit balance of $339. We can logically conclude
A. that the business owes $339 to S. Fitz.
B. that S. Fitz is the owner of the business.
C. that S. Fitz is a customer who owes the business $339.
D. none of the above from the information provided.
33. The balance of an account
A. expresses the dollar value of an account.
B. is calculated by subtracting the lower pin total from the higher.
C. periodically appears on a trial balance.
D. All of the above are correct.
34. Which of the following is an exceptional situation?
A. an Accounts Payable account with a debit balance
B. a debtor's account with a debit balance
C. a Supplies account with a debit balance
D. a Capital account with a credit balance
35. A service was performed for a client with payment due in 30 days. Based on this transaction,
which of the following would be a correct entry?
A. a credit to Accounts Payable
B. a debit to Capital
C. a debit to Bank
D. a debit to Accounts Receivable
36. Identify the most positive change among the following changes that occurred in the balance
sheets of the Ward Company from Year 1 to Year 2.
A. Accounts Payable increased from Year 1 to Year 2.
B. Owner’s Equity increased from Year 1 to Year 2.
C. Accounts Receivable decreased from Year 1 to Year 2.
D. Total Assets decreased from Year 1 to Year 2.
37. A further investment in the business by the owner would be recorded as
A. a debit to Capital.
B. a debit to Loan Payable.
C. a debit to Bank.
D. None of the above.
38. A new piece of equipment was purchased for $798 on credit. This transaction should be
recorded as a
A. debit to Equipment and a credit to Accounts Receivable.
B. debit to Bank and a credit to Equipment.
C. debit to Equipment and a credit to Accounts Payable.
D. debit to Equipment and a credit to Bank.
39. A $250 payment was made on the bank loan, which should be recorded as a
A. debit to Bank Loan and a credit to Bank.
B. debit to Bank and a credit to Bank Loan.
C. debit to Accounts Receivable and a credit to Bank Loan.
D. debit to Accounts Receivable and a credit to Bank.
40. A business purchased office supplies for $350 cash, with the remaining $500 to be paid later.
This transaction should be recorded as a
A. debit to Bank, credit to Accounts Receivable, and credit to Supplies.
B. debit to Supplies, credit to Bank and, credit to Accounts Payable.
C. debit to Supplies and credit to Accounts Payable.
D. debit to Supplies, credit to Bank, and credit to Accounts Receivable.
41. A business performed a service and received payment of $1200 cash, with the remaining
$2050 to be paid later. This transaction should be recorded as a
A. debit to Bank, credit to Accounts Receivable, and credit to Capital.
B. debit to Bank, debit to Accounts Payable, and credit to Capital.
C. debit to Bank, debit to Accounts Receivable, and credit to Capital.
D. debit to Bank, credit to Accounts Payable, and credit to Capital.
42. Select the true statement.
A. Equipment would normally have a debit balance.
B. Bank Loan would normally have a debit balance.
C. Capital would normally have a debit balance.
D. All the above are true.