Chapter 02 Accounting for Transactions

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Chapter 02
Accounting for Transactions

True / False Questions



1. Accounting records are also referred to as the books.
True False



2. The first step in the analyzing and recording process is to analyze each transaction and
event from source documents.
True False



3. Preparation of a trial balance is the first step in the analyzing and recording process.
True False



4. Source documents provide evidence of business transactions and are the basis for
accounting entries.
True False



5. Items such as sales slips, invoices, checks and purchase orders are source documents.
True False



6. An account is a record of increases and decreases in a specific asset, liability, equity,
revenue or expense item.
True False



7. According to the seller, a customer's promise to pay is called an account payable.
True False




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8. Dividends are a type of business expense.
True False



9. As prepaid expenses are used up, the costs of these assets become expenses.
True False



10. Land and buildings are generally recorded in the same ledger account.
True False



11. It is not necessary to keep separate accounts for all items of importance for business
decisions.
True False



12. Unearned revenues are classified as liabilities.
True False



13. Cash dividends should be treated as an expense to the business.
True False



14. When a company provides services for which cash will not be received until some future
date, the company should record unearned revenue for the amount charged to the customer.
True False



15. The chart of accounts is a list of all the accounts used by a company and a corresponding
identification number.
True False




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16. An account balance is the difference between the debits and credits for an account
including any beginning balance.
True False



17. Debit means the right-hand side of any account.
True False



18. In a double-entry accounting system, total amount debited must always equal total amount
credited.
True False



19. Increases in liability accounts are recorded as debits.
True False



20. Debits increase both asset and expense accounts.
True False



21. Credits always increase account balances.
True False



22. Crediting an expense account decreases it.
True False



23. Double entry accounting requires that the impact of each transaction be recorded in, at
least two accounts.
True False




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24. A revenue account normally has a debit balance.
True False



25. Accounts are normally decreased by debits.
True False



26. The dividends account normally has a credit balance since it is an equity account.
True False



27. Asset accounts normally have credit balances and expense accounts normally have debit
balances.
True False



28. Common Stock normally has a debit balance.
True False



29. A debit entry is always favorable.
True False



30. A transaction that decreases an asset account and increases a liability account must also
affect one or more other accounts.
True False



31. A transaction that increases an asset and decreases a liability must also affect one or more
other accounts.
True False




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