4-2 Problem Solution True / False Questions for Chapter 4
True or False
T
1. Revenue accounts will always start each new accounting period with zero
beginning balances.
F
2. Expense accounts will always start each new accounting period with a beginning
balance equal to all of the debit entries that were made into the expense account
during the previous accounting period.
T
3. Credit entries into the Sales Revenue account increase the account balance and
will ultimately increase Retained Earnings.
T
4. Debit entries into an expense account increase the expense account and will
ultimately decrease Retained Earnings.
F
5. The Cost of Goods Sold account is an asset account similar to the Inventory
account.
F
6. Some of the revenue and expense are accounts used to prepare the Income
Statement, and some of the revenue and expense accounts appear on the
Balance Sheet.
T
7. If there was no need to prepare the Income Statement then there would be no
need to have revenue and expense accounts.
T
8. A company will have a Net Loss when the sum of all the expense accounts is
greater than the sum of all the revenue accounts.
F
T
9. When a sale is made to a customer on credit, there is no entry made to the Sales
Revenue account because no cash has been received.
10. The Retained Earnings amount needed for the Balance Sheet can be calculated
as follows: Retained Earnings at the beginning of the period, plus the sum of the
revenue account balances, less the sum of the expense account balances.