chap003.docx - Chapter 03 The Accounting Cycle Capturing...

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Chapter 03 The Accounting Cycle: Capturing Economic Events1) The credit side of an account is the right side, while the debit side is the left side.A) TrueB) False
2) In its simplest form an account has only three elements: a title, a left side (called debit), and a right side (called credit).
3) A credit to a ledger account refers to the entry of an amount on the right side of an account.
4) Every transaction affects equal numbers of ledger accounts and is recorded by equal dollar amounts of debits and credits.
5) All liability accounts normally have a credit balance.A) TrueB) False
6) Decreases to owners' equity accounts are recorded using debits.
7) Liability accounts should only be debited and never credited.
8) Increases in owners' equity are recorded by credits; increases in assets and in liabilities are recorded by debits.
9) An increase in a liability is recorded by a credit; an increase in owners' equity by a debit.A) TrueB) False
10) The left-hand side of an account is used for recording debits and the right-hand side for recording credits.
11) If the number of debit entries in an account is greater than the number of credit entries, the account will have a debit balance.
12) Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.
13) When making a general journal entry, there can only be one debit and one credit.A) TrueB) False
14) When a company uses the double-entry method, the total dollar amount of debits recorded must equal the total dollar amount of credits recorded, but the number of debit and credit entries may differ.
15) The ledger is a chronological, day-by-day, record of business transactions.
16) When recording a journal entry, asset accounts are shown first, followed by liabilities, and finally owners' equity accounts.
17) Ledger accounts are updated first, and then transactions are recorded in the journal.A) TrueB) False
18) Ledger accounts are updated through a process called posting.
19) Earning revenue increases owners' equity and expenses reduce owners' equity, therefore, revenues are recorded with debit entries and expenses are recorded with credit entries.

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