True False Questions

2-1 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Financial Statements and the Accounting System

True / False Questions

• The first step to get from transactions and events to financial statements is to identify each

transaction from source documents.

True False

• Preparation of a trial balance is the first step in processing a financial transaction.

True False

• Source documents identify and describe business transactions and are the basis for accounting

entries.

True False

• Items such as sales tickets, bank statements, checks, and purchase orders are examples of a

business's source documents.

True False

• An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or

expense item.

True False

Financial Accounting Information for Decisions 8th Edition John Wild Test Bank Visit TestBankDeal.com to get complete for all chapters

2-2 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• A customer's promise to pay on credit is classified as an account payable by the seller.

True False

• Dividends paid to the stockholders are a business expense.

True False

• The purchase of land and buildings will generally be recorded in the same ledger account.

True False

• Unearned revenues are classified as liabilities.

True False

• Cash paid to stockholders by the business of a corporation and used for personal expenses, should

be treated as an expense of the business.

True False

• When a company provides services for which cash will not be received until some future date, the

company should record the amount charged as accounts receivable.

True False

• A company's chart of accounts is a list of all the accounts used and includes an identification number

assigned to each account.

True False

• An account's balance is the difference between the total debits and total credits for the account,

including any beginning balance.

True False

2-3 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• The right side of an account is called the debit side.

True False

• In a double-entry accounting system, the total dollar amount debited must always equal the total

dollar amount credited.

True False

• Increases in liability accounts are recorded as debits.

True False

• Debits increase asset and expense accounts.

True False

• Credits always increase account balances.

True False

• Crediting an expense account decreases it.

True False

• A revenue account normally has a debit balance.

True False

• Asset accounts are normally decreased by debits.

True False

• Debit means increase and credit means decrease for all accounts.

True False

2-4 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

• Asset accounts normally have debit balances and revenue accounts normally have credit balances.

True False

• A dividend normally has a debit balance.

True False

• A debit entry is always an increase in the account.

True False

• A transaction that credits an asset account and credits a liability account must also affect one or more

other accounts.

True False

• A transaction that decreases a liability and increases an asset must also affect one or more other

accounts.

True False

• If insurance coverage for the next two years is paid for in advance, the amount of the payment is

debited to an asset account called Prepaid Insurance.

True False

• The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to

Accounts Payable.

True False

• If a company purchases equipment paying cash, the journal entry to record this transaction will

include a debit to Cash.

True False