Green False Black True

A new account is opened for each transaction entered into by a business firm.

The recording process becomes more efficient and informative if all transactions are recorded in
one account.

When the volume of transactions is large, recording them in tabular form is more efficient than
using journals and ledgers.

An account is often referred to as a T-account because of the way it is constructed.

A debit to an account indicates an increase in that account.

If a revenue account is credited, the revenue account is increased.

The normal balance of all accounts is a debit.

Debit and credit can be interpreted to mean increase and decrease, respectively.

The double-entry system of accounting refers to the placement of a double line at the end of a
column of figures.

A credit balance in a liability account indicates that an error in recording has occurred.

The drawing account is a subdivision of the owner's capital account and appears as an expense on
the income statement.

Revenues are a subdivision of owner's capital.

Under the double-entry system, revenues must always equal expenses.

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on
the accounts.

Business documents can provide evidence that a transaction has occurred.

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in
a journal.

Transactions are entered in the ledger accounts and then transferred to journals.

All business transactions must be entered first in the general ledger.

A simple journal entry requires only one debit to an account and one credit to an account.

A compound journal entry requires several debits to one account and several credits to one
account.
Transactions are recorded in alphabetic order in a journal.
A journal is also known as a book of original entry.

The complete effect of a transaction on the accounts is disclosed in the journal.

The account titles used in journalizing transactions need not be identical to the account titles in the
ledger.

The chart of accounts is a special ledger used in accounting systems.

A general ledger should be arranged in the order in which accounts are presented in the financial
statements, beginning with the balance sheet accounts

The number and types of accounts used by different business enterprises are the same if generally
accepted accounting principles are being followed by the enterprises.

Posting is the process of proving the equality of debits and credits in the trial balance.

After a transaction has been posted, the reference column in the journal should not be blank .

A trial balance does not prove that all transactions have been recorded or that the ledger is correct.

Many business transactions affect more than one time period.

The time period assumption states that the economic life of a business entity can be divided into
artificial time periods.

The time period assumption is often referred to as the matching principle

A company's calendar year and fiscal year are always the same

Accounting time periods that are one year in length are referred to as interim periods.

Income will always be greater under the cash basis of accounting than under the accrual basis of
accounting.

The cash basis of accounting is not in accordance with generally accepted accounting principles.

The matching principle requires that efforts be matched with accomplishments

Expense recognition is tied to revenue recognition.

The revenue recognition principle dictates that revenue be recognized in the accounting period in
which cash is received.

Adjusting entries are not necessary if the trial balance debit and credit columns balances are equal.
An adjusting entry always involves two balance sheet accounts

Adjusting entries are often made because some business events are not recorded as they occur.

Adjusting entries are recorded in the general journal but are not posted to the accounts in the
general ledger.

Revenue received before it is earned and expenses paid before being used or consumed are both
initially recorded as liabilities.

Accrued revenues are revenues which have been received but not yet earned.

The book value of a depreciable asset is always equal to its market value because depreciation is a
valuation technique.

Accumulated Depreciation is a liability account and has a credit normal account balance.

A liability—revenue account relationship exists with an unearned rent revenue adjusting entry.

The balances of the Depreciation Expense and the Accumulated Depreciation accounts should
always be the same.

Unearned revenue is a prepayment that requires an adjusting entry when services are performed

Asset prepayments become expenses when they expire.

A contra asset account is subtracted from a related account in the balance sheet.

If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

Accrued revenues are revenues that have been earned and received before financial statements
have been prepared.

Financial statements can be prepared from the information provided by an adjusted trial balance

The adjusting entry at the end of the period to record an expired cost may be different depending
on whether the cost was initially recorded as an asset or an expense.

Rent received in advance and credited to a rent revenue account which is still unearned at the end
of the period, will require an adjusting entry crediting a liability account for the amount still
unearned.

An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was
charged to an asset account