1. Transactions are first recorded in the ledger. 2. To promote efficiency, transactions with similar nature are recorded in separate books of accounts called special journals. 3. Entity A uses special journals. Entity A will record its cash sales in the Sales Journal. 4. Entity A uses special journals. Entity A will record its cash purchases of inventory in the Purchases Journal. 5. Entity A uses special journals. Entity A will record all transactions involving an outflow of cash in the Cash Disbursements Journal. 6. Transactions that cannot be recorded in the special journals are recorded in the general journal. 7. Under the double-entry system of recording, for every peso debited there must be a corresponding peso that is credited. 8. Debit simply means the left side of an account. 9. Entity A’s accounts receivable has a balance of P100. If the related allowance for bad debt account has a balance of P40, this means that the carrying amount of the accounts receivable is P140. 10. When recording a transaction, Entity A made a debit of P1. Under the double-entry system, Entity A should also make a credit of P1.
II. Multiple Choice: ( 10 points )
1. Business transactions are initially recorded in the a. Journal b. Ledger c. Scrap paper d. Palm of the accountant 2. When two debits get together, the result is a. Addition b. Deduction c. Multiplication d. Love and happiness 3. An increase to an account is recorded a. In the debit side of that account b. In the credit side of that account c. In the side of that account that represents its normal balance d. Beside the account
4. Assets are decreased through a
a. Debit b. Credit c. Calculator d. Strict diet 5. Transactions are recorded in the journal a. Chronologically b. Alphabetically c. When the accountant says so d. Cheerfully 6. The minimum balance of an account is zero. In accounting, a negative balance in an account is referred to as a. Abnormal balance b. Psychotic balance c. Crazy balance d. LOL balance 7. Entity A uses special journals. Entity borrows money from the bank and issues a note payable. Entity will most likely record this transaction in the a. Sales journal b. Purchases journal c. Cash receipts journal d. General journal 8. In which of the following instances would it be acceptable for the accounting equation to not be balanced? a. When the accountant is feeling sad and lonely. b. When there is a strong typhoon and classes are suspended. c. When the accountant’s calculator is “lowbat.” d. None. The accounting equation should be balanced at all times. 9. Liabilities are increased on which side of the “T-account?” a. Left b. Right c. Top, bottom and middle d. Wait, let me check my hands first 10. Which of the following statements is correct? a. All balance sheet accounts have normal debit balances while all income statement accounts have credit balances. b. To debit means to increase while to credit means to decrease. c. The ending balance of an account is represented by the difference between the total debits and total credits in that account. d. Accountants need not use “T-accounts.” They can also use other accounts like “B- accounts,” “O-accounts” and “Z-accounts.”