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Financial Accounting and Reporting Theories > Chapter 5: Books of Accounts and Double-Entry System > Flashcards

Chapter 5: Books of Accounts and Double-Entry System Flashcards

1
Q

True or False

The two books of accounts are Debit and the Credit

A

False

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2
Q

True or False

The ledger is also called the “book of the original entries”

A

False

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3
Q

True or False

If a business does not utilize special journals, all its transactions are recorded in the general journal

A

True

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4
Q

True or False

Transactions that cannot be recorded in the special journal are not recorded at all

A

False

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5
Q

True or False

A credit balance in an asset account is considered an abnormal balance

A

False

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6
Q

True or False

A credit balance in a liability account is considered an abnormal balance

A

False

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7
Q

True or False

Assets and expenses have normal credit balance while liabilities, equity, and income have normal debit balances

A

False

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8
Q

True or False

Controlling accounts appear on the subsidiary ledger

A

False

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9
Q

True or False
Entity A’s general ledger shows a total account payable of 100. Entity A has only two suppliers - X Co. and Y Co. If the account payable to X Co. is 70, the account payable to Y Co. must be 50

A

False

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10
Q

True or False
All accountable events are recorded in two parts - debit and credit. No transaction can be recorded through a debit alone or a credit alone.

A

True

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11
Q

True or False
Entity A purchased inventory in exchange for notes payable. Entity a will record this transaction in the Purchase journal

A

True

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12
Q

True or False
Entity A purchases inventory and pays for the record purchase price immediately in cash. Entity A will record this transaction in the Cash disbursement journal rather than in the Purchase journal

A

True

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13
Q

True or False

An account with a normal credit balance is increased by debiting it

A

False

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14
Q

True or False

Accounts receivable has a normal debit balance

A

True

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15
Q

True or False

Debiting an asset account increases its balance

A

True

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16
Q

True or False

To debit means to increase

A

False

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17
Q

True or False

Debit means the left side of an account

A

True

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18
Q

True or False

Credit and credit results to deduction

A

False

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19
Q

True or False
The “Equipment” account of Entity A has a balance of 100. If the related “Accumulated depreciation - Equipment” account has a balance of 40, this means that the carrying amount of the equipment is 60.

A

True

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20
Q

True or False

A contra account is an addition to its related account

A

False

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21
Q

True or False

Transactions are first recorded in the ledger

A

False

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22
Q

True or False
To promote efficiency, transactions with similar nature are recorded in separate books of accounts called special journals

A

True

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23
Q

True or False

Entity A uses special journals. Entity A will record its cash sales in the Sales journal

A

False

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24
Q

True or False

Entity A uses special journals. Entity A will record its cash purchases of inventory in the Purchase journal

A

False

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25
Q

True or False
Entity A uses special journals. Entity A will record all transactions involving an outflow of cash in the Cash disbursements journal

A

True

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26
Q

True or False

Transactions that cannot be recorded in the special journals are recorded in the general journal

A

True

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27
Q

True or False

A company that uses the general ledger does not need to use a subsidiary ledger

A

False

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28
Q

True or False

Debit simply means the left side of an account

A

True

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29
Q

True or False
Entity A’s Accounts receivable A has a balance of 100. If the related allowance for bad debts account has a balance of 40, this means that the carrying amount of the accounts receivable is 140

A

False

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30
Q

True or False
When recording a transaction, Entity A made a debit of 1. Under the double-entry system, Entity A should also make a credit of 1

A

True

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31
Q

True or False

Under the double-entry system of recording, for every peso debited there must be a corresponding peso that is credited

A

True

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32
Q

True or False
Every time a business collects money, the balance of its “Cash” account is debited (increased). Every time it disburses money, “Cash” is credited (decreased)

A

True

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33
Q

True or False
This morning, you have a cash balance of 10, During the day, your collected 100 and disbursed 40. At the end of the day, your ending cash balance is 150.

A

False

34
Q

True or False
Yesterday, your neighbor bought your “puto” for 10M. She promised to pay for it today. Today, your neighbor paid only 8M because she is short of cash. After the payment, your neighbor’s accounts receivable subsidiary ledger has a balance of 2M

A

True

35
Q

True or False
You went to the store to buy a bottle of soy sauce. You don’t have money so you promised to pay for it next week. This transaction increases your accounts payable

A

True

36
Q

True or False
Your general ledger shows total accounts receivable of 100. You only have two debtors - Mang Benny and Aling Merced. If Mang Benny’s subsidiary ledger shows a balance of 20, Aling Merced’s subsidiary ledger must have a balance of 70

A

False

37
Q

True or False
The sum of the balances of subsidiary ledgers of accounts payable must be equal to the balance of accounts payable in the general ledger

A

True

38
Q

True or False

The use of special journals simplifies the recording process

A

True

39
Q

True or False

All controlling accounts in the General ledger have accounts in the Subsidiary ledger

A

False

40
Q

True or False

The double-entry system requires all recordings in the books of accounts to be made in two parts

A

True

41
Q

When a customer buys goods from your business and promises orally to pay for the sale price next week, you will

a. debit accounts receivable
b. credit accounts receivable
c. not give him the goods
d. ignore the customer

A

a. debit accounts receivable

42
Q

When a customer buys goods from your business and promises orally to pay for the sale price next week. When the customer pays the sale price, you will

a. debit cash
b. credit cash
c. say “thank you”
d. a and c

A

d. a and c

43
Q

When a customer buys goods from your business and promises orally to pay for the sale price next week. When the customer pays the sale price. If your business uses a special journal, where will you record the transactions?
Transaction 1 Transaction 2
a. sales journal Cash receipts journal
b. general journal general journal
c. general journal cash receipts journal
d. not recorded Cash receipts journal

A

Transaction 1 Transaction 2

a. sales journal Cash receipts journal

44
Q

Which of the following is not a special journal?

a. sales journal
b. purchase journal
c. cash receipts journal
d. subsidiary ledger

A

d. subsidiary ledger

45
Q

Journals are used in a recording process called

a. posting
b. journalizing
c. journalizationing
d. postinging

A

b. journalizing

46
Q

If you debit a liability account, what happens?

a. its balance increases
b. its balance decreases
c. ita balance disappears
d. nothing

A

b. its balance decreases

47
Q

Which of the following represents an abnormal balance?

a. accounts receivable, end. 10 (Dr.)
b. inventory, end. 10 (Dr.)
c. accounts payable, end 10 (Dr.)
d. all of these look normal to me

A

c. accounts payable, end 10 (Dr.)

48
Q

Entity A has the following information

  1. accounts receivable, 100,000
  2. accounts receivable - Mr. George U. Tang, 20,000

Where will you find the accounts described above?

a. both in the general ledger
b. first one, in the general ledger; second one, in the subsidiary ledger
c. first one, in the general ledger; second one, nowhere
d. both on the forehead of the accountant

A

b. first one, in the general ledger; second one, in the subsidiary ledger

49
Q

The “Allowance for bad debts” account is a contra account of

a. cash
b. accounts receivable
c. building
d. equipment

A

b. accounts receivable

50
Q

Which of the following statement is correct?

a. the books of accounts consists of three records - journal, ledger, and T-account
b. business transactions are recorded in the journal chronologically
c. controlling accounts are found in the subsidiary ledger
d. the T-account is not a formal accounting record, it is used only for analysis purposes

A

d. the T-account is not a formal accounting record, it is used only for analysis purposes

51
Q

Business transactions are initially recorded in the

a. journal
b. ledger
c. scrap paper
d. palm of the accountant

A

a. journal

52
Q

When two debits get together, the result is

a. addition
b. deduction
c. multiplication
d. love and happiness

A

a. addition

53
Q

An increase to an account is recorded

a. in the debit side of the account
b. in the credit side of the account
c. in the side of that account that represents its normal balance
d. beside the account

A

c. in the side of that account that represents its normal balance

54
Q

Assets are decreased through a

a. debit
b. credit
c. calculator
d. strict diet

A

b. credit

55
Q

Transactions are recorded in the journal

a. chronologically
b. alphabetically
c. when the accountant says so
d. cheerfully

A

a. chronologically

56
Q

The minimum balance of an account is zero. In accounting, a negative balance in an account is referred to as

a. abnormal balance
b. pyschotic balance
c. crazy balance
d. LOL balance

A

a. abnormal balance

57
Q

Entity A uses special journals. Entity A borrows money from the bank and issues a note payable. Entity A will most likely record this transaction in the

a. sales journal
b. purchase journal
c. cash receipts journal
d. general journal

A

c. cash receipts journal

58
Q

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 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

A

d. none, the accounting equation should be balanced at all times

59
Q

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

A

b. right

60
Q

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”

A

c. the ending balance of an account is represented by the difference between the total debits and total credits in that account

61
Q

You are a business owner. You provided 5M cash to your business as the initial capital. To record this transaction, which of the following accounts will you credit?

a. cash
b. owner’s capital
c. accounts receivable
d. accounts payable

A

b. owner’s capital

62
Q

You are a business owner. You provided 5M cash to your business as the initial capital. To record the transaction, which of the following accounts will you debit?

a. cash
b. owner’s capital
c. accounts receivable
d. accounta payable

A

a. cash

63
Q

You purchased goods that are held for sale in the ordinary course of business activities. You paid the purchase price outright in cash. To record this transaction, which of the following accounts will you debit?

a. cash
b. owner’s capital
c. accounts payable
d. inventory

A

d. inventory

64
Q 
You purchased goods that are held for sale in the ordinary course of business activities. You paid the purchase price outright in cash. To record the transaction, which of the following accounts will you credit?
a. cash 
b. owner's capital 
c. accountas payable 
d inventory
A

a. cash

65
Q

You purchased goods that are held for sale in the ordinary course of business activities. What if the purchase is made on account, rather than on cash basis, what will you credit?

a. cash
b. accounts payable
c. owner’s capital
d. inventory

A

b. accounts payable

66
Q

You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year. To record this transaction, which of the following accounts will your credit?

a. accounts payable
b. notes payable
c. accounts receivable
d. inventory

A

b. notes payable

67
Q

You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year. To record the transaction, which of the following accounts will you debit?

a. cash
b. owner’s capital
c. accounts payable
d. inventory

A

a. cash

68
Q

You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year. The financing company who lent you the loan will record the transaction by debiting which of the following accounts?

a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable

A

d. notes receivable

69
Q

You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year. The financing company will credit which of the following accounts

a. cash
b. notes payable
c. accounts receivable
d. notes receivable

A

a. cash

70
Q

Which of the following is least likely the reason why accountants make use of debits and credits when recording transactions

a. to conform to the concept of double-entry system
b. each transaction has a two-fold effect on values - value received and a value parted with. For example, in loan transaction, your money increases but so is your liability
d. to make things complicated sp they can hide anomalous transactions and people will not know

A

d. to make things complicated sp they can hide anomalous transactions and people will not know

71
Q

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. to record this transaction, which of the following accounts will you debit?

a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable

A

c. accounts receivable

72
Q

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. To record the transaction, which of the following will you credit?

a. service fees
b. owner’s capital
c. accounts payable
d. sales

A

d. sales

73
Q

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. When the customer pays the sale price, which of the following accounts will you credit?

a. cash
b. owner’s capital
c. accounts receivable
d. sales

A

c. accounts receivable

74
Q

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. The customer who bought food from your business will debit which of the following accounts?

a. accounts payable
b. cash
c. accounts receivable
d. inventory

A

d. inventory

75
Q

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. The customer will credit which of the following accounts?

a. accounts payable
b. notes payable
c. accounts receivable
d. inventory

A

a. accounts payable

76
Q

You purchased a computer for 50,000 cash. To record this transaction, which of the following accounts will you debit?

a. cash
b. owner’s capital
c. computer equipment
d. inventory

A

c. computer equipment

77
Q

You purchased a computer for 50,000 cash. To record the computer, you will credit which of the following accounts?

a. cash
b. owner’s capital
c. computer equipment
d. inventory

A

a. cash

78
Q

You purchased a computer for 50,000 cash. You expect to use the computer over the next 5 years. At the end of Year 1, you will debit which of the following accounts?

a. depreciation expense for 50,000
b. depreciation expense for 10,000
c. accumulated depreciation - equipment for 50,000
d. accumulated depreciation - equipment for 10,000

A

b. depreciation expense for 10,000

79
Q

You purchased a computer for 50,000 cash. You expect to use the computer over the next 5 years. At the end of Year 1. After recording the debit, you will credit which of the following accounts

a. depreciation expense for 50,000
b. depreciation expense for 10,000
c. accumulated depreciation - equipment for 50,000
d. accumulated depreciation - equipment for 10,000

A

d. accumulated depreciation - equipment for 10,000

80
Q

After using the computer for two years, what will be the balances of the “computer equipment” and “accumulated depreciation - computer equipment” accounts?
Computer equipment Accumulated depreciation
- Equipment
a. 50,000 20,000
b. 50,000 30,000
c. 50,000 50,000
d. 0 0

A

Computer equipment Accumulated depreciation

                                                   - Equipment			 a. 50,000		                 20,000

Financial Accounting and Reporting Theories (8 decks)

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