Question

select true or false for each of the given statements.

1. the drawing account is a permanent account.
2. a transaction for the sale of goods or services results in a decrease in owner’s equity.
3. if the previous account balance and the current entry posted to an account are both credits, the new account balance is a credit.
4. adjusting entries must be posted to the general ledger accounts.
5. temporary accounts are used to accumulate information until it is transferred to the owner’s capital account.
6. a balance sheet reports financial information for a period of time.
7. a transaction recorded in a journal is not considered a permanent record.
8. the formula for calculating net income is total revenue minus total expenses.
9. the source document for an electronic funds transfer is a memorandum.

Explanation:

To solve each True/False question, we analyze accounting concepts:

1. The drawing account is a permanent account.

• Drawing accounts are temporary (closed to capital at period - end).
• Answer: False

2. A transaction for the sale of goods or services results in a decrease in owner’s equity.

• Sales increase revenue, which increases net income and thus owner’s equity.
• Answer: False

3. If the previous account balance and the current entry posted to an account are both credits, the new account balance is a credit.

• Credits add to credit balances (e.g., liability accounts: previous credit + new credit = larger credit).
• Answer: True

4. Adjusting entries must be posted to the general ledger accounts.

• Adjusting entries update ledger balances for accuracy (e.g., accruals, deferrals).
• Answer: True

5. Temporary accounts are used to accumulate information until it is transferred to the owner’s capital account.

• Temporary accounts (revenue, expense, drawing) are closed to capital at period - end.
• Answer: True

6. A balance sheet reports financial information for a period of time.

• Balance sheets show financial position at a point in time; income statements show activity over a period.
• Answer: False

7. A transaction recorded in a journal is not considered a permanent record.

• Journals are permanent records of transactions (used to post to ledgers).
• Answer: False

8. The formula for calculating net income is total revenue minus total expenses.

• Net Income = Revenue - Expenses (matches the formula).
• Answer: True

9. The source document for an electronic funds transfer is a memorandum.

• EFTs use a memorandum as a source document (no physical check, so a memo documents the transfer).
• Answer: True

Final Answers (with original question numbers):

1. False
2. False
3. True
4. True
5. True
6. False
7. False
8. True
9. True

Answer:

To solve each True/False question, we analyze accounting concepts:

1. The drawing account is a permanent account.

• Drawing accounts are temporary (closed to capital at period - end).
• Answer: False

2. A transaction for the sale of goods or services results in a decrease in owner’s equity.

• Sales increase revenue, which increases net income and thus owner’s equity.
• Answer: False

3. If the previous account balance and the current entry posted to an account are both credits, the new account balance is a credit.

• Credits add to credit balances (e.g., liability accounts: previous credit + new credit = larger credit).
• Answer: True

4. Adjusting entries must be posted to the general ledger accounts.

• Adjusting entries update ledger balances for accuracy (e.g., accruals, deferrals).
• Answer: True

5. Temporary accounts are used to accumulate information until it is transferred to the owner’s capital account.

• Temporary accounts (revenue, expense, drawing) are closed to capital at period - end.
• Answer: True

6. A balance sheet reports financial information for a period of time.

• Balance sheets show financial position at a point in time; income statements show activity over a period.
• Answer: False

7. A transaction recorded in a journal is not considered a permanent record.

• Journals are permanent records of transactions (used to post to ledgers).
• Answer: False

8. The formula for calculating net income is total revenue minus total expenses.

• Net Income = Revenue - Expenses (matches the formula).
• Answer: True

9. The source document for an electronic funds transfer is a memorandum.

• EFTs use a memorandum as a source document (no physical check, so a memo documents the transfer).
• Answer: True

Final Answers (with original question numbers):

1. False
2. False
3. True
4. True
5. True
6. False
7. False
8. True
9. True