Question

part two—identifying accounting concepts and practices
directions: place a t for true or an f for false in the answers column to show whether
each of the following statements is true or false.

1. information in a journal includes the debit and credit parts of each transaction recorded in

one place. (p. 59)

1. the objective evidence accounting concept requires that there be proof that a transaction

did occur. (p. 59)

1. examples of source documents include checks, sales invoices, receipts, and memorandums.

(p. 59)

1. a memorandum is the source document used when items are paid in cash. (p. 61)
2. a receipt is the source document for cash received from transactions other than sales. (p. 61)
3. a calculator tape is the source document for daily cash sales. (p. 61)
4. the accounts affected when cash is received from the owner as an investment are cash and

sales. (p. 62)

1. when cash is paid for supplies, the cash account is debited. (p. 63)
2. when cash is used to pay for insurance, the asset account prepaid insurance increases. (p. 65)
3. the source document used when supplies are ordered by telephone on account is a

memorandum. (p. 66)

1. the source document used when supplies bought on account are paid for is a receipt. (p. 67)
2. when cash is received from sales, both the cash account and the sales account are increased.

(p. 70)

1. the source document sales invoice is abbreviated as s in a journal entry. (p. 71)
2. when services are sold on account, an asset account and a liability account are affected. (p. 71)
3. the accounts affected when paying cash for equipment rental are equipment rental expense

and cash. (p. 72)

1. when cash is received on account, one asset account increases and another asset account

decreases. (p. 73)

1. the accounts affected when paying cash to the owner for a withdrawal of equity are the

capital account and cash. (p. 74)

1. if there is only one blank line remaining on a journal page, it is standard practice to split

the entry and record the second line of the entry on the next page. (p. 76)

1. to correct an error in a journal, simply erase the incorrect item and write the correct item

in the same place. (p. 78)

1. if an error is detected in a journal entry after several additional journal entries have been

made, the entry should be corrected by drawing a line through the incorrect parts and
writing the correct parts on the same line above the error. (p. 78)

Explanation:

To solve this, we analyze each statement based on accounting concepts:

1.

A journal records debit and credit of a transaction together.

Answer:

T

2.

Objective Evidence concept needs proof of transaction.