Question

identifying changes in accounts
write true or false in the column to the right for each statement below.

1. information in a journal includes the debit and credit parts of each transaction recorded in one place. (p. 59)
2. the objective evidence accounting concept requires that there be proof that a transaction did occur. (p. 59)
3. examples of source documents include checks, sales invoices, receipts, and memorandums (p.59)
4. a memorandum is the source document used when items are paid in cash. (p.61)
5. a receipt is the source document for cash received from transactions other than sales. (p. 61)
6. a calculator tape is the source document for daily cash sales. (p. 61)
7. the accounts affected when cash is received from the owner as an investment are cash and sales.(p. 62)
8. when cash is paid for supplies, the cash account is debited. (p. 63)
9. when cash is used to pay for insurance, the asset account prepaid insurance increases. (p. 65)
10. the source document used when supplies are ordered by telephone on account is a memorandum. (p. 66)
11. the source document used when supplies bought on account are paid for is a receipt. (p. 67)
12. when cash is received from sales, both the cash account and the sales account are increased. (p. 70)
13. the source document sales invoice is abbreviated as s in a journal entry. (p. 71)
14. when services are sold on account, an asset account and a liability account are affected. (p. 71)
15. the accounts affected when paying cash for equipment rental are equipment rental expense and cash. (p. 72)
16. when cash is received on account, one asset account increases and another asset account decreases. (p. 73)
17. the accounts affected when paying cash to the owner for a withdrawal of equity are the capital account and cash. (p. 74)
18. 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)
19. to correct an error in a journal, simply erase the incorrect item and write the correct item in the same place. (p. 78)
20. 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:

1. A journal records debit - credit parts of transactions in one place, so True.
2. Objective Evidence concept requires proof of transactions, so True.
3. Checks, sales invoices, receipts, and memorandums are source documents, so True.
4. A memorandum is not for cash - paid items. Cash - paid items usually use receipts, so False.
5. A receipt is for cash received from non - sales transactions, so True.
6. A calculator tape is not a source document for daily cash sales. Usually, a sales invoice or cash register tape is, so False.
7. When owner invests cash, affected accounts are Cash and Owner's Capital, not Cash and Sales, so False.
8. When paying for supplies in cash, Cash is credited, not debited, so False.
9. When paying for insurance in cash, Prepaid Insurance (an asset) increases, so True.
10. When supplies are ordered by phone on account, a purchase order is usually the source document, not a memorandum, so False.
11. When paying for supplies bought on account, a check or cash receipt (if paying in cash) is the source document, not just a receipt in a general sense, so False.
12. When cash is received from sales, both Cash and Sales accounts increase, so True.
13. Sales invoice is abbreviated as S in journal entries, so True.
14. When services are sold on account, an asset (Accounts Receivable) and a revenue account are affected, not a liability account, so False.
15. When paying cash for equipment rental, Equipment Rental Expense and Cash are affected, so True.
16. When cash is received on account, Accounts Receivable decreases and Cash increases (both are assets), so True.
17. When owner withdraws cash, Drawings (or Withdrawals) and Cash are affected, not Capital and Cash directly, so False.
18. It is not standard to split an entry if only one blank line remains on a journal page, so False.
19. You cannot simply erase an error in a journal. Erasing is not proper accounting practice, so False.
20. The proper way to correct an error after several entries is to use a correcting entry, not just draw a line through and write above, so False.

Answer:

1. True
2. True
3. True
4. False
5. True
6. False
7. False
8. False
9. True
10. False
11. False
12. True
13. True
14. False
15. True
16. True
17. False
18. False
19. False
20. False