Question

true false

1. transactions that cannot be recorded in a special journal are recorded in a general journal. (p. 320)
2. a general journal entry posted to accounts payable will also be posted to a subsidiary ledger account. (p. 321)
3. credit allowed for part of the purchase price of merchandise that is not returned results in an increase in the customers account. (p. 322)
4. a debit memorandum prepared by a customer results in the customer recording a debit to the vendor account. (p. 322)
5. an entry recorded in a general journal will either increase all accounts or decrease all accounts affected by the entry. (p. 323)
6. the normal account balance of purchases returns and allowances is a debit. (p. 323)
7. an entry in the general journal that affects accounts payable also affects a vendors account in the accounts payable ledger. (p. 324)
8. in a computerized accounting system, transactions recorded in a general journal are posted immediately after they are entered. (p. 325)
9. a completed general journal page should always be reviewed to be sure that all postings have been made. (p. 325)
10. a credit memorandum issued by a vendor results in the vendor recording a debit to the customers account. (p. 327)
11. the normal account balance of sales returns and allowances is a debit. (p. 327)
12. a sales return that credits the customers account is not recorded in a cash receipts journal because the transaction does not involve cash. (p. 328)
13. entries in the general journal only affect account balances in general ledger accounts. (p. 329)
14. the correcting entry to correct a sale on account recorded to the wrong customer in the sales journal involves only subsidiary ledger accounts. (p. 330)
15. net income increases a corporations total stockholders equity. (p. 332)
16. a corporations dividend account is a permanent account similar to a proprietorships drawing account. (p. 332)
17. dividends can be distributed to stockholders only by formal action of a corporations chief financial officer. (p. 333)
18. all corporations are required to declare dividends. (p. 333)
19. the stockholders equity account, dividends, has a normal debit balance. (p. 333)
20. most corporations pay a dividend by writing a single check to an agent, such as a bank, that distributes checks to individual stockholders. (p. 334)

Explanation:

1. Special journals handle routine transactions; non-routine ones go to the general journal.
2. Accounts Payable is a control account linked to a subsidiary ledger for individual vendors.
3. A purchase allowance (no return) reduces the customer's owed amount, decreasing their account.
4. A customer's debit memo reduces what they owe the vendor, so they credit the vendor account.
5. General journal entries follow double-entry: at least one debit and one credit (increases and decreases).
6. Purchases Returns and Allowances is a contra-purchase account, with a normal credit balance.
7. Accounts Payable is a control account; entries affecting it must update the corresponding vendor subsidiary account.
8. Computerized systems typically post general journal entries immediately upon entry.
9. A reviewed general journal page ensures no postings are missed, maintaining accurate ledgers.
10. A vendor's credit memo reduces the customer's owed amount, so the vendor credits the customer's account.
11. Sales Returns and Allowances is a contra-revenue account, with a normal debit balance.
12. Cash receipts journals only track cash inflows; sales returns (no cash) use a general or sales returns journal.
13. General journal entries can affect both general ledger control accounts and their related subsidiary ledgers.
14. Correcting a wrong customer in sales journal requires adjusting two subsidiary ledger accounts (debit correct, credit incorrect).
15. Net income increases retained earnings, which is part of stockholders' equity.
16. Dividend accounts are temporary (closed at period-end), unlike permanent equity accounts.
17. Dividends require formal action by the corporation's board of directors, not just the CFO.
18. Corporations are not required to declare dividends; it is a board decision.
19. Dividends reduce equity, so the account has a normal debit balance.
20. Most large corporations use an agent (like a bank) to distribute dividend checks to stockholders.

Answer:

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