Accounting : Journalizing Transactions Online Quiz

Paying on account reduces a liability (Accounts Payable) and reduces an asset (Cash). In accounting journals, this is recorded by debiting the liability and crediting cash.

Standard accounting practice requires that cents be represented by digits (e.g., .00) to ensure clarity and consistency in financial records. Using dashes is generally not accepted in formal accounting.

Paying rent is an expense. Recording this transaction involves debiting the Rent Expense account (General Debit) and crediting the Cash account (Cash Credit).

Proving cash is a standard end-of-month procedure to ensure that the cash balance in the records matches the actual cash on hand.

Selling services on account increases an asset (Accounts Receivable) and increases revenue (Sales). This is recorded by debiting Accounts Receivable and crediting Sales.

Double-entry accounting requires that for every transaction, the total debits must equal the total credits, affecting at least two accounts.

Receiving cash from sales increases an asset (Cash) and increases revenue (Sales). This is recorded by debiting Cash and crediting Sales.

Receiving cash on account reduces an asset (Accounts Receivable) and increases another asset (Cash). This is recorded by debiting Cash and crediting Accounts Receivable.

Accounting standards dictate that errors should be corrected by drawing a single line through the incorrect entry, writing the correct information above it, and never erasing or using white-out to maintain an audit trail.

In manual accounting, double lines are ruled under a total to indicate that the column has been verified and the balance is final.

A single line drawn across amount columns indicates that the numbers above are to be added to reach a subtotal or total.

A complete journal entry requires the date, the accounts debited and credited, the amounts, and a reference to the source document for verification.

When supplies are purchased, the Supplies asset account increases. The transaction is recorded by debiting Supplies and crediting Cash.

A withdrawal by the owner decreases equity. This is recorded by debiting the Drawing account (which reduces equity) and crediting Cash (which reduces an asset).

Standard accounting journals require the date to be recorded for every individual transaction to maintain a clear chronological record.

Businesses use different types of journals (general, sales, purchases, cash receipts, cash payments) depending on the volume and nature of their transactions.

The journal is known as the book of original entry, where transactions are recorded in the order they occur (chronological order).

An invoice is a business document that details goods or services sold, quantities, prices, and terms of sale. While sales invoice is a specific type of invoice, the general term for this document is invoice.

Proving cash is the process of verifying that the cash balance in the accounting records matches the actual cash on hand. This is a standard internal control procedure.

Double-entry accounting is the system where every transaction affects at least two accounts, requiring both a debit and a credit entry to maintain the accounting equation.

Accounting records must be permanent and auditable. Erasing or using correction fluid is prohibited; errors must be corrected by drawing a single line through the incorrect entry and writing the correct information above it.

A receipt is a document that provides written acknowledgment that cash has been received. It serves as the source document for cash receipts.

A sales invoice is specifically used by a business to record a sale made on account to a customer. It acts as the source document for the seller.

A journal is the book of original entry where transactions are recorded in chronological order. It is the first place a transaction is recorded in the accounting cycle.

A journal is a permanent accounting record. All transactions must be recorded and preserved for audit and historical purposes.

A source document is any business paper, such as an invoice, check, or receipt, that provides objective evidence of a transaction and the information needed to record it.

Receiving cash from an owner is an investment, which increases Cash (debit) and increases Owner's Capital (credit). It does not involve Sales, which is a revenue account.

A check is a written order to a bank to pay a specific amount of money from the depositor's account to the person or business named on the check.

The Objective Evidence concept is applied when a source document is prepared for each transaction to ensure that financial statements are based on facts rather than opinions.

A memorandum is a brief written message that describes a transaction, often used when no other standard source document exists.

A receipt is used as the source document for cash received from transactions other than sales, such as owner investments or bank interest.

Journalizing is the formal process of recording business transactions in a journal.

A check is the standard source document for all cash payments made by a business, as it provides a clear record of the payment.

An entry is the record of a transaction in a journal, which includes the date, accounts affected, and the amounts.