Following are a series of statements regarding topics discussed in this chapter.
Required:
Indicate whether each statement is true (T) or false (F).
(a) If a journal entry affects two asset accounts and one liability account, that journal entry must be out of balance in reference to the accounting equation.
(b) If a business’s trial balance is ‘‘in balance,’’ then the entity’s accounting records are free of any errors.
(c) Contra-accounts are treated as ‘‘offsets’’ to related accounts for financial statement purposes.
(d) If every business transaction is not recorded, the accounting equation for that business will not be in balance.
(e) A company that has consistently experienced net income throughout its existence will have a credit balance in its Retained Earnings account.
(f) The initial step of the closing process is posting journal entry data to the appropriate general ledger accounts.
(g) An Income Summary account is a temporary account that is used during the preparation of period-ending closing journal entries.
(h) A primary purpose of period-ending adjusting journal entries is to comply with the revenue and expense recognition rules.
(i) Publicly owned companies typically prepare a formal set of financial statements for external users only once per year.
(j) All accounts contained in a chart of accounts for a business begin each accounting period with a zero balance.
(k) Most of the information needed by accountants to analyze business transactions is found in source documents.
(l) Double-entry book keeping is a financial record keeping system used only in the United States and a few European countries.