Part 1

A transaction recorded in a journal is not considered a permanent record.

• True

• False

A balance sheet reports financial information for a period of time.

• True

• False

The source document for an electronic funds transfer is a memorandum.

• True

• False

The drawing account is a permanent account.

• True

• False

A transaction for the sale of goods or services results in a decrease in owner’s equity.

• True

• False

The formula for calculating net income is total revenue minus total expenses.

• True

• False

If the previous account balance and the current entry posted to an account are both credits, the new account balance is a credit.

• True

• False

Adjusting entries must be posted to the general ledger accounts.

• True

• False

Temporary accounts are used to accumulate information until it is transferred to the owner’s capital account.

• True

• False

If an error is recorded in a journal entry, you should:

• cancel the error by drawing a neat line through the error.

• correct the entry by writing the correct item above the canceled error.

• do not erase the incorrect item.

• all of these.