Journalizing and Posting Transactions Flashcards

When posting to the general ledger, the journal page number is recorded in the ledger's posting reference column primarily to:

Answer: Allow tracing back to the original journal entry

The journal page reference in the ledger allows an auditor or bookkeeper to trace any ledger entry back to the original journal entry.

A business pays $1,200 for six months of prepaid insurance. The correct journal entry is:

Answer: Debit Prepaid Insurance $1,200, Credit Cash $1,200

Paying for insurance in advance creates an asset (Prepaid Insurance) that is debited, with Cash credited for the outflow.

The normal balance of the Accounts Payable account is a:

Answer: Credit, because it is a liability account

Accounts Payable is a liability, and liabilities have normal credit balances that increase with credits.

Which sequence correctly describes the accounting cycle flow for journalizing and posting?

Answer: Analyze transaction → Record in journal → Post to ledger

The proper sequence is: analyze the transaction, record it in the journal, then post the entry to the appropriate ledger accounts.

The owner withdraws $800 cash for personal use. Which account is debited?

Answer: Drawing (Withdrawals)

Owner withdrawals are debited to the Drawing account, which is a contra-equity account that reduces owner's equity.

A business performs services and receives $300 cash immediately. How is revenue recorded?

Answer: Debit Cash, Credit Service Revenue

Cash received for services increases Cash (debit) and increases Service Revenue (credit), reflecting earned income.

Which statement is TRUE about the chart of accounts?

Answer: It assigns a number to each account used by the business

The chart of accounts is a numbered list of all accounts a business uses, providing a consistent reference for journalizing.