Which of the following best describes a ledger in accounting?
a) A document that summarizes the financial transactions of a business
b) A record of individual transactions in chronological order
c) A book that contains all the accounts and their balances
d) A financial statement that shows the net income of a business
Answer: c) A book that contains all the accounts and their balances
Which of the following types of accounts would you find in a ledger?
a) Income, expense, and liability accounts
b) Debit and credit accounts
c) Asset, liability, and equity accounts
d) All of the above
Answer: d) All of the above
How are ledger accounts arranged in a general ledger?
a) Alphabetically
b) By the order of creation
c) According to their account numbers
d) Randomly
Answer: c) According to their account numbers
Which of the following is NOT a purpose of maintaining a ledger in accounting?
a) To record and classify financial transactions
b) To prepare financial statements
c) To calculate income tax payable
d) To facilitate auditing and financial analysis
Answer: c) To calculate income tax payable
When a transaction is recorded in a ledger, which accounts are affected?
a) Only the account related to the specific transaction
b) Only the asset and liability accounts
c) Both the account debited and the account credited
d) None of the above
Answer: c) Both the account debited and the account credited
Which of the following is true about the double-entry system used in ledger accounting?
a) It records only one side (debit or credit) of a transaction
b) It ensures that every transaction has equal debits and credits
c) It is used only in manual accounting systems
d) It is not necessary when maintaining a ledger
Answer: b) It ensures that every transaction has equal debits and credits
What is the purpose of posting entries from a journal to a ledger?
a) To transfer the financial data to a permanent record
b) To calculate the total debits and credits of a transaction
c) To determine the account balances at the end of a period
d) To verify the accuracy of the financial statements
Answer: a) To transfer the financial data to a permanent record
Which of the following statements is true about a subsidiary ledger?
a) It contains only summary-level accounts
b) It is a separate ledger used for non-current assets
c) It provides detailed information for a specific general ledger account
d) It is not necessary when maintaining a ledger
Answer: c) It provides detailed information for a specific general ledger account
In a ledger, which side represents a decrease in an asset account?
a) Debit
b) Credit
c) Both debit and credit
d) None of the above
Answer: b) Credit
Which financial statement is prepared directly from the ledger?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Statement of retained earnings
Answer: b) Balance sheet
Which of the following is an example of a controlling account in a subsidiary ledger?
a) Accounts Receivable
b) Sales Revenue
c) Cash
d) Inventory
Answer: a) Accounts Receivable
What is the purpose of a general ledger control account?
a) To track individual transactions within a specific account
b) To summarize the balances of subsidiary ledger accounts
c) To record daily cash transactions
d) To calculate the net income of a business
Answer: b) To summarize the balances of subsidiary ledger accounts
Which of the following accounts is classified as a liability in the ledger?
a) Accounts Payable
b) Office Supplies
c) Prepaid Rent
d) Owner’s Capital
Answer: a) Accounts Payable
Which side of a ledger account represents an increase in a liability account?
a) Debit
b) Credit
c) Both debit and credit
d) None of the above
Answer: b) Credit
When a transaction is recorded in a ledger, which account is debited?
a) The account receiving the benefit
b) The account giving the benefit
c) Both accounts equally
d) None of the above
Answer: b) The account giving the benefit
What is the purpose of a general journal in the accounting process?
a) To record transactions in a chronological order
b) To calculate the net profit of a business
c) To prepare financial statements
d) To post entries to the ledger accounts
Answer: a) To record transactions in a chronological order
Which of the following is true about a T-account in a ledger?
a) It is used to record transactions involving cash only
b) It provides a visual representation of a ledger account
c) It is used to calculate the total assets of a business
d) It is not necessary when maintaining a ledger
Answer: b) It provides a visual representation of a ledger account
Which financial statement can be directly prepared from the ledger’s revenue and expense accounts?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
Answer: b) Income statement
How are ledger accounts affected when a business makes a payment for an expense?
a) The expense account is debited, and the cash account is credited
b) The expense account is credited, and the cash account is debited
c) The expense account is debited, and the accounts payable account is credited
d) The expense account is credited, and the accounts payable account is debited
Answer: a) The expense account is debited, and the cash account is credited
Which of the following statements is true about a trial balance prepared from the ledger accounts?
a) It ensures that all transactions have been properly recorded
b) It determines the net income of a business
c) It shows the cash flow activities of a business
d) It is not necessary when maintaining a ledger
Answer: a) It ensures that all transactions have been properly recorded
Which of the following is an example of a real (permanent) account in a ledger?
a) Rent Expense
b) Sales Revenue
c) Owner’s Drawings
d) Accounts Payable
Answer: d) Accounts Payable
How are ledger accounts affected when a business receives cash from a customer?
a) The cash account is debited, and the revenue account is credited
b) The cash account is credited, and the revenue account is debited
c) The accounts receivable account is debited, and the cash account is credited
d) The accounts receivable account is credited, and the cash account is debited
Answer: a) The cash account is debited, and the revenue account is credited
What is the purpose of a contra account in a ledger?
a) To track expenses related to production
b) To offset the balance of a related account
c) To record transactions involving credit sales
d) To calculate the total assets of a business
Answer: b) To offset the balance of a related account
Which of the following is true about a general ledger in computerized accounting systems?
a) It is no longer required since all transactions are recorded in a database
b) It is a physical book used to record financial transactions
c) It is a digital record that stores all accounts and their balances
d) It can only be accessed by certified accountants
Answer: c) It is a digital record that stores all accounts and their balances
When a transaction is recorded in a ledger, which side represents a decrease in an equity account?
a) Debit
b) Credit
c) Both debit and credit
d) None of the above
Answer: a) Debit
Which of the following statements is true about the trial balance prepared from the ledger accounts?
a) It verifies the accuracy of the financial statements
b) It determines the net income of a business
c) It shows the cash inflows and outflows of a business
d) It is not necessary when maintaining a ledger
Answer: a) It verifies the accuracy of the financial statements
What is the purpose of a post-closing trial balance?
a) To identify and correct errors in the ledger accounts
b) To determine the net income of a business
c) To prepare financial statements
d) To record transactions after the closing entries have been made
Answer: a) To identify and correct errors in the ledger accounts
Which financial statement provides a summary of a company’s financial position at a specific point in time?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Statement of retained earnings
Answer: b) Balance sheet
How are ledger accounts affected when a business records an accrual of revenue?
a) The revenue account is debited, and the accounts receivable account is credited
b) The revenue account is credited, and the accounts receivable account is debited
c) The cash account is debited, and the revenue account is credited
d) The cash account is credited, and the revenue account is debited
Answer: a) The revenue account is debited, and the accounts receivable account is credited