source documents include all of the following excepr: A. Income statement B. Che
ID: 2546818 • Letter: S
Question
source documents include all of the following excepr: A. Income statement B. Checks C. Purchase orders D. Bank statements 24. Identifying business activities requires selecting transactions and events relevant to an organization. W of the following events would be recorded in the accounting records of Acme Car Wash? A. Acme washes 500 cars C. J.B. Smith, a customer, buys lunch at the restaurant next door to Acme while awaiting washing of her car. D. Clean Company, a supplier, sells 50 pounds of soap to ABC Company B. Acme hires Andrea as a receptionist 25. Which of the following statements is incorrecr? A. The normal balance of accounts receivable is a debit B. The normal balance of dividends is a debit C. The normal balance of unearned revenues is a credit D. The normal balance of an expense account is a credit (Numbers 11, 20, and 21 are non-multiple ehoice questions. Answer them on a separate sheet of paper, and show your workings).Explanation / Answer
23. Answer: Option A. Income statement
Explanation: Source documents are the basis for recording and substantiating the financial transactions. Hence, checks, purchase orders, and bank statements are all source documents. However, the income statement is not a source document but the financial statement depicting the total revenues, expenses and net income for a period.
24. Answer: Option A. Acme washes 500 cars
Explanation: Event A will be recorded in the accounting records of Acme Car Wash since there is revenue that has been earned by washing cars and the same needs to be recorded as it results in a change in the financial position of Acme. There is no change in the financial position of Acme when it hires a receptionist per event B and hence the same will not be recorded. The accrual/payment of salaries to the receptionist on rendering services will however be recorded. Events C and D also do not affect the financial position of Acme and hence will not be recorded in the accounting records of Acme.
25. Answer: Option D. The normal balance of an expense account is a credit
Explanation: Accounts receivable being an asset account has a normal debit balance hence statement A. is correct. The Dividends account is debited and dividends payable or cash is credited when dividends are declared or paid. The normal balance of dividends is thus a debit and hence statement B. is correct. Unearned revenue is a liability account and thus has a normal credit balance due to which statement C. is correct. All incomes have credit balances and expenses have debit balances hence the statement D. is incorrect.
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