Question

In: Accounting

During the accounting period, it is noted that the Cash account has a credit balance. Which...

During the accounting period, it is noted that the Cash account has a credit balance. Which statement is true?

a. This is the normal balance for cash.

b. Although cash has a debit balance, it will often have a credit balance during the accounting period due to payments on account.

c. The account needs to be analyzed to determine the reason for the credit balance.

d. Debit postings exceed the credit postings for the accounting period.

Which statement is incorrect?

a. A chart of accounts is a listing of accounts used by a business.

b. New accounts can be added to the chart of accounts.

c. Stockholders’ Equity is an account that is included in the chart of accounts.

d. Account titles for the chart of accounts are used in general journal entries.

Expert Solution

Solution

Cash account has a credit balance, which statements true –

The answer is option C. the accounts needs to be analysed to determine the reasons for the credit balance.

Explanation:

Cash accounts lists all the cash receipts and all the cash payments. The cash account’s debits usually exceed credits to leave a balance. The cash account normally has a debit balance. If the cash account has a credit balance, then the accounts needs to be analysed to determine the reasons for the credit balance.

Incorrect Statement –

Stockholders’ equity is an account that is included in the chart of accounts.

The statement is incorrect for the following reason.

Stockholders’ equity is not a single account but a sets of accounts relating to the capital of the company. Stockholders’ Equity is shown as a separate section in the balance sheet. The set normally consists of preferred stock, additional paid-in – preferred stock, common stock, additional paid-in – common stock, retained earnings, treasury stock, contributed capital.

All other given statements about chart of accounts are true.

A chart of account is a listing of accounts used by a business.

The company records all its business transactions in general ledger using these accounts listed in the chart of accounts.

New accounts can be added to the chart of accounts.

Account titles for the chart of accounts are used in general journal entries.

ekkarill92 answered 2 years ago

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