The only correct way to change the balance of a ledger account is ...

[Sufayan.ah]

The only correct way to change the balance of a ledger account is to make a journal entry.
 a. True
   b. False
   Indicate whether the statement is true or false

Question 2

(Journal entries for an Agency Fund)
 
  A state collects sales taxes both for itself and for counties that have elected to piggy-back their taxes on the state tax.
 
  The state takes several weeks to process returns and determine how much each participating government should receive, so tax collections are temporarily invested. Resulting investment income is distributed to the state to defray processing costs.
 
  Prepare entries to record these transactions in the Agency Fund.
   a. The state collects sales taxes totaling 7,000,000 for itself and participating counties.
   b. The entire 7,000,000 is temporarily invested.
   c. The state determines that 4,800,000 of the tax collections belong to the state and that the remaining 2,200,000 should be distributed to the counties.
   d. The investments are immediately liquidated and 7,003,500 is received in cash.
   e. Tax collections and the investment income are forwarded to the state and the counties.

[bobsmith]

Answer to Question 1

True

Answer to Question 2

Agency Fund Entries
a. Cash 7,000,000
Due to state and other governmental units 7,000,000

b. Investments 7,000,000
Cash 7,000,000

c. Due to state and other governmental units 7,000,000
Due to General Fund 4,800,000
Due to other governmental units 2,200,000

d. Cash 7,003,500
Investments 7,000,000
Due to General Fund 3,500

e. Due to General Fund 4,803,500
Due to other governmental units 2,200,000
Cash 7,003,500