AC391 Ch3 test 1

operates to sell a product

Merchandising business

purpose to close entries

Close the temporary accounts (to get ready for the next period) Determine net income Transfer net income to a permanent owners' equity account (retained earnings for a corporation)

types of closing entries

temporary account and permanent account

general ledger

the main or primary ledger

tests the equality of debits and credits within the ledger

trial balance

permanent (real) accounts

asset, liability and owners' equity accounts

basic accounting equation

assets= liabilities + sotckhodler's equity

balance sheet

assets= liabilities + stockholders equity

Calculation of cost of goods sold

beginning inventory + net cost of goods purchased = cost of goods available for sale - ending inventory = cost of goods sold

ledger

book of final entry

journal

book of original entry

(Adjusting and Reversing entries) interest of 770 has accrued on notes payable

d interest expense 770 c interest payable 770

(Adjusting and Reversing entries) On November 1, Rent Revenue was credited for 1800, representing revenue form a subrental for a 3 month period beginning on that date

d rental revenue (1800*⅓) 600 c unearned rental revenue 600

Performed services for patients who had dental plan insurance. At January 31, $760 of such services was performed but not yet billed to the insurance companies.

d- Account rec. c- service rev.

(Adjusting and Reversing entries) The prepaid insurance account shows a debit of 5280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year

d- insurance expense (5280*5/24) 1100 c- prepaid insurance 1100

Completed a tax assignment and billed client $1,180 for services rendered

d-account rec. c-service rev.

(Adjusting and Reversing entries) Purchase of advertising materials for 800 during the year was recorded in the Advertising Expense account. On December 31, advertising material

d-avertising materials 290 c advertising expense 290

Received cash of $3,230 for services completed for Ferengi Co.

d-cash c-service rev

Received $3,980 advance on a management consulting engagement.

d-cash c-unearned service rev.

invested 32000 cash and equipment valued 14000 in the business

d-cash d-equipment c-capital

Invested $31,310 cash and equipment valued at $15,720 in the business.

d-cash d-equipment c-owners capital

Purchased dental equipment on January 1 for $84,000, paying $24,700 in cash and signing a $59,300, 3-year note payable. (a) The equipment depreciates $420 per month. (b) Interest is $620 per month.

d-depreciaition ex. c-accumulated ex.

Purchased a new computer for $6,350 with personal funds. (The computer will be used exclusively for business purposes.)

d-equipment c-owner's capital

Paid insurance expense $200

d-insurance ex. c-cash

Purchased a one-year malpractice insurance policy on January 1 for $15,000.

d-insurance ex. c-prepaid insurance

Hired a secretary-receptionist at a salary of $390 per week payable monthly.

d-no entry c-no entry

Paid office rent of $610 for the month

d-rent ex. c-cash

Paid secretary-receptionist $1,560 for the month

d-salaries and wages ex. c-cash

Purchased supplies on account $900. (Debit an asset account.)

d-supplies c-account pay.

A count of supplies indicated that $150 of supplies had been used.

d-supplies ex c-supplies

Purchased $1,650 of dental supplies. On January 31, determined that $420 of supplies were on hand.

d-supplies ex c-supplies

Utility expenses incurred but not paid prior to January 31 totaled $590.

d-utlities ex. c-account pay.

Adjusting Entries

Required at end of accounting period to record any as yet unrecorded changes in accounts caused by the passage of time, usage, and other causes not evidenced by formal transactions

net cost of goods purchased

gross purchases- purchase return and allowances - purchase discounts + transpiration -in

Three different inventory accounts

raw materials, work in process, finished goods inventory

temporary (nominal) accounts

revenue and expense accounts (plus withdrawals or dividends paid)

income statement

revenues - expenses= net income

operates to provide a service

service business

control accounts are in the general ledger

Accounts receivable and accounts payable