Accounting Final
3 things every financial statement must have
1. company name 2. statement name 3. date or time period
the inventory cost flow assumptions where the cost of the most recent purchases are likely to remain in inventory?
FIFO
A contra account is an account linked with another account; it is added to the account to show the proper amount for the item recorded in the associated account
False
Adjusting entires are designed primarily to connect accounting errors
False
An adjusting entry often includes an entry to cash
False
Closing entries are required at the end of each accounting period to close all ledger account
False
a company had a gross profit of $300,000 based on sales of $400,000, its cost of goods sold equal $700,000
False
accounts that appear in the balance sheet are often called temporary accounts
False
The inventory cost flow assumption where the cost of the most recent purchases is matched first against sales revenue is?
LIFO
the inventory cost flow assumption where the oldest cost of inventory items is likely to remain on the balance sheet is?
LIFO
An error in the period-end inventory balance will cause an error in the calculation of cost of goods sold
True
Income summary is a temporary account only used in the closing process
True
The expense recognition principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid
True
an accounts balance is the difference between the total debits and total credits for the account, including any beginnings balance
True
Trail Balance
a list of account and their balances at a point in time; the total debi balances should equal the total credit balances
Journal
a record of each transaction in one place that shows debits and credits for each transaction
Debit
an increase in an asset, owner withdrawl, and espense account, and a decrease in a liability, owners capital, and revenue account; recorded on the left side of a t - account
purchased merchandise for cash
cash disbursements journal
borrowed cash from the bank
cash receipts journal
paid cash to settle the utility bill
cash receipts journal
sold merchandise for cash
cash receipts journal
Adjusting entries are made after the preparations of financial statements
false
Debit means increase and credit means decrease for all accounts
false
Transactions are recorded first in the ledger and then transferred to the journal
false
a contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account
false
accounts that appear in the balance sheet are often called temporary accounts
false
adjusting enteries are made after the preparation of financial statements
false
adjusting entries are designed primarily to correct accounting errors
false
an adjusting entry often includes and entry to cash
false
an advantage of FIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement
false
as long as a company accurately records total credit sales information, it is not necessary to have separate accounts for specific customers
false
clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control
false
closing entries are required at the end of each accounting period to close all ledger accounts
false
companies follow both the expense recognition (matching) principle and the materiality constraint when applying the direct write-off method
false
debit means increase and credit means decrease for all accounts
false
goods in transit are automatically included in inventory regardless of whether title has passed to the buyer
false
incidental costs for acquiring merchandise inventory, such as import duties, freight, storage, and insurance, should not be added to the cost of inventory
false
no attempt is made to estimate bad debts expense under the allowance method of accounting for uncollectible accounts recievable
false
sales discounts is added to the sales account when computing a company's net sales
false
the use of internal controls provide a guarantee against losses due to operating activites
false
transactions are recorded first in the ledger and then transferred to the journal
false
two commons subsidiary ledgers are cash receipts and cash disbursements
false
when posting from special journals, each individual debit and credit entry of similar transaction is entered in the general ledeger
false
whether purchases cost rising or falling FIFO always yield the highest gross profit and net income
false
recorded depreciation for the period
general journal
purchased merchandise on credit
purchases journal
sold merchandise on credit
sales journal
income statement
shows a period of times revenues and expenses
balance sheet
shows balance of a specific day
Cost of goods sold is an expense, and its reported on the income statement
true
Every business transaction leaves the accounting equation in balance
true
Merchandise inventory refers to products that a company owns and intends to sell to customers
true
a perpetual inventory system continually updates accounting records for merchandising transaction
true
a special journal is used to record and post transactions of a similar type
true
a subsidiary ledger is a listing of individual accounts that contain detailed information on specific accounts in the general ledger
true
an account's balance is the difference between the total debits and total credits for the account, including any beginning balance
true
beginning inventory plus net purchases equals merchandise available for sale
true
canceled checks are checks the bank has paid and deducted from the customers account during the period
true
each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold
true
every business transaction leaves the accounting equation in balance
true
income summary is a temporary account only used for the closing process
true
on a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made
true
the expense recognition (matching) principle requires that expense get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid
true
the merchandise inventory account balance at the beginning of the current period is equal to the amount of ending merchandising inventory from the previous period
true
