Accounting Midterm
Determining the debit and credit parts of each transaction is called
analyzing business transactions
Whether accounts are kept manually in a special file or electronically on magnetic disks or tapes, the ledger is often called a(n) ____.
general ledger
All of the following about a trial balance are true except:
it includes only the permanent accounts
A(n) ____ is often called a book of original entry.
journal
Adding all the debit balances and all the credit balances and then comparing the two totals to see whether they are equal is called
proving the ledger
The top of the T account is used for account titles. Credits are entered on the left side of the T; debits on the right.
False
The total financial claims do not have to equal the total cost of the property.
False
Generally Accepted Accounting Principles
GAAP
Money a business earns from the sale of goods or services is the
Revenue
A business should have separate accounts for recording revenue and expenses.
True
A business transaction affects at least two accounts.
True
The amounts for the trial balance come directly from the journal.
False
The owner's claims to the assets of a business are liabilities.
False
The payment of a liability is recorded by a debit to the liability account and a credit to the owner's capital account
False
The process of transferring information from the ledger to the journal is called posting.
False
If a transaction is journalized on the 8th and is posted on the 10th, the date entered in the Date column of the ledger account is the 10th.
False
Liability, expense, and capital accounts all have normal credit balances.
False
Liability, revenue, and withdrawal accounts all have normal credit balances.
False
Prepaid Insurance is an expense account.
False
Revenues increase owner's equity, and increases in revenues are recorded as debits
False
Sole Proprietorship
A business owned and managed by a single individual
All of the following account titles are asset titles except
Accounts Payable
The purchase of a desk on account will increase Office Furniture and will also increase
Accounts Payable
The account Accounts Receivable is an example of a
Asset
A(n) ____ accounting period begins on January 1 and ends on December 31.
calendar year
Smith Company mailed a check for $200 for the first installment payment on office equipment purchased last month. The journal entry should be
debit A/P credit cash
Smith Company received and deposited a check for $790 for delivery service. The journal entry should be
debit cash and credit delivery revenue
Smith Company purchased a used pick up truck on account for $20,000. The account to be debited is
delivery equipment
Each of the following is a business expense except a payment for
equipment
The ____ is an all-purpose journal used for recording business transactions.
general journal
Recognizing and recording revenue on the date it is earned even if cash has not been received on that date is known as
revenue recognition
The asset, liability, and owner's equity accounts are extended to the ____ of the worksheet.
Balance Sheet section
The free enterprise system is based on the right to own property
True
What type of account is Accounts Receivable
Asset
Smith Company paid cash for one file cabinet $100. The account credited should be
Cash
Purchased a computer for $1,200. Accidently the journal entry was recorded and posted as a debit to Office Furniture instead of Computer Equipment. Record the entry to correct this error
Credit Office Furniture and Debit Computer Equipment for $1,200
Journalized and posted as an error a credit of $150 to A/R-Mary Jones instead of A/R Mary Smith. What is the the correcting entry?
Debit A/R-Mary Jones and Credit A/R Mary Smith
Correcting Entry: Discovered that a transaction for rent expense for last month was journalized and posted in error as a debit to Repair Expense instead of Rent Expense, $550. M16
Debit Rent Expense, Credit Cash
Free enterprise
Economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
A credit posting to the Office Equipment account will result in an increase to that account.
False
A credit to an account always increases it; a debit to an account always decreases it.
False
A double rule under a column of figures means that the figures are to be added or subtracted.
False
A work sheet always covers a period of one month.
False
After the net loss is calculated, it should be reflected in the debit column of the Income Statement section and the credit column of the Balance Sheet section.
False
All liability accounts are listed in the credit column of the Income Statement section.
False
Amounts from the Trial Balance section are extended first to the Income Statement section.
False
An account is a record of only the increases in the balance of a specific item such as cash or equipment.
False
An asset account appears on the right side of the accounting equation and is also increased on the right side of its T account.
False
An error discovered before posting is usually corrected with a journal entry.
False
The Balance Sheet accounts are assets, liabilities and revenue.
False
To locate a trial balance error, the first step is to check the postings from the journal to the individual ledger accounts.
False
Total expenses for the period are reflected in the total of the credit column of the Income Statement section.
False
A(n) ____ is an accounting period of twelve months ending on the last day of any month except December.
Fiscal year
What type would be the source document for the following transaction. Bought office furniture on account from O'Brians Office Supply
Invoice
A business transaction can affect two accounts on the same side of the accounting equation and still leave the equation in balance.
True
A creditor has a financial claim to the assets of a business.
True
A double rule across both amount columns of the Trial Balance section means that no more entries will be made.
True
A net income for the period is the amount left after the expenses for the period have been subtracted from revenue.
True
A net loss decreases the balance in the owner's capital account.
True
A trial balance is prepared after posting is completed.
True
A worksheet is prepared at the end of each fiscal period.
True
After each transaction, the basic accounting equation should remain in balance.
True
All asset accounts are extended to the Balance Sheet section.
True
Buying on account is the same as buying on credit
True
Every amount posted will either increase or decrease the balance of a ledger account.
True
Every journal entry requires a posting to at least two ledger accounts.
True
Every transaction affects two or more accounts and is recorded by equal amounts of debits and credits.
True
Expenses decrease owner's equity and are recorded as debits
True
Expenses have the opposite effect from revenue on the capital account.
True
In the preparation of a trial balance, all accounts are listed in the order in which they appear on the chart of accounts, including those accounts with a zero balance.
True
One of the purposes of accounting is to provide financial information about property and the rights to that property
True
Revenue is income earned from the sale of goods and services
True
Temporary capital accounts are extensions of the owner's capital account.
True
The Income Statement columns are temporary accounts.
True
The Trial Balance section contains entries for all accounts in the general ledger including those with zero balances.
True
The increases and decreases caused by business transactions are recorded in specific accounts.
True
The notation "G3" in the Posting Reference column of a ledger account indicates the data was posted from general journal page 3.
True
The purpose of posting is to show the changes that take place in the business's accounts as a result of financial transactions.
True
The rules of debit and credit for expense accounts are the same as the rules for asset accounts.
True
The total of all accounts with normal debit balances should equal the total of all accounts with normal credit balances if the rules of debit and credit were followed correctly.
True
When posting a correcting entry, the phrase "correcting entry" is usually written in the Description column of the ledger account.
True
A record of all the transactions of a business is called
a journal
The various activities a business completes to organize its accounting records in an orderly fashion is called the ____.
accounting cycle
A list of specific information about a business transaction involving the buying or selling of an item and containing the date of the transaction, the quantity, description and cost of each item is called
an invoice
A list of all accounts used by a business
chart of accounts
Which of the following steps in the accounting cycle is in the correct order?
collect and verify source documents, analyze each transaction, journalize each transaction, post to the ledger, and prepare a trial balance
Errors discovered after posting has taken place require a(n)
correcting entry
Another term used for "recording" a business transaction is ____
journalizing
The accounts used by a business can be kept on pages or cards, which are kept together in a book or file called a(n)
ledger
A(n) ____ results when revenue is larger than expenses.
net income
The dollar balance of a(n) _____account is carried forward from one period to the next
permanent
Transferring data from the journal to the ledger is called
posting
If you were to write $190 as either $19 or $1,900, this mistake would be called a(n) ____.
slide
A(n) ____ is any type of business paper that verifies that a transaction occurred.
source document
The paper that is the record of a business transaction is called a
source document
If you meant to write $27 but wrote $72, this mistake is called a(n) ____.
transposition error
A periodic report prepared by a business to test the equality of total debits and total credits in the ledger is called a(n)
trial balance
A(n) _____occurs when the owner takes assets out of the business for personal use
withdrawls