Chapter 4 Accounting

General ledger accounts are usually arranged in what order?

ALORE (Assets, Liabilities, Owner's equity, Revenue and Expenses) *Note...this is in order of what you find on a balance sheet first, then Income statement. Balance sheet has assets, liabilities and owner's equity...income statement has revenue and expenses.

What is recorded in the Posting Reference column of the ledger account?

Journal page number

General Journal

a financial record for entering all types of business transactions; a record of original entry

Correcting Entry

a journal entry made to correct an erroneous entry

Compound Entry

a journal entry with more than one debit or credit

Indicate how each of the following would be reflected in the journal entry required to record the effects described by using debit or credit to indicate the increase or decrease in each affected account. An increase in Cruz Drawing: (debit or credit)

debit

Bertrand Inc. performed services for clients in the amount of $1,350 on credit. If this transaction had been posted in error to the Cash account instead of the Accounts Receivable account, what correcting entry would be necessary? A. Debit Accounts Receivable $1,350; credit Cash $1,350 B. Debit Cash $1,350; credit Accounts Receivable $1,350 C. Debit Accounts Receivable $1,350; credit Fees Income $1,350 D. Debit Fees Income $1,350; credit Cash $1,350

A. Debit Accounts Receivable $1,350; credit Cash $1,350

The owner of the business would like to see both the debit and credit entry for a specific transaction, he would look in A. the chart of accounts. B. the journal. C. the source document. D. the ledger.

B. the journal

Provided services on credit. What accounts are debited and credited?

Accounts receivable is debited Fees income is credited

The journal entry to record the payment of a monthly utility bill would include A. a debit to Utilities Expense and a credit to Capital. B. a debit to Capital and a credit to Cash. C. a debit to Utilities Expense and a credit to Cash. D. a debit to Utilities Expense and a credit to Accounts Payable.

C. a debit to Utilities Expense and a credit to Cash

Sold $3,000 in t shirts. What accounts are debited and credited?

Cash is debited Fees income is credited

Returned damaged supplies and received $300 cash back. What accounts are debited and credited?

Cash is debited Supplies is credited

The journal entry to record the sale of services on credit should include A. a debit to Accounts Receivable and a credit to Capital. B. a debit to Cash and a credit to Accounts Receivable. C. a debit to Fees Income and a credit to Accounts Receivable. D. a debit to Accounts Receivable and a credit to Fees Income.

D. a debit to Accounts Receivable and a credit to Fees Income.

A company purchased equipment costing $15,000. They paid $1,000 right away and agreed to pay the balance in 30 days, the journal entry to record the purchase of equipment would include A. a debit to Equipment for $15,000 and a credit to Cash for $15,000. B. a debit to Equipment for $1,000 and a credit to Cash for $1,000. C. a debit to Equipment for $14,000 and a credit to Accounts Payable for $14,000. D. a debit to Equipment for $15,000, a credit to Cash for $1,000 and a credit to Accounts Payable for $14,000.

D. a debit to Equipment for $15,000, a credit to Cash for $1,000 and a credit to Accounts Payable for $14,000.

I paid rent for January. What accounts are debited and credited?

Rent expense is debited Cash is credited

True or false: A ledger account contains a complete record of the individual transaction activity in each account.

True

Audit Trail

a chain of references that makes it possible to trace information, locate errors, and prevent fraud

The general ___________ is the record of original entry and the general _________ is the record of final entry.

journal (original entry) ledger (final entry)

Chronological Order

organized in the order in which the events occur

Journal is the record of ___________ entry.

original

Journalizing

recording transactions in a journal

Determine the accounts and amounts to be debited and credited for the following transactions for Madison's Clock Repair. Purchased new equipment for $1,700 by issuing a check for $1,000 as a down payment with the balance due in 30 days.

.Equipment (debit. $1,700); Cash (cr. $1,000) and Accounts Payable (cr. $700)

True or false: When transactions are entered in a general journal, the asset accounts are listed first, followed by the liability and owner's equity accounts.

False They are listed in chronological order.

Making corrections after it has been posted.... You discovered that a receipt of $2,000 was recorded as a rent expense when it was a salary expense. What does your correcting entry look like?

Make a debit to salary expense and a credit to rent.

I purchased supplies on credit. What accounts are debited and credited?

Supplies are debited Accounts payable are credited

Balance Ledger Form

a ledger account form that shows the balance of the account after each entry is posted

Indicate how each of the following would be reflected in the journal entry required to record the effects described by using debit or credit to indicate the increase or decrease in each affected account. A decrease in cash (debit or credit)

credit

Journal

the record of original entry

Posting

transferring data from a journal to a ledger

The general ledger accounts are usually arranged in the following order: A. first the balance sheet accounts, then the income statement accounts. B. first the accounts with debit balances, then the accounts with credit balances. C. first the temporary accounts, then the permanent accounts. D. first the accounts used most often, then those used less frequently.

A. first the balance sheet accounts, then the income statement accounts.

Accounting Cycle

a series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information

General Ledger

a permanent, classified record of all accounts used in a firm's operation; a record of final entry

Ledger

the record of final entry

True or False: The revenue accounts come before the expense accounts in the general ledger.

True *remember...ALORE

On July 3, the ABC Company received $865 in cash on account from customers. The correct journal entry is A. debit Cash, $865; credit Income from Services, $865 B. debit Cash, $865; credit Accounts Payable, $865 C. debit Accounts Receivable, $865; credit Cash, $865 D. debit Cash, $865; credit Accounts Receivable, $865

D. debit Cash, $865; credit Accounts Receivable, $865

True or False: When a transaction is entered in a general journal, the first account title is indented about half an inch from the left margin of the Description column.

False

Bertrand Inc. purchased some shop equipment for $4,500 in cash. By mistake, the journal entry debited the Office Equipment account rather than the Shop Equipment account. What correcting entry would be necessary? A. Debit Office Equipment $4,500; credit Shop Equipment $4,500 B. Debit Shop Equipment $4,500; credit Office Equipment $4,500 C. Debit Cash $4,500; credit Shop Equipment $4,500 D. Debit Office Equipment $4,500; credit Cash $4,500

B. Debit Shop Equipment $4,500; credit Office Equipment $4,500

61. On December 1, the Accounts Receivable account had a $5,000 balance. The business received $400 during the month from its charge-account customer. After posting this transaction, the new balance in the Accounts Receivable account is A. a $4,600 credit balance. B. a $4,600 debit balance. C. a $5,400 debit balance. D. a $5,400 credit balance. $5,000 debit - $400 credit = $4,600 debit

B. a $4,600 debit balance. $5,000 debit - $400 credit = $4,600 debit

The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of $400 due in 30 days would include A. a debit to Equipment for $100 and a credit to Cash for $100. B. a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400. C. a debit to Equipment for $100 and a credit to Accounts Payable for $400. D. debit to Equipment for $500 and a credit to Cash for $500.

B. a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.

67. A firm purchased telephone equipment for cash. By mistake, the person who recorded the transaction debited Utilities Expense instead of Office Equipment. The error was discovered after the data posted. The correcting entry should contain A. a debit to Office Equipment and a credit to Cash. B. a debit to Office Equipment and a credit to Utilities Expense. C. a debit to Cash and a credit to Office Equipment. D. a debit to Utilities Expense and a credit to Cash.

B. a debit to Office Equipment and a credit to Utilities Expense.

When an entry is made in the general journal, A. assets should be listed first. B. accounts to be debited should be listed first. C. accounts to be increased should be listed first. D. accounts may be listed in any order.

B. accounts to be debited should be listed first

When I make an entry in the general journal, do I indent the debit entry? (Yes or no)

No...you indent the account to be credited. Your debit entry is NOT indented.

Determine the accounts and amounts to be debited and credited for the following transactions for Madison's Clock Repair. Issued checks for $2,400 to pay the employees their monthly salaries.

Salaries Expense (debit. $2,400); Cash (cr. $2,400)

True or false: Account names are written in the general journal exactly as they appear in the chart of accounts.

True