Accounting Ch. 1-3
The unexpired insurance at the end of the fiscal period represents
A deferred expense
Which of the following errors, each considered individually, would cause the trial balance totals to be unequal?
A payment of $1,311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to Accounts Receivable
The debt created by a business when it makes a purchase on account is referred to as an
Account Payable
Which of the following is the BEST description of accounting's role in business?
Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company
A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper should
Accounts Receivable, debit; Fees Earned, credit
Which of the following entries records the billing of patients for services performed?
Accounts Receivable, debit; Fees Earned, credit
Which of the following is NOT considered to be a liability?
Accounts Recievable
Data for an adjusting entry described as "accrued wages, $2,020" means to debit
Wages Expense and credit Wages Payable
The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is
Accrual
Generally accepted accounting principles requires that companies use the ____ of accounting.
Accrual basis
Generally accepted accounting principles requires that companies use the _____ of accounting.
Accrual basis
The cost of office supplies to be used in the future periods is ordinarily shown on the balance sheet as a(n)
Asset
The account type and normal balance of Accumulated Depreciation is
Asset, credit
Accrued revenues would appear on the balance sheet as
Assets
How does the owner withdrawing cash from the business affect the accounting equation?
Assets decrease; Owner's Equity decreases
How does the purchase of supplies on account affect the accounting equation?
Assets increase; Liabilities increase
How does the rendering of services on account affect the accounting equation?
Assets increase; Owner's Equity increases
All of the following are financial statement(s) of a proprietorship EXCEPT:
B) The statement of retained earnings
Which of the following financial statements reports information as of a specific date?
Balance sheet
Prior to the adjusting process, accrued revenue has
Been earned and not recorded as revenue
The difference between the balance of a fixed account and the related accumulated depreciation account is termed
Book value
Which of the following is NOT a true statement about the accounting equation and its elements?
C) The accounting equation is Assets = Liabilities - Owner's Equity
Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service.
Cash, debit; Unearned Rent, credit.
Expenses can result from:
Consuming services
Which of the following abbreviations are correct?
Debit "Dr", Credit "Cr"
The payment for the monthly rent will require the following entry
Debit Rent Expense and Credit Cash
When amounts of a transaction are entered on the left side of an account, they are said to be
Debited
If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)
Deferral
As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
Depreciation
Which of the accounts below would appear on an adjusted trial balance but probably would NOT appear on the trial balance?
Depreciation Expense
Which of the following is NOT true regarding Depreciation?
Depreciation expense reflects the decrease in market value each year
The revenue recognition concept
Determines when revenue is credited to a revenue account
All of the following occur with a double-entry accounting system EXCEPT
Each business transaction will have only two entries
Which of the items below is NOT a business entity?
Entrepreneurship
Which of the following is NOT a business transaction?
Erin pays her monthly personal credit card bill
The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income statements by having
Expenses understated and therefor net income overstated
Assets are
Financed by the owner and/or creditors
The initials GAAP stand for
Generally Accepted Accounting Principles
4 financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?
I, OE, B
Which one of the following accounts below would likely be included in a deferral adjusting entry?
Unearned Revenue
All of the following statements regarding vertical analysis are true EXCEPT
In a vertical analysis of an income statement, each item is stated as a percent of total expenses
Accounts are classified in the ledger
In accordance with their appearance in the financial statements
Collins Landscape Company purchased various landscaping supplies on account to be used for landscape designs for their customers. How will this business transaction affect the accounting equation?
Increase Assets (Supplies) and increase Liabilities (Accounts Payable)
Earning revenue
Increases Assets; Increases Owner's Equity
The process of initially recording a business transaction is called
Journalizing
The process of recording a transaction in the journal is called
Journalizing
Accrued expenses are ordinarily reported on the balance sheet as
Liabilities
Which of the following statements is NOT true about liabilities?
Liabilities do not include wages owed to the employees of the company
Which of the following is NOT a business transaction?
Make a sales offer
Adjusting entries are
Needed to bring accounts up to date and match revenue and expense
Deferred revenue is revenue that is
Not earned but the cash has been received
Deferred expenses have
Not yet been recorded as expenses
Which of the following entries records the acquisition of office supplies on account?
Office Supplies, debit; Accounts Payable, credit
Which of the following is NOT an asset?
Owner's Equity
The classification and normal balance of the drawing account is
Owner's Equity with a debit balance
Which of the accounting steps in the accounting process below would be completed last?
Preparing the financial statements
Which of the following entries records the payment of rent for the current month?
Rent Expense, debit; Cash, credit
Which of the following supports the accrual basis of accounting?
Revenue recognition and matching concepts
Net income will result when
Revenues (credits) > expenses (debits)
Which of the following types of accounts have a normal credit balance?
Revenues and Liabilites
Expenses are recorded when
Services are rendered
A trial balance is prepared to
Summarize the account balances to help prepare financial statements
Which of the following is an example of a prepaid expense?
Supplies
Supplies purchased on account were incorrectly recorded as Office Equipment. The correcting entry would be
Supplies, debit; Office Equipment, credit
Which of the following is an example of accrued revenue?
Swimming pool cleaning that has been provided but has not been billed or paid.
A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing
The Income Statement
An account is said to have a debit balance if
The amount of the debits exceeds the amount of the credits
The business entity concept means that
The entity is an individual economic unit for which data are recorded, analyzed, and reported
All of the following are financial statement(s) of a proprietorship EXCEPT
The statement of retained earnings
Which one of the statements below is NOT a purpose for the journal?
To show increases and decreases in accounts
What is the purpose of the adjusted trial balance?
To verify that the debits and credits balance
The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a
Trial balance
Using accrual accounting, revenue is recorded and reported only
When the services are rendered without regard to when cash is received
Using accrual accounting, expenses are recorded and reported only
When they are incurred, whether or not cash is paid
For accounting purposes, the business entity should be considered separate from its owners if the entity is
a proprietorship a partnership a corporation
How does the collection of cash from a customer who was previously put on account affect the accounting equation?
assets increase; assets decrease
Which of the following group of accounts are increased with a debit?
assets, drawing, expenses
Which of the following entries records the investment of cash by Ron York, owner of a proprietorship?
debit Cash; credit Ron York, Captial
Which of the following entries records the withdrawal of cash by Sue Martin, owner of a proprietorship, for personal use?
debit Sue Martin, Drawing; credit Cash
The balance in the supplies account, before adjustment at the end of the year is $725. The proper adjusting entry if the amount of supplies on hand at the end of the year $300 would be
debit Supplies Expense $425, credit Supplies $425
Which of the following entries records the receipt of a utility bill from the water company?
debit Utilities Expense; credit Accounts Payable
Earning revenue
increases Assets, increases Owner's Equity