ACCOUNTING CH. 1-3

With double-entry accounting, each transaction requires:

-atleast 2 accounts are affected -that the total debits will equal the total credits

Indicate the order the financial statements are prepared.

1) Income statement 2) statement of retained earnings 3)Balance sheet

Recall the required information in a financial statement heading. Rearrange the following line items as they would appear in a heading.

1) name of the business 2) name of the statement 3)period of time the statement covers

Which of the following is a true statement about debits and credits?

A credit is on the right side of an account.

In defining a reporting period, which of the following statements is (are) correct? (Check all that apply.)

A one-year reporting period is known as the fiscal year. A reporting period is determined by the business. A reporting period can be one month, one quarter or one year.

On December 31, the company paid a $200 invoice that they received in November for electricity.

Accounts payable - 200 debit cash- 200 credit

Which of the statements below is true regarding the statement of retained earnings?

Both the beginning and ending retained earnings balances are reported on the statement.

Indicate how to increase each of the accounts listed below.

CASH- debit ACCOUNTS PAYABLE- credit SUPPLIES- debit ACCOUNTS RECEIVEABLE- debit

Indicate how to increase each of the accounts listed below.

COMMON STOCK- credit PROFESSIONAL FEES REVENUE- credit DIVIDENDS- debit SALARIES EXPENSE-debit

On December 31, Fantastic Tea receives $3,000 cash from Don Smith, in exchange for common stock.

Cash- $3,000 on debit side Common stock- $3,000 on credit side

On December 31, the company provides services and receives cash of $5,000.

Cash- $5,000 on debit Services Revenue- $5,000 on credit

Which of the following statements are true about the chart of accounts?

Different companies use different charts of accounts based on individual company needs. AND The chart of accounts should be ordered in a logical sequence based on type of account.

On December 31, the company purchases equipment for $10,000 and pays for the purchase in cash.

Equipment- $10,000 on debit side Cash- $10,000 on credit side

Select the correct reporting time period for each financial statement.

Income statement- period of time balance sheet-point of time statement of retained earnings- period of time statement of cash flows- period of time

Which of the following items is (are) required in the heading of every financial statement? (Check all that apply.)

Name of the financial statement Date or period of time covered Name of the business

Which of the following would be included on a statement of retained earnings? (Check all that apply.)

Net income (loss) Retained earnings balance at end of period Retained earnings balance at beginning of period Dividends

Gunner Corporation received $300 cash from a client that had been billed earlier in the month. Show how to record this transaction into T-accounts by selecting the correct answer below.

Place $300 on left side of the Cash account; place $300 on the right side of the Accounts receivable account.

Recall that the Balance Sheet reports the equality of the accounting equation and would include which of the following amounts? (Check all that apply).

Retained earnings balance at end of period Total Liabilities Total Assets

Why are posting references entered in the journal when entries are posted to the ledger accounts?

So we will know that the entry has been posted.

Correctly identify steps 3 and 4 of the accounting process:

Step 3: record transactions into the journal; Step 4: post entries into the ledger.

On December 31, the company purchases supplies for $1,000 on credit.

Supplies- $1,000 on debit side Accounts Payable-$1,000 on credit side

From the following list, identify those that are likely to serve as source documents.

Telephone bill sales ticket invoice from supplier bank statement

Alex invested $30,000 in cash in his business. How will this entry be posted in the ledger accounts?

The $30,000 will be posted to the debit side of the Cash account. The $30,000 will be posted to the credit side of the Common Stock account.

Which of the following statements are true about the general ledger?

The general ledger contains all of the accounts that a company uses, along with detail of the balances in those accounts.

Which of the following would be included on an income statement? (Check all that apply.)

Total expenses Net income Total revenues

On November 30, the company received an invoice from the electric company for $200. The company will pay the invoice in December.

Utility expense- 200 on debit Accounts payable- 200 on credit

Cash and all assets have: (right side of equation)

a debit normal balance

if debits must always equal credits, then the right side of the equation must always have

a net normal credit balance

A record of the increases and decreases in a specific account is :

account

Which of the following accounts is a liability?

accounts payable

The balance sheet reports:

assets, liabilities and the ending retained earnings balance

Which of the following accounts is an equity?

common stock

The trial balance is completed to ensure that...

debits and credits are equal in the General Ledger

The statement of retained earnings reports:

how equity changed over a period of time

The process of recording transactions in a journal is called:

journalizing

Which of the following accounts is an asset?

prepaid advertising

If the sum of the amounts in the credit column (right) exceeds the sum of the amounts in the debit column (left), then...

the account will have a credit balance

If the sum of the amounts in the debit column (left) exceed the sum of the amounts in the credit column (right), then...

the account will have a debit balance

An income statement reports:

the revenues less the expenses incurred by a business

Financial statements are prepared from a(n)

trial balance

Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.

trial balance

If a credit balance in Unearned Revenue (a liability account) is incorrectly listed as a credit balance in the Sales Revenue account (a revenue account), is the trial balance still in balance?

yes