Accounting CH 1-7

An accounting system must be able to: a.summarize information. b.collect and classify information. c.report information. d.All of these choices are correct.

d. All these choices are correct

Which of the following accounts will be debited in closing entry at end of year? a. Unearned Fee b. Rent Expense c. Depreciation Expense d. Fees Earned

d. Fees Earned

A popular computerized accounting software is a.Word®. b.Excel®. c.Cisco Systems. d.QuickBooks®.

d. QuickBooks

Which side of the account increases the cash account? a. neither dr or cr b. credit c. either dr or cr d. debit

d. debit

Which of the following describes the classification and normal balance of the fees earned on account? a. liability, credit b. owners equity, debit c. asset, credit d. revenue, credit

d. revenue, credit

Which of the following accounts have a normal credit balance? a. capital and drawing b. liabilities and expenses c. assets and liabilities d. revenues and capital

d. revenues and capital

Is accumulated depreciation reported on the balance sheet?

No, therefore income statement will not be impacted.

Equipment with an estimated market value of 30,000 is offered for sale at 45,000. The equipment is acquired for $15,000 in cash and $20,000 on account due in 30 days. The amount used in the account record would be?

$35,000

Office supplies were sold to Janer's Cleaning service at cost to another repair shop, with cash received. What would record this transaction?

(Cash, debit) & (Office supplies, credit)

State whether each account is likely to have debit or credit entries, or both. 1. Accounts Payable 2. Cash 3. Del Robinson, Drawing 4. Misc. Expense 5.Insurance Expense 6. Fees Earned

1. Both dr & cr. NB: Credit 2.Both dr & cr. NB: Debit 3.Debit NB: Debit 4.Debit NB: Debit 5.Debit NB: Debit 6.Credit NB: Credit

The cash payment for accrued expenses occurs _________ the adjusting entry for the accrued expenses

AFTER

Generally Accepted Accounting Principles (GAAP) require that companies use the _________ basis of accounting

Accrual

What are the types of adjusting journal entries?

Accrued revenue, accrued expenses, unearned revenue, prepaid expenses

What flows into the balance sheet?

Asset, liability, and owners equity accounts flow into the Balance Sheet. Ex. Accounts payable, Office equipment, Unearned Rent, Wages Payable

Accrued revenues affect _____________ on the balance sheet.

Assets

What is the accounting equation?

Assets = Liabilities + Owner's Equity

Which of the following accounts will be debited in the closing entry at the end of the year? a. Unearned Fees b. Fees Earned c. Rent Expense d. Depreciation Expense

B - Fees Earned

If a company makes three purchases of supplies on account during September of $250, $150, and $1,200 and records them in the purchases journal, what is the Accounts Payable credit balance at the end of the month? a.$250 b.$150 c.$1,600 d.$1,200

C. 1,600

Which of the following financial statements reports info as a specific date? a. income b. cash flow c. balance sheet d. statement of owners equity

C. Balance Sheet

Internet applications to plan and coordinate marketing and sales efforts are known as a.supply chain management. b.cloud software management. c.customer relationship management. d.product life-cycle management.

C. Customer Relationship Management or CRM

E-commerce refers to using a.computers to perform accounting operations. b.the Internet to check on price changes. c.the Internet to perform business transactions. d.computers to send information to stakeholders.

C. the Internet to perform business transactions

A list of accounts used by a business is called the

Chart of accounts

How do you calculate Current Ratio in relation to the working capital?

Current Ratio = current assets/current liabilities

Which of the following accounts will NOT be closed to the capital account at end of year? a. Insurance Expense b. Fees Earned c. Utilities Expense d. Prepaid Insurance

D. Prepaid Insurance - Prepaid insurance is considered as an Asset

Which of the following is NOT an actual step in the accounting cycle?

Decisions are made after reviewing financial statements

Which of the following is the LAST step in the posting process?

Enter the ledger account number in the Post. Ref. column of the JOURNAL

Which of the following is the authoritative body in the United States that has the primary responsibility for developing accounting principles?

FASB

True or False: Under perpetual inventory system, a company purchases merch on terms 2/10 n/30. The journal entry for this will include a debit to cash, and credit to sales.

False

True or False: the specific identification inventory method should be used when the inventory consists of identical, low cost units that are purchased and sold frequently?

False

True or False: Accumulated Depreciation accounts are liability accounts

False - AD is a contra asset

True or False: The cash account will always be debited

False, cash can be debited and credited

What flows into the statement of owners equity?

Owners Capital and drawing accounts flow into the statement of Owners Equity. Ex. Nat Hager, Capital

When revenue and expenses are closed in a single entry, net income is close to;

Owners Capital with a credit

Which of the following will increase owners equity on the statement of owners equity?

Owners Investment, net income.

What type of accounts are Cash, Land, Building, Equipment? a. Permanent b. Temporary c. Revenue

Permanent

An adjusting entry debiting supplies expense and crediting supplies is an example of?

Prepaid Expense

What flows into the income statement?

Revenue and Expenses accounts flow into the Income Statement. Ex. Depreciation Expense, Rent Revenue, Supplies Expense

A purchase of supplies on account is recorded in the a. general b. cash payments c. revenue d. purchases

Purchases journal

What belongs on the income statement?

Revenues - Expenses

What is the net income equation?

Revenues - Expenses = Net Income

Which of the following statements regarding the cash basis of accounting is true?

Revenues are reported in the period in which cash is RECEIVED, and expenses are reported when cash is PAID OUT

The posting of depreciation expense will be done during which step of the accounting cycle?

Step 6: Journalizing and posting adjusting entries

What accounts are closed to zero at the beginning of a new period?

Temporary

Which of the following steps is OPTIONAL in the accounting cycle?

an end of period spreadsheet is prepared

True or False: Journal entries can have more than two accounts as long as debits equal credits?

True

Which of the following accounts ordinarily appears in the post - closing trial balance?

Unearned Rent

What is the formula for working capital?

Working Capital = Current Assets - Current Liabilities

Does the adjusted trial balance have a specific date?

Yes

In applying segment analysis to a business with declining total revenue from one year to the next, a.a company may discover that revenue growth in one segment may not be sufficient to offset revenue decline in another segment. b.a company will learn very little because segment analysis cannot be done to compare one year to the next. c.a company will not be able to determine if revenue growth in one segment is sufficient to offset revenue decline in another segment. d.a company will learn very little because segment analysis should not be done for companies with declining revenues.

a company may discover that revenue growth in one segment may not be sufficient to offset revenue decline in another segment.

Indicate whether each of the following is identified as an asset, liability, or owners equity: a. Accounts Receivable b. Accounts Payable c. Cash d. Fees Earned e. Land f. Rent Expense g. Supplies

a. Asset b. Liability c. Asset d. Owners Equity e. Asset f. Owners Equity g. Asset

Which of the following accounts will be closed with a Credit? a. Depreciation Expense b. Notes Payable c. Fees Earned d. Accumulated Depreciation

a. Depreciation Expense - an expense account has a normal debit balance, therefore; a credit is required to zero out the depreciation expense account

Which of the following accounts would appear in the Balance Sheet Columns at the end of period spreadsheet? a. Prepaid Insurance b. Fees Earned c. Rent Expense d. Consulting Revenue

a. Prepaid Insurance

The methods and procedures for collecting, classifying, summarizing, and reporting financial information make up a.an accounting system. b.bookkeeping. c.subsidiary ledgers. d.e-commerce.

a. an accounting system

Segment analysis uses a.horizontal and vertical comparisons. b.only horizontal comparisons. c.only vertical comparisons. d.neither horizontal nor vertical comparisons.

a. horizontal and vertical comparisons.

Gross profit is a.profit before deducting operating expenses. b.profit after deducting operating expenses. c.profit after deducting other expenses. d.None of these choices are correct.

a. profit before deducting operating expenses.

Segment revenues are determined by a.only invoice data that are entered into the accounting system. b.only cash receipt data that are entered into the accounting system. c.both cash receipt and invoice data that are entered into the accounting system. d.neither cash receipt nor invoice data that are entered into the accounting system.

a.only invoice data that are entered into the accounting system.

The term used to describe an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is:

accrued

The objectivity concept requires that

amounts recorded in the financial statements be based on independently verifiable evidence

The type of account and normal balance of Prepaid Insurance would be

asset, debit

What belongs on a balance sheet?

assets, liabilities, owner's equity

In the chart of accounts, the balance sheet accounts are normally listed in which order?

assets, liabilities, owners equity

During the month, merchandise is sold for $23,700 cash and for $34,200 on account. The cost of merchandise sold is $41,300. What is the amount of gross profit? a.$41,300 b.$16,600 c.$23,700 d.$57,90

b. 16,600 GP = Rev-COGS

When merch purchased on account is returned, under perpetual inventory system, the buyer would debit a. merch inventory b. accounts payable c. purchase returns allowance d. accounts receivable

b. Accounts payable

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is a. FIFO b. LIFO c. Weighted Avg. Cost d. Specific Identification

b. LIFO

A credit signifies a decrease in: a. capital b. assets c. revenue d. liability

b. assets

Subsidiary ledgers: a. are never used for more than 4 accounts b. may be used for several general ledger accounts c. may be used only for cash accounts d. are used only for accounts payable and accounts receivable

b. may be used for several general ledger accounts

Merchandise inventory is reported as a(n) a.expense. b.long-term asset. c.current asset. d.current liability.

c. Current asset

Which of the following accounts is used in the journal entry for the freight cost under the FOB (free on board) destination method? a.Accounts Receivable b.Accounts Payable c.Delivery Expense d.Merchandise Inventory

c. Delivery Expense

Which of the following accounts will be closed with a Debit? a. Miscellaneous Expense b. Notes Receivable c. Rent Revenue d. Cash

c. Rent revenue - revenue is closed out by a debit because it has a normal credit balance.

A special journal is used for a.recording transactions that are nonrecurring. b.only cash transactions. c.recording a single kind of transaction that occurs frequently. d.recording transactions that are unique and need to be kept separate from others.

c. recording single kind of transactions that occurs frequently.

Which column would be used in a purchases journal for a lawn service company? a.Accounts Payable Dr. b.Accounts Receivable Cr. c.Accounts Payable Cr. d.Accounts Receivable Dr.

c.Accounts Payable Cr.

Which of the following asset accounts is increased when a receivable is collected? a. cash b. supplies c. accounts payable d. accounts receivable

cash

The book value of an asset is determined as

cost of asset minus accumulated depreciation

Prepaid Insurance is reported on the balance sheet as a?

current asset

An advantage of using a computer system is a.the ease of report creation of current account balances. b.more accurate information. c.simplified data entry. d.All of these choices are correct.

d. All of these choices are correct

Which of the following is a common special journal? a.Revenue journal b.Purchases journal c.Cash payments journal d.All of these choices are correct.

d. All of these choices are correct

The Internet is being used by businesses for supply chain management (SCM), which can be defined as a.Internet applications to plan and coordinate the product development and design process. b.streamlining purchases and payments by automating transactions and eliminating paperwork. c.Internet applications to plan and coordinate marketing and sales efforts. d.Internet applications to plan supply needs and coordinate suppliers.

d.Internet applications to plan supply needs and coordinate suppliers.

The entry to close the appropriate insurance account at the end of the accounting period is

debit Owners Capital, credit insurance expense

In the vertical analysis of balance sheet

each asset item is stated as a percent of total assets.

In the vertical analysis of an income statement

each item is stated as a percent of revenues or fees earned.

Accrued revenues are

earned but not yet received or recorded

Because collecting the adjustment data requires time, the adjusting entries are often

entered later but dated as the last day of the period.

Prepaid expenses are eventually expected to become

expenses when their future economic value expires or is used up

The annual accounting period adopted by a company is called its

fiscal year

Adjusting entries affect at least one:

income statement account and one balance sheet account

Michael Anderson is starting a computer programming business and has deposited an initial investment of $15,000 into the business cash account. Identify how the accounting equation will be affected.

increase in assets (cash), and increase in owners equity, (Michael Anderson, Capital)

Earning revenue:

increases assets, increases owner's equity

How does a bill to be paid next month for services received affect the accounting equation?

liabilities increase, owners equity decreases

The type of account and normal balance of Unearned consulting fees would be

liability and credit

Which of the following is NOT a business transaction?

make a sales offer

What two rules of adjusting journal entries were mentioned in the lectures?

never affect cash, always affect one balance sheet account and one income statement account

Unearned revenue

represents future revenue

The first item appearing in the Statement of Owners Equity is

the beginning balance of owners equity

Working capital is

the excess of current assets if a business over current liabilities.

Which of the following is NOT true of accounting principles?

the new accounting principle can be adopted with stockholders approval

Adjusting entries are needed for?

to bring accounts up to date and match revenue and expense

When undertaking horizontal analysis, the significance of the various increases and decreases in the revenue and expense items should be investigated;

to see if operations can be improved

The adjusted trial balance is prepared

to verify the equality of total debt and credit balances

If an entry to adjust depreciation is not recorded at the end of the period, Depreciation Expense on the income statement will be

understated

If an entry to adjust unearned rent and rent revenue is not recorded at the end of the period, Rent Revenue and Net Income on the income statement will be

understated