Accounting Chapter 4 & 5 Review

Deferred Expense

Debit Expense Credit Asset

Accrued Expense

Debit Expense Credit Liabilities

Deferred Revenue

Debit Liabilities Credit Revenue

Accrued Revenues

Debit Asset Credit Revenue

Perpetual system

a system in which the inventory account is increased at the time of each purchase and decreased at the time of each sale computers have made this easier

Periodic system

a system in which the inventory account is updated only at the end ofthe period physical count of inventory of hand

When products are sold, their costs are removed from inventory and reported on the income statement as an expense called a. operating expense b. cost of goods sold c. cost of goods manufactured d. inventory expenses

b. cost of goods sold

FOB shipping point

the buyer has responsibility for shipping and they own the product as soon as it leaves the seller

Closing summary

1. Revenue x Income Summary x 2. Income Summary x Expenses x 3. Income Summary x Retained Earnings Net Income 4. Retained Earnings x Dividends x

COGS Sold

Beginning Inv +COGS Purchased =COGS avail for sale -Ending Inv =COGS sold COGS Sold = COGS avail for sale - ending inv

Net sales

Net sales = sales - sales returns and allownaces - sales discounts

Accrued expenses are: a. incurred but not yet paid or recorded b. paid and recorded in an asset account after they are used or consumed c. paid and recorded in an asset account before they are used or consumed d. incurred and already paid or recorded

a. incurred but not yet paid or recorded

If the ending inventory balance is understated, net income of the same period will be a. overstated b. understated c. unaffected d. cannot be determined

a. overstated

Deferred Expenses are: a. paid and recorded in an asset account before they are used or consumed b. paid and recorded in an asset account after they are used or consumed c. incurred but not yet paid or recorded d. incurred and already paid or recorded

a. paid and recorded in an asset account before they are used or consumed

Deferred Revenues are: a. recieved and recorded as liabilities before they are recognized b. recognized and recorded as liabilities before they are recieved c. recognized but not yet recieved or recorded d. recognized and already recieved and recorded

a. recieved and recorded as liabilities before they are recognized

The following accounts show balances on the adjusted trial balance. Which of these account balances will not appear the same on the balance sheet? a. retained earnings b. accounts receivable c. common stock d. notes payable

a. retained earnings

Using accrual accounting, expenses are recorded and reported only a. when they are incurred whether or not cash is paid b. when they are incurred and paid at the same time c. if they are paid before they are incurred d. if they are paid after they are incurred

a. when they are incurred whether or not cash is paid

If the shipping terms indicate that the buyer owns the goods upon shipment from the seller, this arrangment is known as a. goods in transit b. FOB shipping point c. FOB destination d. FOB carrier

b. FOB shipping point

If a business has recieved cash in advance of servies performed and credits a liability account, the adjusting entry needed after the services are performed will be: a. debit unearned service revenue and credit cash b. debit unearned service revenue and credit service revenue c. debit unearned service revenue and credit prepaid expenses d. debit unearened service revenue and credit accounts receiveable

b. debit unearned service revenue and credit service revenue

If a company fails to make an adjusting entry to record supplies expense, then: a. stockholder's equity will be understated b. expense will be understated c. assets will be understated d. net income will be understated

b. expense will be understated

If a company fails to adjust for accrued expense, what effect will his have on that month's financial statements? a. failure to make an adjustment does not effect the financial statements b. expenses will be understated and net income and stockholder's equity will be overstated c. assets wikll be overstated and net income and stockholder's equity will be undersated d. assets will be overstated and net income and stockholder's equity will be overstated

b. expenses will be understated and net income and stockholder's equity will be overstated

An adjusted trial balance: a. is prepared after the financial statements are completed b. proves the equality of the total debit balances and the total credit balances of ledger accounts after all adjustments have been made c. is a required financial statement under generally accepted accounting principles d. cannot be used to prepared financial statements

b. proves the equality of the total debit balances and the total credit balances of ledger accounts after all adjustments have been made

An adjusting entry: a. affects two balance sheet accounts b. affects two income statement accounts c. affects a balance seet account and an income statement account d. is always a compound entry

c. affects a balance sheet and income statement

If a resource has been consumed but a bill has not been recieved at the end of the account period, then a. an expense should be recorded when the bill is recieved b. an expense should be recorded when the cash is paid out c. an adjusting entry should be made recognizing the expense d. it is optional whether to record the expense before the bill is recieved

c. an adjusting entry should be mad recognizing the expense

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: a. net income to be understated b. an overstatement of assets and an overstatement of liabilities c. an understatement of expense and an understatment of liabilities d. an overstatement of expenses nd an overstatement of liabilities

c. an understatement of expense and an understatment of liabilities

Which of the following would NOT be included in ending inventory of the seller a. goods shipped to customers, F.O.B. destination b. goods purchsed from suppliers, F.O.B. shipping point c. goods held on consignment d. inventory expenses

c. goods held on consignment (goods held on someone's behalf)

If a company fails to adjust an unearned rent revenue account for rent that has been earned, what effect will this have on that months financial statements? a. assets will be understated and revenues will be understated b. liabilities will be understated and revenues will be understated c. liabilities will be overstated and revenues will be understated d. assets will be overstated and revenues will be understated

c. liabilities will be overstated and revenues will be understated

A post-closing trial balance will show a. zero balances for all accounts b. zero balances for balance sheet accounts c. only balance sheet accounts d. only income statement accounts

c. only balance sheet accounts

Accrued revenues are: a. recieved and recorded as liabilities before they are recognized b. recognized and recorded as liabilities before they are recieved c. recognized but not yet recieved or recorded d. recognized and already recieved and recorded

c. recognized but not yer recieved or recorded

If expenses are overstated on the income statement, net income a. will be unaffected b. will be overstated c. will be understated d. cannot be determined

c. will be understated

Adjusting entries are made to ensure that a. expense are recognized in the period in which they are incurred b. revenues are recorded in the period in which the perofrmance obligation is satisified c. balance sheet and income statement accounts have correct balances at the end of an accounting period d. all of these answer choices are correct

d. all of these are correct

The closing entry process consists of the closing: a. all asset and liability accounts b. out the retained earnings account c. all permanent accounts d. all temporary accounts

d. all temporary accounts

Unearned revenue is classified as a(n): a. asset account b. revenue account c. contra revenue account d. liability

d. liability

Which of the following accounts would be debited when making closing entries? a. cost of goods sold b. purchases c. sales discounts d. purchase returns

d. purchase returns

Gross profit

gross profit = net sales - COGS

Accruals

not yet paid or reported ex. wages, utilities, notes payable, and interest

Deferrals

on the books ex. prepaid supplies, unearned revenue, depreciation

FOB destination point

sale doesnt occur until the goods have reached the destination