Accounting: Chapters 3 and 4 Exam
Prepaid insurance balance is 15,000 of which 4,000 is unexpired insurance expense.
11,000 is left
Five day week with 20,000 dollar salaries. Wednesday is the last day in period. The amount of adjusting entry is what?
12,000 dollars
Unearned rent balance is 30,000 dollars of which 3,000 is unearned. Amount of the adjustment is..
27,000 dollars
Supplies begin at 1,000 purchase. 3,000 supplies on hand. There is an 800 supply expense. What is left?
3,200 dollars
Current assets
Are expected to be converted to cash or sold or used up usually within one year or less (cash, accounts receivable, supplies)
Real accounts/permanent
Assets, liabilities, common stock, retained earnings (balance sheet accounts)
Notes receivable due in 345 days would appear on..
balance sheet as a current asset
Current liabilities
due within a short time (accounts payable, wages payable)
After posting second closing entry balance income summary is
net income or loss
Every adjusting entry has..
one balance sheet account and one income statement account.
Nominal accounts/temporary
revenue, dividends, expenses
Prepaid expenses
the advance payment of future expenses and are recorded as assets
Omitted adjustment to prepaid insurance. What would the effect be?
the net income would be overstated
Working capital and and the current ratio are
two financial measures for evaluating a business short term liquidity and solvency
Long term liabilities
will not be due for a long time (mortgage)
Closing entries steps
Close revenues to income summary, close expenses to income summary, Balance in income summary is net income or loss, Close income summary to retained earnings, Close Close dividends to retained earnings
Working Capital
Current assets-current liabilities
Current ratio
Current assets/current liabilities
Fixed assets lose their capacity to account for this loss. It is systematically moved to expense by a process called what? Decrease in usefulness
Depreciation
Order statements are prepaired
Income statement retained earnings balance sheet
Adjusting entries should be..
Journalized and reported
Which fixed asset does not have a related contra account?
Land
Normal balance on unearned rent is a what?
Liability (credit). This account would appear on post-closing trail balance.
What are deferrals?
Prepaid expenses and unearned revenues
The following basic types of accounts require adjusting entires:
Prepaid expenses, Unearned revenues, Accrued revenues, Accrued expenses
What is the last step in the accounting cycle?
Prepare post closing trail balance
Solvency
The ability of a business to pay its debts
Adjusting process
The analysis and updating of accounts at the end of the period before the financial statements are prepared
Contra accounts
accumulated depreciation accounts
Unearned revenues
advance receipt of future revenues and are recorded as liabilities
Fees receivable would appear on the balance sheet as..
an asset
Depreciation expense and accumulated depreciation is classifieds as what?
an expense, contra asset
Fixed assets or plant assets
are physical resources that are owned and used by a business and are permanent or have a long life. (land, buildings, equipment)
Accrued expenses
are unrecorded expenses that have been incurred and for which cash has yet to be paid.
Accrued revenues
are unrecorded revenues that have been earned and for which cash has yet to be received.
Depreciation expense
as a fixed asset depreciates, a portion of its const should be recorded as an expense
Accrued expenses reported on balance sheet..
as liabilities
