Accounting Test Chapter 5, 6, 7, & 8

false

a memo is the source document for the entry to record establishing a petty cash fund

trial balance

a proof of equality of debits and credits in a general ledger

true

banks deduct service charges from customers checking accounts without requiring customers to write a check for the same amount

false

because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less

true

businesses use petty cash when writing a check is not time or cost effective

adjustments

changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

false

component percentages on an income statement are calculated by dividing sales and total expenses by net income

false

most banks do not look at the date the check is written and will withdraw money from the depositors account anytime

true

most errors occur in doing arithmatic

false

net income on a worksheet is calculated by subtracting the income statement credit column total from the income statement debit column total

true

not only do banks charge a fee for handling a dishonored check but they also deduct the amount of the check from the account as well

true

single lines ruled across an amount column of an income statement indicate that amounts are to be added

true

stakeholders are any persons or groups who will be affected by an action

false

techknow consulting maintains a petty cash fund for making large cash cash payment without writing checks

False

the accounting concept consistent reporting is being applied when a delivery business reports the number of deliveries made one year and the amount of revenue received for deliveries made the next year

general ledger accounts with balances after the closing entries are posted...

the accounts listed on a post closing trial balance are...

true

the adequate disclosure accounting concept is applied when financial statements contain all information necessary to understand a business's financial condition

true

the amount of a check is written twice on each check

it is the same as net income shown on the work sheet

the amount of net income calculated on an income statement is correct if...

true

two financial statements are prepared from the information of the worksheet

false

when a business has two different sources of revenue, a separate income statement should be prepared for each kind of revenue

true

when a deposit is made in a bank account the bank issues a receipt

false

when the petty cash fund is replenished the balance of the petty cash account increases

true

when two column totals are not in balance on the worksheet the difference between the two totals is calculated and checked

true

when writing a check the first step is to prepare the check stub

special endorsement

An endorsement indicating a new owner of a check

restrictive endorsement

An endorsement restricting further transfer of a check's ownership

checking account

A bank account from which payments can be ordered by a depositor

work sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

income statement

A financial statement showing the revenue and expenses for a fiscal period.

balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

bank statement

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank

endorsement

A signature or stamp on the back of a check transferring ownership

shown on the balance sheet for the fiscal period

After the closing entries are posted, the owner's capital account balance should be the same as

income statement debit column

Information needed to prepare an income statement's Expense section is obtained from a work sheet's Account Title column and

income statement credit column

Information needed to prepare an income statement's revenue section is obtained from a work sheet's Account Title column and

net loss

The difference between total revenue and total expenses when total expenses are greater

accounting cycle

The series of accounting activities included in recording financial information for a fiscal period

credit balance

When revenue is greater than total expenses, resulting in a net income, the income summary account has a

accounting period cycle

Which accounting concept applies when a work sheet is prepared at the end of each fiscal cycle to summarize the general ledger information needed to prepare financial statements?

matching expenses with revenue

Which accounting concept applies when expenses are reported in the same fiscal period that they are used to produce revenue?

true

a balance sheet reports financial information of a specific date and includes the assets liabilities and owners equity

true

a balance sheet reports information about the elements of the accounting equation

debit card

a bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the cardholder

dishonored check

a check that a bank refuses to pay

true

a check that contains errors must be marked with the word VOID so that others will know that is is not to be used

true

a check with a blank endorsement can be cashed by anyone who has possession of the check

post dated check

a check with a future date on it

true

a component percentage is the percentage relationship between one financial statement item and the total that includes that item

electronic funds transfer

a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents

petty cash slip

a form showing proof of a petty cash payment

code of conduct

a statement that guides the ethical behavior of a company and its employees

post-closing trial balance

a trial balance prepared after the closing entries are posted

permanent accounts

accounts used to accumulate information from one fiscal period to the next

temporary accounts

accounts used to accumulate information until it is transferred to the owner's capital account

the cost of the supplies on hand at the end of the fiscal period

after adjusting entries are posted the supplies account balance will be equal to...

false

all companies should have a total expenses component percentage that is not more than 80%

true

all general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts

true

an accounting period is also know as a fiscal period

petty cash

an amount of cash kept on hand and used for making small payments

false

an amount written in parenthesis on a financial statement indicates an estimate

blank endorsement

an endorsement consisting only of the endorser's signature

true

an important aspect of cash control is verifying that the information on a bank statement and a checkbook are in agreement

true

an income statement reports information over a period of time, indicating the financial progress of a business in earning a net income or a net loss

true

an outstanding check is one that has been issued by a depositor but not yet reported on a bank statement by the bank

true

anytime a payment is made from the petty cash fund a petty cash slip is prepared showing proof of a petty cash payment

true

double lines are ruled across the balance sheet columns to show that the column totals have been verified as correct

true

errors in general ledger accounts should never be erased

true

if errors are found on a worksheet they must be erased and corrected before any further work is completed

false

if the difference between the totals of debit and credit columns on a work sheet can be evenly divided by 9, then the error is most likely in addition

true

if there are errors in the worksheets trial balance columns, it might be because not all general ledger account balance were extended into the trial balance column correctly

a temporary account

income summary is...

worksheets adjustments columns

information needed for journalizing the adjusting entries is obtained from the...

worksheets income statement and balance sheet columns

information needed for recording the closing entries is obtained from the...

false

information needed to prepare an income statement comes from the trial balance columns and the income statement columns of a worksheet

adjusting cycle

journal entries recorded to update general ledger accounts at the end of a fiscal perdiod

closing entries

journal entries used to prepare temporary accounts for a new fiscal period

false

journals ledgers and work sheets are considered permanent records

true

the best way to prevent errors is to work carefully when possible use a calculator

for month ended July 31, 2018

the date on a monthly income statement prepared on july 31 is written as...

net income

the difference between total revenue and total expenses when total revenue is greater

net income divided by total sales equals net income component percentage

the formula for calculating the net income component percentage is...

false

the four questions asked when analyzing an adjustment are: why where when and how

true

the income statement account balances are obtained from the worksheets income statement columns

false

the income statement for a service business has five sections: heading revenue expenses net income or loss and capital

false

the journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check

fiscal period

the length of time for which a business summarizes and reports financial information

true

the matching expenses with revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period

false

the net income on an income statement is verified by checking the balance sheet

false

the owners capital amount of reported on a balance sheet is calculated as: capital account balance plus drawing account balance, less net income

true

the owners equity section of a balance sheet may report different kinds of details about owners equity depending on the need of the business

true

the position of the total asset line on the balance sheet is determined after the equities section is prepared

true

the source document for a debit card purchase is a memo

true

the source document for an electronic funds transfer is a memo

false

the two accounts affected by the adjustment for insurance are prepaid insurance expense and insurance

true

the two accounts affected by the adjustment for supplies are supplies and supplies expense

false

there are four types of endorsements commonly used blank special original and restrictive

true

totaling and ruling the adjustments columns of a work sheet are necessary to prove the equality of debits and credits