Review

Transactions for Jayne Company for the month of June are presented below. June 1 Issues common stock to investors in exchange for $5,000 cash. 2 Buys equipment on account for $1,100. 3 Pays $740 to landlord for June rent. 12 Sends Wil Wheaton a bill for $700 after completing welding work. Identify the accounts to be debited and credited for each transaction. Account Debited: Account Credited: 1 2 3 12

Debited: Credited: 1 Cash Com Stock 2 Equipment Accts Pay 3 Rent Exp Cash 12 Accts Rec Service Rev

Accounting is:

The information system that identifies, records and communicates financial information about a business entity to interested users.

Every transaction affects at least two accounts. (T/F)

True

Accounting Equation

Assets = Liabilities + Equities Total Debit-balance accounts = Total of Credit-balance accounts

At October 1, 2022, Novak Corp. had an Accounts Payable balance of $170800. During the month, the company made purchases on account of $122000 and made payments on account of $195200. At October 31, 2022, the Accounts Payable balance is

(Beg. Acc. Pay. + Purch. + Pay.) 170800 + 122000 + 195200 = 97600

At December 1, 2022, Coronado Industries Accounts Receivable balance was $15790. During December, Coronado had credit sales of $42300 and collected accounts receivable of $33840. At December 31, 2022, the Accounts Receivable balance is

(Beg. Acc. Rec. + sales + collect.) 15790 + 42300 + 33840 = 24250 debit

At January 1, 2022, Sheridan Company reported Retained Earnings of $294000. During 2022, Sheridan had a net loss of $63000 and paid dividends to the stockholders of $42000. At December 31, 2022, the balance in Retained Earnings is

(Beg. Ret. Earn. - Net loss - div.) 294,000 - 63,000 - 42,000 = 189,000 credit

The Cash account balance of Oriole Company at July 1 is $560. The total of the debit entries to the Cash account amounted to $1680 and the total of the credit entries to the Cash account amounted to $1680 during July. At the end of the month, the Cash account has a

(Cash Debits - Cash Credits) 560dr. + 1680dr. - 1680cr. = 560dr.

Accounting Cycle

1. Analysis of Business Transactions 2. Make Journal Entries 3. Post to ledger accounts 4. Prepare trial balance 5. Make adjusting entries 6. Adjusted trial balance 7. Prepare financial statements 8. Close accounts 9. Post-closing trial balance

Primary Activities of businesses are:

1. Service 2. Merchandising 3. Manufacturing****

What are the types of business entities

1. Sole proprietorship 2. Partnership 3. Corporation

At June 1, 2022, Whispering Winds Corp. had an Accounts Receivable balance of $19,100. During the month, the company had credit sales of $22,000 and collected Accounts Receivable of $27,700. What is the balance in Accounts Receivable at June 30, 2022?

19,100 (Beg accts rec) + 22,000 (credit sales) - 27,700 (collections) = 13,400 (End accts rec)

Whistler Corp. performed service for a customer but has not received payment, nor has it recorded any entry related to the work. Which of the following types of accounts are involved in the adjusting entry: (a) asset, (b) liability, (c) revenue, or (d) expense? For the accounts selected, indicate whether they would be debited or credited in the entry. An __________ is __________ and a __________ is ______________

An ASSET is DEBITED and a REVENUE is CREDITED

What accounts have debit normal account balances?

Assets, dividends, and expenses.

Assets

Current Assets - Allowance for bad debts Investments Property and equipment - Accumulated Depreciation Intangible Assets

What accounts have credit normal account balances?

Common stock, liabilities, retained earnings, and revenues.

Who might be interested in financial information about a firm, and what do they want to know?

External users are banks, lenders/creditors, stockholders, IRS, public, media Internal users are Owners and managers

What types of business activities are recorded and reported?

Financing: Debt or equity Investing: Long-term assets Operating Activities: Revenues and expenses, and, current assets and liabilities.

What are business' reasons for existing?

For profit, non-profit, or by primary activity

What is the most efficient way to provide this information to most users?

General Purpose Financial Statements: - Income Statement - Statement of Owner's Equity (or Retained Earnings Statement) - Balance Sheet - Cash Flow Statement

Liabilities + Equities

Payables Common Stock Loans Paid-in-Capital Bonds Retained Earnings - Dividends Temporary Accounts (closed annually): + Revenues - Sales Returns - Sales Discounts - COGS - Expenses

Saira works for a sports franchise, which pays wages and salaries earned on a monthly basis. A new accountant was hired by the sports franchise in late May. Due to inexperience, the new accountant failed to accrue Saira's salary for May. What is the impact on the May 31 financial statements of the sports franchise? a) Expenses are understated; net income is overstated. b) Liabilities are overstated; retained earnings is overstated. c) Liabilities are understated; assets are overstated. d) Revenues are overstated; net income is understated.

a) Expenses are understated; net income is overstated.

A company that receives money in advance of performing a service: a) debits Cash and credits Unearned Service Revenue. b) debits Unearned Service Revenue and credits Accounts Payable c) debits Cash and credits Accounts Receivable. d) debits Cash and credits Prepaid Insurance.

a) debits Cash and credits Unearned Service Revenue.

Adjustments for prepaid expenses: a) decrease assets and increase expenses. b) decrease revenues and increase assets. c) decrease assets and increase revenues. d) decrease expenses and increase asset

a) decrease assets and increase expenses.

What effects occur when an account payable is paid with cash? a )Increases assets and decreases liabilities b) Decreases assets and decreases liabilities c) Decreases assets and increases stockholders' equity d) Decreases stockholders' equity and decreases liabilities

b) Decreases assets and decreases liabilities

Which of the following transactions does not affect cash during a period? a) Collection of accounts receivable. b) Write-off of an uncollectible account. c) Sale of treasury stock. d) Redeeming bonds before maturity.

b) Write-off of an uncollectible account.

When a company performs a service but has not yet received payment, it: a) makes no entry until cash is received. b) debits Service Revenue and credits Accounts Receivable. c) debits Accounts Receivable and credits Service Revenue. d) debits Service Revenue and credits Accounts Payable.

c) debits Accounts Receivable and credits Service Revenue.

A retailer sells prepaid gift cards under its own brand to customers, which are popular during the Holidays. If a company sells $200 worth of gift cards to a customer before Xmas but the same are not used to purchased goods until after the New Year's, how should the retailer record this transaction? a) Debit cash and credit Revenue. b) Debit cash and credit Accounts Payable. c) Credit cash and debit Unearned Revenue. d) Debit cash and credit Unearned Revenue.

d) Debit cash and credit Unearned Revenue.

Adjustments for accrued revenues: a) decrease liabilities and increase revenues. b) increase assets and increase liabilities. c) decrease assets and decrease revenues. d) increase assets and increase revenues.

d) increase assets and increase revenues.

A credit to a liability account: a) must be accompanied by a debit to an asset account. b) is an error. c) indicates a decrease in the amount owed to creditors. d) indicates an increase in the amount owed to creditors.

d) indicates an increase in the amount owed to creditors.