Accounting 2000 Exam 1
if equity is $300,000 and liabilities are $192,000, then assets equal
$492,000
the income summary account is used to
close the revenue and expense account
distributions of cash or other resources by a business to its stockholders
dividends
the difference between a company's assets and its liabilities, or net assets
equity
the rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue
going-concern assumption
which of the following is the usual final step in the accounting cycle
preparing a post-closing trial balance
revenues, expenses, and dividends accounts, which are closed at the end of each accounting period are
temporary accounts
a business uses a credit to record
a decrease in an asset account
a business's record of the increases and decreases in a specific asset, liability, equity, revenue, or expense
account
the recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance
accounting cycle
a debit is used to record an increase in all of the following except; accounts payable, cash, dividends, supplies, prepaid insurance
accounts payable
which of the following accounts are permanent accounts
accounts payable
identify the account below that is classified as an asset in a company's chart of accounts
accounts receivable
adjusting entries
affect both income statement and balance sheet accounts
when closing entries are made
all temporary accounts are closed but permanent accounts are not closed
a debit is used to record
an increase in the dividends account
resources a company owns or controls that are expected to yield future benefits
assets
if a company receives $# from the stockholders to establish a corporation, the effect on the accounting equation would be:
assets increase $# and equity increase $#
if a company purchases equipment costing $# on credit, the effect on the accounting equation would be
assets increase $# and liabilities increase $#
prepaid expenses are generally
assets that represent prepayments of future expenses
accounts payable appear on which of the following statements
balance sheet
a company's list of accounts and the identification numbers assigned to each account
chart of accounts
journal entries recorded at the end of each accounting period to prepare the revenue, expense, and dividend accounts for the upcoming period and to update the retained earnings account for the events of the period just finished are referred to as
closing entries
an account used to record the stockholders investments in a business
common stock account
the right side of a t-account
credit
two common subgroups for liabilities on a classified balance sheet
current liabilities and long-term liabilities
richard redden contributed $70,000 in cash and land worth $130,000 to open a new business, rr consulting, inc. what is the journal entry will rr make to record this transaction
debit cash $70,000; debit land $130,000; credit common stock $200,000
prior to recording adjusting entries, the office supplies account had a $359 debit balance. a physical count of the supplies showed $105 of unused supplies available. the required adjusting entry is
debit office supplies expense $254 and credit office supplies $254
k. canopy, the stockholder of canopy services, inc., the company paid $5,700 cash in dividends to the owner (sole stockholder) the entry to close the dividends account at the end of the year
debit retained earnings $5,700; credit dividends $5,700
the closing process is necessary in order to
ensure that net income or net loss and dividends for the period are closed into the retained earrings account
a partnership:
has unlimited liability for its partners
the financial statement that reports whether the business earned a profit and also lists the revenues and expenses
income statement
the total amount of depreciation recorded against an asset over the entire time the asset has been owned
is referred to as accumulated depreciation
a debit
is the left-hand side of a t-account
the current ratio
is used to help assess a company's ability to pay its debts in the near future
the record of all accounts and their balances used by a business
ledger
creditors' claims on the assets of a company
liabilities
unearned revenues are generally
liabilities created when a customer pays in advance for products or services before the revenue is earned
which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported
matching principle
another name for a temporary account
nominal account
which of the following is classified as a current assets
office supplies
if a company uses $# of its cash to purchase supplies, the effect on the accounting equation would be:
one asset increases $# and another asset decreases $# causing no effect
a classified balance sheet
organizes assets and liabilities into important subgroups that provide more information
assets, liabilities, and equity accounts are not closed; these are called
permanent accounts
the process of transferring general journal entry information to the ledger
posting
a business's source documents
provide objective evidence that a transaction has taken place
the rule (1) that requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets of associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services
revenue recognition principle
increases in equity from a company's sales of products or services
revenues
the basic financial statements include all of the following except: statement of cash flows, statement of retained earnings, balance sheet, income statement, or statement of changes in assets
statement of changes in assets
the financial statement that shows the beginning balance of retained earnings; the changes in retained earnings that resulted from, net income (or net loss); dividends; and the ending balance
statement of retained earnings
an account balance
the difference between the total debits and total credits for an account including the beginning balance
identify the account used by businesses to record the transfer of assets from a business to its owner for personal use
the dividends account
net income
the excess of revenues over expenses
identify the statement below that is incorrect; the normal balance of dividends is a debit, the normal balance of an expense account is a credit, the normal balance of the common stock account is a credit, the normal balance of unearned revenues is a credit, or the normal balance of accounts receivable is a debit
the normal balance of an expense account is a credit
a balance sheet lists
the types and amounts of assets, liabilities, and equity of a business as of a specific date
identify the correct formula below used to calculate the debt ratio
total liabilities/total assets
revenue is properly recognized:
upon completion of the sale or when services have been performed and the business obtains the right to collect the sale price
a credit used to record an increase in all of the following accounts except; accounts payable, wages expense, service revenue, common stock, or unearned revenue
wages expense