ACCT Test1

Business Entity

A business enterprise, separate and distinct from the persons who supply the assets it uses.

Accounts Receivable

An account used to record the amounts due from (legal claims against) charge customers.

Which is NOT considered an account: Cash Prepaid Insurance Equipment Assets Accounts Receivable

Assets

What are the effects in the fundamental accounting equation? The owner of a business invested $5000 in the business:

Assets increase by $5000; Liabilites, no effect; owner's equity increases $5000.

What is the Fundamental accounting equation?

Assets= Liabilities + Owner's Equity

When an owner deposits cash in an account in the name of the business, it is an increase to:

Cash and Capital

Assets

Cash, properties, and other things of value owned by an economic unit or a business entity.

If an owner invest her computer and printer in the business, there is an increase to:

Computer Equipment and Capital

Debit or Credit? To decrease Assets:

Credit

Debit or Credit? To decrease Drawing:

Credit

Debit or Credit? To decrease Expenses:

Credit

Debit or Credit? To increase Capital:

Credit

Debit or Credit? To increase Liabilities:

Credit

Debit or Credit? To increase Revenue:

Credit

Debit or Credit? To decrease Capital:

Debit

Debit or Credit? To decrease Liabilites:

Debit

Debit or Credit? To decrease Revenue:

Debit

Debit or Credit? To increase Drawing:

Debit

Debit or Credit? To increase Expenses:

Debit

Indicate whether the following changes in account would be a Debit or Credit: To increase Assets:

Debit

List the credit and debit accounts for: Paid utility bill on account

Debit Accounts Payable Credit Cash

List the credit and debit accounts for: Received a bill for advertising

Debit Advertising Expense Credit Accounts Payable

List the credit and debit accounts for: Sold services for cash

Debit Cash Credit Service Income

List the credit and debit accounts for: Received and paid a bill for repairs

Debit Repair Expense Credit Cash

T or F In the Fundamental Accounting Equation, assets are added to liabilities.

False

T or F The account number is recorded in the Post Ref column of the general journal when the transaction is first recorded in the journal.

False

T or F The first step in the posting process is the write the amount of the transaction in the ledger account

False

T or F The only way that the FAE can stay in balance is by adding or subtracting equal amounts from both sides of the equation.

False

The process of subtotaling both sides of an account and recording the amount on that side is known as:

Footing

Amounts owed by a business are referred to as:

Liabilities

A debit may signify a decrease in:

Liability, Capital, Revenue accounts.

Cash

Money in coins or notes, as distinct from checks, money orders, or credit.

Name the asset account: Sales Office Equipment Supplies Expense Insurance Expense

Office Equipment

Creditor

One to whom money is owed

The ending capital balance appears on which statements?

Statement of Owner's Equity and balance sheet

If a $47 cash purchase of supplies is recorded as a $57 debit to Supplies and a $57 credit to Cash, what will be the result?

Supplies will be overstated and Cash will be understated.

Accounts

The categories under Assets, Liabilities, and Owner's Equity headings

Expenses

The costs that relate to earning revenue (the cost of doing business); examples are wages, rent, interest, advertising.

Owner's Equity

The owner's right to or investment in the business.

What is the effect on the fundamental accounting equation when Equipment is purchased on account?

Total assets increase Total Liabilities increase

T or F A ledger account contains a complete record of the transaction activity in the account

True

T or F A trial balance checks the equality of debits and credits

True

T or F Assets are things of value owned by a business entity

True

T or F Captital represents the owner's investment, or equity, in a business

True

T or F If equipment is bought by paying $200 as a down payment and the remaining $400 in 30 days, total liabilities are increased by $200

True

T or F In any transaction, the total dollar amount of debits must equal the total dollar amount of credits

True

T or F Liabilities represent accounts owed to creditors

True

T or F One type of ledger account form has a two-balance-column arrangement

True

T or F The general ledger is a collection of all the accounts

True

T or F The left side is always the debit side

True

Correct this transaction error: A cash payment of $130 on account was recorded as a $310 debit to Accounts Payable and a $310 credit to Cash:

debit Cash $180; credit Accounts Payable, $180

If the number of an account is 211, this probably means that the account is:

from the Liabilities section

A __________ is also known as a book of original entry

journal

To find the balance of a particular account, an accountant should refer to the __________.

ledger

Where would you find the balance of an account:

ledger

A credit may signify an increase in:

liability, revenue and Capital account.

When a T-account has several items on both sides, the balance of the account is written :

on the side with the larger total

The normal balance of an account is on the __________ side. ( + or - )

plus

Name the first step in the posting process:

recording the date in the ledger account

Which accounts have a normal credit balance? assets expenses drawing revenues and liabilites

revenues and liabilites

The proof that the debits and credits in the ledger are equal is called:

the trial balance