BEGINNING THE ACCOUNTING CYCLE - CHAPTER 3

A journal is called the book of final entry

False

A running balance is maintained in the journal after each transaction is posted.

False

Correctly posting a transaction twice will cause the tiral balance totals to be unequal

False

If the trial balance is in balance, it proves that all transactions were properly journalized

False

The debit part of the transaction is recorded second in a journal entry.

False

For which of the following reasons would the withdrawal account be debited?

Owner removes cash from the business for personal expenses

"PR" in the general journal and general ledger stands for:

Posting Reference.

At the end of an accounting period, an accountant prepares a report that shows all the accounts of the company and their related balances. The balance of each account is listed in either a debit or credit column and each column is totaled to determine if there is an equality of debits and credits. What is the accountant doing?

Preparing a trial balance

The purpose of posting is to:

Provide an explanation of the transaction

The journal entry debiting Cash and crediting Capital would be a result of a(n):

investment

The general journal:

is the Book of Original Entry.

The general journal

is the book of original entry.

Business transactions are first recorded in the:

journal

If a Trial Balance is not equal, you should first:

re-add the Trial Balance and calculate the difference.

The posting reference column in the journal is used for:

recording the account number to which the entry was posted.

A debit to a liability account was posted to a revenue account. This would cause:

revenue to be understated.

A calendar year is:

the 12 - month period beginning with January

If Accounts Receivable has been credited, it is most likely that:

the company collected a payment from a customer

If Rent Expense has been debited, it is likely that:

this month's rent was paid

When the trial balance includes a debit column total of $210,400 and a credit column total of $10,930, it is probable that:

$265 debit was recorded as a credit

BOOK OF FINAL ENTRY

A book that records information about business transactions from a book of original entry (a journal). Example: a ledger.

Which of the following would be an explanation for a transaction where Prepaid rent is debited and cash is credited?

A company paid for rent in advance of enjoying the benefits of the lease

An accountant comes upon a posting mistake in the general ledger that resulted in assets being understated and expenses being overstated. Which of the following mistakes would have that effect?

A company purchases a truck for $30,000 cash and debits Truck Expenses instead of the Truck Asset account

Which of the following would be considered an error because of a "slide"?

A sale for $721 was incorrectly recorded as $7,210

ACCOUNTING CYCLE

A six-step procedure that results in the preparation and analysis of the major financial statements.

The process that begins with recording business transactions and includes the completion of the financial statements in the:

Accounting cycle

Rapid Transit Express billed customers $850 for delivery services. The journal entry to record this transaction is:

Accounts Receivable, debit $850; delivery fees earned, credit $850.

Sue's Book Review billed customers $950. The journal entry to record this transaction is:

Accounts Receivable, debit $950; Editing fees, credit $950

A company purchases computer equipment from a supplier for $10,000 and pays $3,000 cash with the remaining amount owed on account. The transaction is records with a debit to Equipment for $10,000, credit to cash for $3,000, and a credit to accounts receivable for $7,000. What is the correction that needs to be made?

Accounts receivable should be fixed by debiting the account $7,000 and properly recording accounts payable as a credit of $7,000

The Trial Balance:

All of the listed answers are correct: ensures that debits equal credits includes all accounts with a ledger balance. includes assets, liabilities, capital, withdrawals, revenues and expenses.

The posting reference column on the general journal:

Allows us to cross reference to the general ledger. Displays to which accounts the transactions have been posted. Shows which transactions have been posted to the ledger. ALL OF THE ABOVE ARE CORRECT.

A company purchases equipment for $15,000 and incorrectly debits Supplies Expense and correctly credits cash. What would be the effect of this mistake?

Assets would be understated and expenses would be overstated

Bobs' catered a reception. The total price was $900. The customer paid half of the fee in cash and placed the remainder on account.

Cash $450 Accounts Receivable $450 Catering Service Fees 900

During the month of March, John invested $19,000 in starting his landscaping business. The journal entry would be:

Cash, debit $19,000; John, capital, credit $19,000

During the month of June, Jane invested $7,000 in starting her legal practice. The proper journal entry would be:

Cash, debit $7,000; Jane, Capital, credit $7,000

The entry to record the payment of office salaries would be:

Debit Salaries Expense; Credit Cash

On May 14th, paid $700 to vendors for supplies that had been purchased on account in April, how does this affect the accounting equation?

Debit accounts payable, credit cash

On August 1, Kitchen Designs paid six months of rent for one of its stores in advance. The journal entry to record this transaction is:

Debit prepaid rent; credit cash

Which of the following accounting records is considered the "Book of Original Entry"?

General journal

Which of the following correctly describes the order of the accounts listed in a trial balance?

In the same order, as in the ledger

The entry to record completing a financial lecture and immediately collecting payment from customers would be:

Lecture Fees 1,100 Cash 1,100

A credit to the capital account was posted to notes payable in error. This would cause:

Liabilities to be overstated

The process by which business transactions are recorded, financial statements are prepared, and temporary accounts are closed is called:

The accounting cycle

Below are selected balances from a trial balance. Applying the concept of normal balances, which of the following statements is true? Cash $10,000 (debit balance) Accounts Receivable $20,000 (credit balance) Accounts Payable $15,000 (credit balance) Capital $50,000 (debit balance)

The accounts receivable account should have a debit balance and the capital account should have a credit balance

The sale of a product is traditionally recognized as revenue in the accounting records when:

The product is delivered to the customer

ACCOUNTING PERIOD

The time period covered by the financial statements

The fiscal year is:

The twelve-month period a business chooses for its accounting period

If the business records a sale as $189 and it should be $198, this error would be called a:

Transposition

What is the purpose of posting?

Update the account balances in the ledger

What account would be debited if an owner withdraws cash from a business?

Withdrawals

An accountant makes an error in the journal (prior to posting in the ledger). Which of the following is an acceptable way of correcting the error?

Write or a new journal entry or edit the existing one, correcting the original entry. You also can simply draw a line through the incorrect info, write the correct information and initial the change

If Accounts Payable has been debited, it is most likely that:

a purchase was made on account

The time period for which a statement of Owner's Equity is prepared is a(n):

accounting period

The proper sequence used in recording a business transaction is:

analyze, journalize, post, record the account balance, and complete the reference column in the journal.

The first step of the accounting cycle is:

analyzing business transactions.

A credit to an Asset account was posted to a Liability account. This would causes:

assets to be overstated.

When recording a transaction in a journal, the account listed first is always the:

debit

To manually correct an error made in the journal (prior to posting in the ledger):

draw a line through the original entry, write the correct information above the line, and write your initials near the change.

The twelve-month period a business chooses for its accounting period is a(n):

fiscal year.

When an accountant updates an account balance in a ledger as a result of a transaction, it is called:

posting

Conner Sales' total assets and total liabilities increased $1,000. The transaction could have been:

purchase of supplies for $1,300 with a down payment of $300 and the remainder on account.

The posting reference column in the ledger is:

used to record the journal and page number the transactions originated.