Business Accounting Final

When assets are recorded at original value, they are recorded under the

historical cost principle

Source documents provide objective, verifiable evidence of business transactions.

True

Source documents provide the input for the accounting process

True

If the book value of an asset is $12,500 and the accumulated depreciation is $3,500, the original cost of the asset is

$16,000

When posting an adjusting entry to the general ledger, write

"adjusting" in the item column.

An asset cost $33,000. It has an expected useful life of 5 years and an expected salvage value of $3,000. Depreciation expense for the first year of the asset's life using the straight-line method is

$6,000

Owner's equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner's equity at the end of the period is

$75,000

A typical account number for a contra-account would be

185.1

The third pair of columns on a 10-column work sheet prepared at the end of the period would be the

Adjusted Trial Balance columns

The second pair of columns on a 10-column work sheet prepared at the end of the period would be the

Adjustments columns

The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the

Balance sheet columns

Posting from the journal to the ledger does NOT involve which of the following steps?

Enter the description of the entry

A computer workstation cost $35,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $5,000 per year.

False

A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.

False

A list of all the accounts used by a business is called a trial balance.

False

When the trial balance indicated that the ledger is in balance, you can assume there are no errors in the ledger.

False

purchase invoices received from suppliers provide information about cash payments

False

the cash basis of accounting and the accrual basis of accounting result in the same measure of net income

False

The Item column in the general ledger is used to describe special entries not including the following entries

Forwarding entries

The balance sheet reports

Liabilities

Purchase invoices received from suppliers provide information about

Purchases of goods or services

The 10-column work sheet is used to facilitate the preparation of the income statement, the statement of owner's equity, and the balance sheet.

True

The first pair of columns on a 10-column work sheet would be the

Trial balance columns

A complete set of all the accounts used by a business is known as the general ledger.

True

A separate line in the two-column journal should be used for each account title.

True

Depreciation matches the cost of an asset against the revenues it will produce.

True

Each entry in the journal affects two or more accounts.

True

The Income Statement columns of a work sheet include all revenue and expense accounts

True

If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n)

accrual basis of accounting

Corrections in accounts should NOT be

covered completely

Net income is shown on the work sheet as a

debit in the income statement column

The cost of an asset that is subject to depreciation is called

depreciable cost

Matching the cost of an asset with the revenue it is expected to produce is called

depreciation

The Posting Reference column of the journal provides a cross-reference between the

journal and ledger

If a business records revenue when it is received and records the purchase of a building as an asset and makes adjustments to allocate the cost of the building over many accounting periods, the business accounting system is a (n)

modified cash basis of accounting

The accounts in the chart of accounts are arranged in

numerical order

The matching principle in accounting requires the matching of

revenue earned with the expenses incurred to produce the revenue

Copies of sales tickets or sales invoices issued to customers or clients provide information about

sales of goods or services

Corrections in accounts should be made by

the ruling method

The simplest form of journal is one with

two columns

Adjusting entries does not always affect both the income statement and the balance sheet.

False

After posting journal information to the ledger accounts, a check mark should be entered in the posting reference column of the journal to indicate that the transaction item has been posted.

False

If the total of the income statement credit column, before determining net income or net loss, exceeds the total of the income statement debit column, the result is a net loss for the year.

False

Recording adjustments on the work sheet has no effect on the ledger accounts

True

Net income is shown on the work sheet as a(n)

credit in the Balance Sheet columns

To find an error, you should do all of the following EXCEPT

erase questionable entries

To record wages earned but not paid under the modified cash accounting method,

no entry is required

Information about cash disbursements can be obtained from check stubs and carbon copies of checks.

True

Source documents begin the process of entering transactions in the accounting system.

True

The Description column of a two-column journal is used to enter the titles of the accounts affected by each transaction, together with a description of the transaction

True

The amount of depreciation taken each period will be the same using the straight-line mehtod

True

The chart of accounts includes the account titles in numerical order

True

The flow of data through the accounting information system includes analyzing transactions, journalizing, posting, and preparing a trial balance.

True

The historical cost principle allows for assets to be recorded at actual cost.

True

The journal provides the information needed to transfer the debits and the accounts in the ledger

True

The ledger is a reliable source of information only when all of the transactions entered in the journal have been posted.

True

The only correct way to change the balance of a ledger account is to make a journal entry.

True

The owner's capital account in the last two columns of the work sheet is not up-to-date because it does not yet include net income and withdrawals of the current period.

True

The process of copying the debits and credits from the journal to the ledger accounts is known as posting.

True

The purpose of a journal is to provide a chronological record of all transactions completed by the business

True

Supplies originally cost $600, but only $150 worth of supplies were used this period. The adjusting entry would be

debit supplies expense, $150; credit Supplies, $150.

To record the purchase of assets on account under the modified cash basis of accounting method,

debit the asset and credit Accounts Payable

The adjusting entry for the depreciation of office equipment for the period includes

debiting Depreciation Expense-Office Equipment and crediting Accumulated Depreciation-Office Equipment

If the owner of a company invested cash in a business enterprise, the transaction would include

debiting cash and crediting capital

Cash is used to pay for a car for personal use by the owner. The transaction includes

debiting drawing and crediting cash

If cash is paid for worker salaries, the transaction includes

debiting salaries expense and crediting cash

The payment of a utility bill (like electricity) for the month would include

debiting utilities expense and crediting cash

Instead of T accounts, businesses are more likely to use a

four-column account

Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash

False

Almost any document that provides information about a business transaction is included in the chart of accounts.

False

An account in the chart of accounts is assigned a number at random.

False

Entering transactions in a journal is called posting

False

What does the credit balance in the Accumulated Depreciation account represent?

the amount of depreciation taken in the past years

Every entry in the journal should include all of the following EXVCEPT

the balance of the accounts affected

The time an asset is expected to last is called its

useful life

Plant assets provide benefits over a long period of time

True

In some cases, erasures are better for correction than the ruling method

False

In some cases, erasures are better for corrections than the ruling method

False

It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal

False

The balance sheet reports assets, liabilities, and owner's equity for a specific period of times.

False

The chart of accounts includes assets, liabilities, and owner's equity accounts only

False

The formula to calculate straight-line depreciation is depreciable cost times the expected life of the asset

False

The main advantage of a two-column account is that it maintains a running balance

False

The posting reference, amount, and description are the three items of information about each transaction that should be entered in the ledger accounts.

False

To make the posting process easier, posting reference entries are made at the same time that transactions are entered in the two-column journal

False

The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the

Income Statement columns

The depreciation system used by many businesses for tax purposes is the

Modified Accelerated Cost Recovery System

In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column?

Owner's equity is not up-to-date-

The business or professional person using the cash basis of accounting takes the view that there is no revenue until it is received in such a form that it can be spent.

True

The cash basis of accounting is used by some small businesses and by most individuals for tax purposes.

True

The purpose of a trial balance is to prove that the totals of the debit and credit balances in the ledger accounts are equal.

True

Under the cash basis of accounting, a certain expense may be incurred in one period but not entered until the following period.

True

While certain distinctive problems may arise in keeping the accounts of any specific enterprise, the principles of accounting on the cash basis are generally the same

True

Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about

cash receipts

An account used with a related account to bring about a decrease in the net amount of the two account balances is call a(n)

contra-account

The steps in the journalizing process include all of the following EXCEPT

enter the balance