Chapter 3 Accounting 101

Based on the accounts reflected below, the missing value for Equipment for the fundamental accounting equation to be in balance is what amount? Assume that all accounts have normal balances. Cash - $30,800 Accounts Payable - $20,000 Jack Cartel, Capital - $60,000 Equipment - X Supplies - $9,200

$40,000

Steps to calculate the balance of an account

1. Add the figures on each side of the account. 2. Enter the total in small pencil figures called a footing 3. Subtract the smaller total from the larger total 4. Record the balance on the side that has the larger total

Place the steps to prepare a trial balance in the correct order:

1. Enter trial balance heading. 2. List accounts names in the order they appear on the financial statements. 3. Enter the ending balances of each account in the appropriate debit or credit column 4. Total the debit column; total the credit column 5. Compare the total debits with total credits

Financial statements should be prepared in a specific order. Organize the statements below in the order of preparation:

1. Income Statement 2. Statement of Owner's Equity 3. Balance Sheet

Arrange the following sections of the statement of owner's equity, for a one year period, in the correct order.

1. Title 2. Capital, January 1, 2016 3. Net Income 4. Less Withdrawals 5. Increase in Capital 6. Capital, December 31, 2016

Charts of accounts

A list of the accounts used by a business to record its financial transactions

Classification

A means of identifying each account as an asset, liability, or owner's equity

Footing

A small pencil figure written at the base of an amount column showing the sum of the entries in the column

Drawing account

A special type of owner's equity account set up to record the owner's withdrawal of cash from the business

Trial balance

A statement to test the accuracy of total debits and credits after transactions have been recorded

T account

A type of account, resembling a T, used to analyze the effects of a business transaction

Permanent account

An account that is kept open from one accounting period to the next

Temporary account

An account whose balance is transferred to another account at the end of an accounting period

Slide

An accounting error involving a misplaced decimal point

Transposition

An accounting error involving misplaced digits in a number

Double-entry system

An accounting system that involves recording the effects of each transaction as debits and credits

Debit

Any entry on the left side of an account

Credit

Any entry on the right side of an account.

Identify which of the following items appear on a balance sheet title:

Balance Sheet 12/31/20XX Company Name

The owner's capital account appears on which two financial statements?

Balance sheet & Statement of Owner's equity

A company collected $200 cash from customers for services provided. This transaction would (debit/credit) _____________the fees earned account, and (debit/credit) _____________the cash account.

Credit the fees earned account -Because Increases are recorded on the right side of the T account for accounts on the right side of the equation. Debit to the cash account - Because increases on the left hand side of the equation are recorded on the left hand side of the T account.

The Richey Company purchased new equipment for $40,000 from Office supplies, Inc., to be paid in 30 days. Which of the following is correct?

Equipment is increased by $40,400.Accounts payable is increased by $40,400

True or false: A list of the accounts used by a business to record financial transactions is called the trial balance.

False - Because A list of accounts used by a business to record its financial transaction is called the chart of accounts.

The sum of several entries on either side of an account that is entered in small pencil figures is a:

Footing

Identify which items appear on the title of an income statement:

For the Year Ended 2014 Income Statement Company Name

The financial statement that should be prepared first is the:

Income Statement

Liability Accounts

Increase Credit & Decrease Debit

Owner's Capital Account

Increase Credit & Decrease Debit

Revenue Accounts

Increase Credit & Decrease Debit

Owner's Drawing Account

Increase Debit & Decrease Credit

Expense Accounts

Increase Debit & Decrease Debit

Asset Accounts

Increase Debit & Decrease credit

When analyzing expenses accounts:

Increases are shown on the Left-hand side of the T account & Decreases are shown on the Right-hand side of the T account

When analyzing the fees earned account:

Increases are shown on the right-hand side of the T account & Decreases are shown on the left-hand side of the T account

Increases are recorded on which side of Asset, Liability, and Owner's Equity Accounts?

Increases in asset accounts are recorded on the left side (Debit). Increases in liability and owner's equity accounts are recorded on the right side (Credit).

The drawing account is always increased on the:

Left-hand side

Identify which of the following items are on the statement of owner's equity.

Net Income Capital, Beginning Balance Withdrawals

Identify which items are on the income statement:

Revenues Net income Expenses

Net income appears on which two financial statements?

Statement of owner's equity & Income statement

An account whose balance is transferred to another account at the end of the accounting period, such as fees income or wages expense, is called a__________ account.

Temporary or Nominal Account

Account Balance

The difference between the amounts recorded on the two sides of an account

Normal balance

The increase side of an account

The normal balance side for Asset, Liability, and Owner's Equity Account is:

The normal balance (Increase Side) of an asset account is on he left side (Debit Side). The normal balance (Increase Side) of liability and Owner's equity accounts is on the right side (Credit).

Accounts

Written records of the assets, liabilities, and owner's equity of a business

Identify which of the following accounts are permanent accounts:

accounts payable prepaid rent cash

A list of the accounts used by a business to record its financial transactions is called the

chart of accounts

The right side of a T account is the

credit side

The left side of a T account is the

debit side

Identify which of the following accounts are temporary accounts:

fees income utilities expense

The normal balance of an account is:

increase side of the account.