Essentials of Accounting MidTerm Study

Which account shows up on the Income Statement

Revenue

The first step in preparing a worksheet is to prepare trial balance. True or False

True

The general ledger is used to keep track of the current balance in each account. True or False

True

The purpose of depreciation is to spread the cost of an asset over its useful life. True or false

True

The sum of the debits must equal the sum of the credits on the trial balance True or False

True

There are no debit or credit columns on financial statements. True or False

True

To calculate depreciation expense, an accountant needs estimate the asset's useful life and salvage value. True or False

True

To credit an account is to enter an amount on the right side of the account. True or False

True

When making a journal entry, all debited accounts must be listed before any credited accounts are listed. True or False

True

statement of owner's equity is a statement summarizing all of the changes in owner's equity during a specified period of time. True or False

True

Short-term liabilities are liabilities that will be paid off using current assets. True or False

Ture

The income statement does not report

Withdrawals

Tom invests $500 cash in the business, journal entry as follows:

Debit = cash, Credit capital

Rod paid $1,000 for the month's rent. This transaction would:

Decrease an asset and decrease owner's equity

The concept that income determination can be made on a periodic basis is known as the accounting period concept. True or False

True

the owner withdrew $4,500 and beginning of the year. At the end of the year, the balance was $43,000, During the vear, The owner's equity in a business had a $30.000 balance at the made no additional investments. The net income for the year was

$17,500

Prepaid insurance has a balance of $1,200 that represents 6 months of insurance. One month of insurance has expired. The amount of the adjustment is

$200

The revenue for the month was $12,000, expenses totaled $7,500, and withdrawals totaled $4,500. The net income or net loss for the month was

$4,500 income

The cost of an asset is $6,000, Salvage value is $200, Estimated useful life is 10 years. The amount of depreciation per year using the straight-line method is

$580

Purchase a desk on account increases office furniture and will also increase:

Accounts payable

Which of the following accounts is a liability:

Accounts payable

After the accounts are closed and the journal entries have been posted, which of the following accounts would have a balance?

Accumulated Depreciation

Which if the following is true about source documents? a. They provide objective evidence of business transactions b. They provide verifiable evidence of the accuracy of the accounting records C. They should be filed for possible future reference d.) All of the statements are true

All of the statements are true

Users of accounting information may include A.Owners B.Creditors c. Government agencies d. All of these

All of these

Looking at events that have taken place and thinking about how they affect business is:

Analyzing

What is normal cash balance

Debit

After the Statement of Owner's Equity is prepared, which of the following is carried over to the Balance Sheet?

Ending Capital Balance

A sole proprietorship can have multiple owners. True or False

False

After source documents are used to record a transaction, they should be destroyed.

False

Assets + Liabilities Owner's Equity True or False

False

Debit always means decrease and credit always means increase. Trye or False

False

Historical cost is the amount of depreciation expense recorded for each accounting period. True or False

False

One business transaction has a single-entry effect upon the accounting elements; two business transactions together have a dual-entry effect on accounting elements. True or False

False

Short-term assets and short-term liabilities are temporary accounts. True or False

False

Temporary accounts accumulate information across accounting periods. True or False

False

The cost of plant assets is depreciated because the assets provide benefits only in the year of purchase. True or False

False

The income summary account appears on the income statement at the end of the accounting period. True or False

False

The matching principle matches balance sheet accounts with income statement accounts. True or False

False

The matching principle of accounting requires the matching of debits & credits. True or False

False

There are only two types of business ownership; partnerships & sole proprietorships. True or False

False

fa transaction has one debit, it can only have one credit. True or False

False

GAAP

Generally Accepted Accounting Principles

The financial statement prepared first is the

Income Statement

Which of the following is an example of long-term debt?

Mortgage Payable

The amount by which the business assets exceed the business liabilities is:

Owner's equity

A classified balance sheet groups similar items together. True or False

True

A contra-asset is deducted from the related asset on the balance sheet. True or False

True

A fiscal year is a 12 month period. True or False

True

A trial balance is a list of accounts showing the title and the balance of each account. True or False

True

After the Statement of Owner's Equity is prepared, the Ending Capital Balance is carried over to the Balance Sheet. True or False

True

As part of the adjustment of supplies an expense account is debited and supplies is credited for the amount of supplies used during the accounting period. True or False

True

Book value is the difference between original cost and accumulated depreciation. True or False

True

Entering the transactions in a journal is called journalizing. True or False

True

Financial statement preparation order: Income Statement, Owner's Equity Statement, Balance Sheet. True or False

True

If Damen's delivery fees for the month include $800 on account from customers and $300 in cash, the revenue account increases $1,100. True or False

True

Prepaid insurance is an asset because it will provide future benefits. True or False

True

The Balance Sheet columns of the work sheet provide all of the information needed to prepare statement of owner's equity unless there are additional investments. True or false

True

The Income Statement columns of a work sheet include all revenue and expense accounts. True or False

True

The amounts in the financial statements must with the ledger account balances. True or False

True

The chart of accounts is a list of all accounts used by a business. True or False

True

When a loan is paid, a(n)

aliability account is debited

. An example of a source document would be

an invoice

The order of the flow of financial data accounting information systems is

analyze, journalize, post

The assets of a business may consist of a number of items, such as

cash

Cash received on account affects

cash and accounts receivable

What is the first step in the closing process

close revenue

Entries requiring more than one debit and/or more than one credit are called

compound entries

Ken paid $400 cash for services he had received earlier in the month. This transaction would: a Increase an asset and decrease an asset b. Increase liability C Increase an asset and increase owner's equity dNone of these

dNone of these

Supplies originally cost $500, but only $50 worth of supplies remain on hand at the end of the month. The adjusting entry would be

debit Supplies Expense $450; credit Supplies, $450

Wages earned but not yet paid amounted to $500. The adjusting entry will

debit Wages Expense and credit Wages Payable

To find an error on the trial balance, you should

double check your addition

Payment of office rent represents an increase in

expenses

Mr. T invested $20,000 in cash into his business. This transaction would:

increase assets and increase owner's equity

Investment of cash in a business

increases cash

Which is an example of a merchandiscing business:

pharmacy

What is the correct sequence for closing the temporary accounts?

revenues, expenses, Income Summary, Drawing

For the straight-line method, depreciable cost is calculated by taking the total cost of an asset and

subtracting salvage value

The main source of the information needed to prepare the balance sheet is

the Balance Sheet columns of the work sheet

Adjusting entries always affect

the balance sheet

The statement of owner's equity does not include information about

the liabilities of the business