Learnsmart

Which of the following accounts is considered a prepaid expense?

Supplies

Which of the following accounts has a normal debit balance? (Check all that apply.)

Supplies Buildings Cash Accounts receivable

Which of the following statements are accurate regarding supplies? (Check all that apply.)

Supplies are assets until they are used. When supplies are purchased, they are added to the Supplies account. Unused supplies are treated as assets. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies.

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300. Supplies would be credited for $300.

Which of the following statements is accurate about the Land account? (Check all that apply.)

The Land account is increased on the left side of its T-account. The Land account is an asset. The Land account is used to record the costs of land purchased by the business.

Which of the following statements below lists the rules of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

On Sept 9, Daniels Corporation earns $2,000 by performing consulting services. Their customer said that she would pay next month. Daniels Corporation journalized the transaction as follows, but something is wrong with the journal entry. Use your knowledge of what a correct journal entry should look like to identify everything that is wrong. (Check all that apply.)

The correct account that should be debited is the Accounts receivable account. The Consulting revenue account should be indented, as it is credited. Accounts payable is not involved in this transaction. Consulting revenue should be listed below the debited account as it is credited.

Which of the following accounts has a normal credit balance? (Check all that apply.)

Unearned consulting revenue Accounts payable Common stock

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Unearned revenue would be debited for $700. Service revenue would be credited for $700.

Identify which of the following statements is correct as to why accounting is important.

We live in an information age whereby accounting information impacts everyone.

Identify the correct definition of an asset:

An asset is something of value that a business owns or controls

Describe the order in which a company prepares financial statements

1. income statement 2. statement of retained earnings 3. balance sheet 4. statement of cash flows

Which of the following statements is (are) correct regarding a T-account? (Check all that apply.)

A T-account represents a ledger account. A T-account may be used as a tool to visualize the effects of a transaction. A T-account will show the debit and credit effects of transactions.

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Choose the statement below that correctly explains a general journal..

A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.)

A liability is a claim by creditors against the assets of a business. A liability is a debt owed by the business. A liability can be settled by transferring assets or providing products or services to others.

Retained Earnings Statement

A summary of the changes in the retained earnings in a corporation for a specific period of time, such as a month or a year.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

Identify the importance of accounting by selecting the statement(s) that is (are) correct below.

Accounting is a system that identifies, records and communicates financial information.

Why does a business need accounting information?

Accounting records business transactions and communicates financial information.

Which of the following statements is (are) true about accounts receivables? (Check all that apply.)

Accounts receivable increased when credit sales are made. Accounts receivable reflects the amount still owed by customers.

Which of the following describes accrued revenue? (Check all that apply)

Accounts receivable is usually increased when accruing revenues. They refer to revenues that are earned in a period, but have not been received and are unrecorded. The adjustment causes an increase in an asset account and an increase in a revenue account. They refer to earnings which have been earned but not yet billed.

Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.)

Adjustments involve increasing both an expense and a liability account. Examples of accrued expenses are wages expense and interest expense. They are reported on an income statement. They refer to costs that are incurred in a period, but are both unpaid and unrecorded.

When recording transactions into the accounting equation, which of the following statements are correct? (Check all that apply.)

After recording the transaction, total assets will always equal total liabilities plus equity.

retained earnings

An amount earned by a corporation and not yet distributed to stockholders. how equity changed over a period of time

Which of the following correctly depicts the accounting equation?

Assets = Liabilities + Equity What a business owns will always equal what it owes to creditors and owners.

When the stockholders receive a dividend, how would this affect the equity of a business?

Assets are decreased and equity is decreased.

The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business?

Assets would be decreased and total equity would decrease as well.

Enter one word for each blank. The expanded accounting equation is:

Assets=liabilities+common stock+revenues-expenses-divideneds

Which of the following accounts would be considered an asset? (Check all that apply.)

Building Cash Accounts receivable Supplies

Identify which of the following lists include only examples of assets.

Building, cash, accounts receivable

Which of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.)

Businesses report financial information at regular intervals to ensure timeliness of data. Useful information must reach decision makers frequently and promptly. The value of information is often linked to its timeliness.

Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)

Cash Supplies Equipment Retained earnings, 12/31 Accounts Payable

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.)

Cash would be credited for $4,000. Salaries payable will be debited for $500. Salaries expense would be debited for $3,500.

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Interest expense for $30.

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include by choosing the correct statement below.

Debit Unearned revenues for $400.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?

Debit accounts receivable and credit services revenue

Sheldon Company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes:

Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000

Which of the following would be included on a statement of retained earnings? (Check all that apply.)

Dividends Retained earnings at end of period Retained earnings at beginning of period Net income (loss)

From the following statements, select the one that describes the effect of dividends on equity.

Dividends cause equity to decrease.

Which of the following statements about the Dividends account is (are) correct? (Check all that apply.)

Dividends is used to record distributions of assets to the owners of a business. Dividends decrease equity. Dividends are increased on the left side of the T-account.

On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be included. (Check all that apply.)

Dividends would be debited and listed first. Cash would be credited and listed second.

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.)

Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. Equipment purchases are reported on the balance sheet. Equipment is reported on the left side of the accounting equation. Equipment is an asset.

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.)

Equipment purchases are reported on the balance sheet. Equipment is reported on the left side of the accounting equation. Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. Equipment is an asset.

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt. (Check all that apply.)

If a company has a lot of debt, they may not be able to afford to take on new debt. A company that finances their assets by borrowing will need to make enough money to pay off the debt. A company's required debt payments may be greater than its ability to generate money to make those payments.

Which of the following statements is (are) correct regarding a journal? (Check all that apply.)

In a journal, both the debit and credit side of the transaction can be seen. A journal is used to record business transactions. Transactions are generally entered in chronological order.

Net Income Formula

Revenue - Expenses

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.

Insurance expense would be debited for $300.

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

A plant asset can be defined by which of the following statements? (Check all that apply.)

It is a tangible long-term asset. Its original cost (minus any salvage value) is expensed over its useful life. It has a life within the business greater than one year. It is reported on the balance sheet.

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.)

It is the promise of another entity to pay a specific sum of money on a specified future date. Notes receivable is classified as an asset. Another name for a note receivable is a promissory note.

Given the following list of accounts, identify which are classified as assets. Select all that apply

Land Accounts Receivable Cash Supplies Building

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account.

The definition of revenues includes which of the following statements? (Check all that apply.)

Revenues increase equity. Revenues are the sales of products or services to customers by a business.

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation? Select all that apply.

Salaries expense will be increased. Equity will be decreased.

The FASB conceptual framework consists of all of the following

Objectives Qualitive characteristics Elements Recongnition and measurement

Given the statements below, choose the most accurate definition of dividends.

Outflow of resources to stockholders.

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

On Nov.1, Lyons Company pays $1000 cash for a 12-month insurance policy. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry

Prepaid Insurance would be debited and listed first Cash would be credited and listed second

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

An employee that has unpaid bills might exhibit the following fraud factor:

Pressure

Melton's Door Company pays rent on the building facilities of $5,000 on May 1. Show how to record this transaction in the accounting equation of Melton's Door Company.

Rent Expense will be increased.

Which of the statement(s) below define(s) an asset? (Check all that apply.)

Resources controlled by the business An amount owned Resources with expected future benefits

Which of the following statements explain(s) how the accounting equation applies to businesses? Check all that apply.

The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation applies to all transactions. The equation states that Assets = Liabilities + Equity. The relation of assets, liabilities and equity is reflected in the equation.

Which of the following describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Users of accounting information can be divided into two main groups. These groups include:

The three factors that must exist for a person to commit fraud includeinternal and external

Which of the following statements best represents the reason for the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)

They refer to cash received in advance of performing a service or product. They are also called deferred revenues. They are reported on a balance sheet. They are a liability.

Identify which of the following formulas correctly defines how to calculate the debt ratio.

Total liabilities/Total assets

Which of the following would be included on an income statement?

Total revenues Net income Total expenses

Accrual basis accounting is defined as: (Check all that apply.)

an accounting system that uses the matching principle to determine when to recognize revenues and expenses. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred. an accounting system which is consistent with generally accepted accounting principles.

Analyzing the accounting equation at the end of the month will reveal the following. Select all that apply.

assets = liabilities + equity revenues and expenses will change the equity account

The expanded accounting equation is defined as

assets=liabilities+common stock+ revenue - expenses - dividends

StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December:

debit accounts receivable credit services revenue

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

debit to Insurance expense for $400. credit to Prepaid insurance for $400.

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

decreasing Cash; increasing Equipment

An external user of accounting information:

does not directly run the organization

A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest (expense/payable/receivable)

expense credit payable

The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the

expense recognition principle

The details behind the financial statement are often disclosed in the

footnotes to the statements

The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the

full disclosure principal

Revenues cause equity to _____ and they are increased on the _____ side of the T-account.

increase, right

The general ledger can be used to determine which of the following (select all answers which apply):

increases and decreases in all accounts in a business. which accounts are being used by a company and their balances at any given time. common and unique accounts used by a business

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by:

increasing Cash; increasing Common Stock

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to

interest receivable credit interest revenue

trail balance

list, credit

The area of accounting that serves the decision-making needs of internal users is referred to as (managerial/financial/research)

managerial accounting

Another name for the expense recognition principle is

matching principal

The _____ principle states that accounting information is based on actual cost.

measurement

The principle which states that accounting information is based on actual cost is called the

measurement principle

Return on Assets (ROA)

net income / average total assets (expressed as ratio) 4.5% Rationale: $5 million/[($100 million + $120 million/)2] = 4.5% $14,300 Rationale: $4,000 beginning retained earnings+ $10,000 net income - $300 dividends

The three factors that must exist for a person to commit fraud include

opportunity pressure rationalization

Transferring entries from the journal to the ledger is called

posting

Generally accepted accounting principles (GAAP) wants information to have:

relevance and faithful info

The principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the

revenue recognition principle

Analyzing the accounting equation at the end of the month will reveal the following. Select all that apply.

revenues and expenses will change the equity account assets = liabilities + equity

Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? (Check all that apply.)

six-month one-year one-month