Accounting 1 Midterm
"Assets + Liabilities = Owner's Equity" is another way to express the basic accounting equation.
False
A credit posting to the Office Equipment account will result in an increase to that account.
False
A credit to an account always increases it; a debit to an account always decreases it.
False
A double rule under a column of amounts means that the amounts are to be added or subtracted.
False
A work sheet always covers a period of one month.
False
All liability accounts are listed in the credit column of the Income Statement section.
False
If a transaction is journalized on the 8th and is posted on the 10th, the date entered in the Date column of the ledger account is the 10th.
False
The Balance Sheet accounts are assets, liabilities and revenue.
False
The amounts for the trial balance come directly from the journal.
False
The owner's claims to the assets of a business are liabilities.
False
The payment of a liability is recorded by a debit to the liability account and a credit to the owner's capital account.
False
The process of transferring information from the ledger to the journal is called posting.
False
The top of the T account is used for account titles. Credits are entered on the left side of the T; debits on the right.
False
The total financial claims do not have to equal the total cost of the property.
False
Total expenses for the period are reflected in the total of the credit column of the Income Statement section.
False
Prepaid Insurance is an expense account.
False- asset
A(n) ____ results when revenue is larger than expenses.
Net income
___ means drawing a line under a column of amounts.
Ruling
The first two columns on the work sheet are used to enter the ____.
Trial Balance
A business should have separate accounts for recording revenue and expenses.
True
A business transaction affects at least two accounts.
True
A business transaction can affect two accounts on the same side of the accounting equation and still leave the equation in balance.
True
A creditor has a financial claim to the assets of a business.
True
A net income for the period is the amount left after the expenses for the period have been subtracted from revenue.
True
A net loss decreases the balance in the owner's capital account.
True
A trial balance is prepared after posting is completed.
True
A work sheet is prepared at the end of each fiscal period.
True
Adjustments are needed to update accounts.
True
After each transaction, the basic accounting equation should remain in balance.
True
All asset accounts are extended to the Balance Sheet section.
True
An error discovered after posting is usually corrected with a journal entry.
True
Buying on account is the same as buying on credit.
True
Every amount posted will either increase or decrease the balance of a ledger account.
True
Every journal entry requires a posting to at least two ledger accounts.
True
Every transaction affects two or more accounts and is recorded by equal amounts of debits and credits.
True
Expenses decrease owner's equity and are recorded as debits.
True
Expenses have the opposite effect from revenue on the capital account.
True
In the preparation of a trial balance, all accounts are listed in the order in which they appear on the chart of accounts, including those accounts with a zero balance.
True
Joseph Kwiatek, withdrawals has a normal balance in the debit column.
True
One of the purposes of accounting is to provide financial information about property and the rights to that property.
True
Revenue is income earned from the sale of goods and services.
True
Temporary capital accounts are extensions of the owner's capital account.
True
The Income Statement columns are temporary accounts.
True
The Trial Balance section contains entries for all accounts in the general ledger including those with zero balances.
True
The free enterprise system is based on the right to own property.
True
The purpose of posting is to show the changes that take place in the business's accounts as a result of financial transactions.
True
The total of all accounts with normal debit balances should equal the total of all accounts with normal credit balances if the rules of debit and credit were followed correctly.
True
When posting a correcting entry, the phrase "correcting entry" is usually written in the Description column of the ledger account.
True
A(n) ____ is an accounting period of twelve months ending on the last day of any month except December.
fiscal year
A(n) ____ is often called a book of original entry.
journal
Another term used for "recording" a business transaction is ____.
journalizing
A(n) ____ is any type of business paper that verifies that a transaction occurred.
source document
The asset, liability, and owner's equity accounts are extended to the ____ of the work sheet.
Balance sheet section
An asset account appears on the right side of the accounting equation and is also increased on the right side of its T account.
False
Liability, expense, and capital accounts all have normal credit balances.
False
Liability, revenue, and withdrawal accounts all have normal credit balances.
False
Revenues increase owner's equity, and increases in revenues are recorded as debits.
False
Smith Company paid cash for one file cabinet $100. The account credited should be a. cash b. office furniture c. accounts payable d. office equipment
a. cash
Recognizing and recording revenue on the date it is earned even if cash has not been received on that date is known as _____ a. revenue recognition b. expense accounts c. revenue accounts d. temporary accounts
a. revenue recognition
The paper that is prepared when a business transaction occurs is called a a. source document b. memorandum c. journal d. check stub
a. source document
A list of specific information about a business transaction involving the buying or selling of an item and containing the date of the transaction, the quantity, description and cost of each item is called a. a memo b. an invoice c. a journal d. a stub
b. an invoice
The amount of net income for the period is added to the Balance Sheet credit total because it increases the balance in the ____ account.
Capital
A net loss is entered in the ____ column of the Income Statement section of the work sheet.
Credit
If there is a net loss for the period, it is entered in the ____ column of the Balance Sheet section of the work sheet.
Debit
____ is transferring balances from the Trial Balance section of the work sheet to either the Balance Sheet section or the Income Statement section.
Extending
After the net loss is calculated, it should be reflected in the debit column of the Income Statement section and the credit column of the Balance Sheet section.
False
Amounts from the Trial Balance section are extended first to the Income Statement section.
False
An account is a record of only the increases in the balance of a specific item such as cash or equipment.
False
The ____ of the work sheet answers the questions "who?", "what?", and "when?".
Heading
Revenue and expense accounts are listed in the Trial Balance section of the work sheet and in the ____ of the work sheet.
Income Statement section
The ____ allows a business to match revenue against expenses as a means of measuring profit for the period.
Matching principle
If the total of the credit column of the Income Statement section is less than the debit column, there is a(n) ____ for the period.
Net loss
The increases and decreases caused by business transactions are recorded in specific accounts.
True
The notation "G3" in the Posting Reference column of a ledger account indicates the data was posted from general journal page 3.
True
The rules of debit and credit for expense accounts are the same as the rules for asset accounts.
True
A(n) ____ is a paper used to collect information from the general ledger accounts.
Work sheet
If Paul Abdou deposits $30,000 in a checking account in the name of his business, the two accounts affected are ____. a. Cash in Bank and Paul Abdou, Capital b. Cash in Bank and Accounts Receivable c. Cash in Bank and Computer Equipment d. Cash in Bank and Accounts Payable
a. Cash in Bank and Paul Abdou, Capital
What type of account is Accounts Receivable? a. Asset b. Liability c. Owner's Equity
a. Asset
Purchased a computer for $1,200. Accidently the journal entry was recorded and posted as a debit to Office Furniture instead of Computer Equipment. Record the entry to correct this error a. Credit Office Furniture and Debit Computer Equipment for $1,200 b. Debit office furniture for $1,200 credit Computer Equipment c. Credit Cash, Debit Office Furniture for $1,200 d. Debit cash for $1,200 and credit office furniture
a. Credit Office Furniture and Debit Computer Equipment for $1,200
Journalized and posted as an error a credit of $150 to A/R-Mary Jones instead of A/R Mary Smith. What is the correcting entry? a. Debit A/R-Mary Jones and Credit A/R Mary Smith b. Debit Cash and Credit A/R Mary Jones c. Debit A/R-Mary Smith and Credit A/R Mary Jones d. Debit Cash and Credit A/R Mary Smith
a. Debit A/R-Mary Jones and Credit A/R Mary Smith
Determining the debit and credit parts of each transaction is called a. analyzing business transactions b. working the transaction c. thinking critically d. describing the transaction
a. analyzing business transactions
The account Accounts Receivable is an example of a(n) ____. a. asset b. liability c. owner's equity d. none of the above
a. asset
Which of the following steps in the accounting cycle is in the correct order? a. collect and verify source documents, analyze each transaction, journalize each transaction, post to the ledger, and prepare a trial balance b. collect and verify source documents, analyze each transaciton, prepare a trial balance, journalize each transaction, and post to the ledger c. analyze each transaction, journalize, collect source documents, prepare a trial balance, and post d. post to the ledger, prepare a trial balance, journalize, anlyze each transaction, and collect source documents
a. collect and verify source documents, analyze each transaction, journalize each transaction, post to the ledger, and prepare a trial balance.
All of the following about a trial balance are true except: a. it includes only the permanent accounts b. it proves the ledger c. it includes all general ledger accounts d. it is completed after posting
a. it includes only the permanent accounts
Money a business earns from the sale of goods or services is the: a. revenue b. withdrawals c. temporary d. expenses
a. revenue
The various activities a business completes to organize its accounting records in an orderly fashion is called the ____.
accounting cycle
A list of all accounts used by a business. a. T-account b. chart of accounts c. titles d. revenue recognition
b. chart of accounts
The dollar balance of a(n) _____account is carried forward from one period to the next a. temporary capital b. permanent c. revenue recognition d. withdrawal
b. permanent
All of the following account titles are asset titles except ____. a. Office Furniture b. Cash in Bank c. Accounts Payable d. Equipment
c. Accounts Payable
The purchase of a desk on account will increase Office Furniture and will also increase ____. a. Accounts Receivable b. Cash in Bank c. Accounts Payable d. Marie Krabish, Capital
c. Accounts Payable
What type would be the source document for the following transaction. Bought office furniture on account from O'Brians Office Supply a. Receipt b. Memo c. Invoice d. Check
c. Invoice
Smith Company received and deposited a check for $790 for delivery service. The journal entry should be a. debit delivery revenue and credit cash b. debit capital and credit delivery revenue c. debit cash and credit delivery revenue d. debit delivery revenue and credit drawing
c. debit cash and credit delivery revenue
Each of the following is a business expense except a payment for ____. a. utility bills b. monthly rent c. equipment d. advertising
c. equipment
A(n) _____occurs when the owner takes assets out of the business for personal use a. temporary b. expenses c. withdrawals (drawing) d. permanent
c. withdrawals (drawing)
A(n) ____ accounting period begins on January 1 and ends on December 31.
calendar year
If the creditor's financial claim to property totals $1,000 and the owner's financial claim to property totals $11,000, the property value is ____. a. $11,000 b. $1,000 c. $10,000 d. $12,000
d. $12,000
Correcting Entry: Discovered that a transaction for rent expense for last month was journalized and posted in error as a debit to Repair Expense instead of Rent Expense, $550. M16 What account should be debited and what account should be credited to correct the mistake? a. Debit Repair Expense, Credit Cash b. Debit Rent Expense, Credit Cash c. Debit Repair Expense, Credit Rent Expense d. Debit Rent Expense, Credit Repair Expense
d. Debit Rent Expense, Credit Repair Expense
A record of all the transactions of a business is called a. the accounting cycle b. source document c. a fiscal year d. a journal
d. a journal
A business transaction that involves a purchase on account is considered to be a(n) ____. a. expense transaction b. investment by the owner c. cash transaction d. credit transaction
d. credit transaction
Smith Company mailed a check for $200 for the first installment payment on office equipment purchased last month. The journal entry should be a. debit cash and credit office equipment b. debit cash and credit A/P c. debit office equipment and credit cash d. debit A/P credit cash
d. debit A/P credit cash
Smith Company purchased a used pick up truck on account for $20,000. The account to be debited is a. cash b. accounts payable c. accounts receivable d. delivery equipment
d. delivery equipment
The ____ is an all-purpose journal used for recording business transactions.
general journal