Accounting 4.1-4.3

When is a correcting entry necessary?

When a transaction has been improperly journalized and posted to the ledger

Determining that the amount of cash agrees with the balance of the Cash account in the accounting records is called

proving cash

1. Because an account form has columns for the debit and credit balance of an account, it is often referred to as the balance-ruled account form. (p. 93)

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10. Each amount in the Debit and Credit columns of a general journal is posted to the account written in the Account Title column. (p. 98)

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12. There are five steps in posting an amount from the Debit column of a general journal. (p. 98)

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15. After a journal has been posted, the Post. Ref. column is completely filled in with account numbers. (p. 102)

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17. If an error requires a correcting entry, a memorandum is prepared as the source document describing the correction to be made. (p. 109)

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A ledger that contains all accounts needed to prepare financial statements is called a

general ledger

Writing an account title and number on the heading of an account is called

opening an account

Transferring information from a journal entry to a ledger account is called

posting

11. The only reason for the Post. Ref. columns of the journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interrupted. (p. 98)

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All assets start with

1

What are the three steps for correcting an incorrect amount posted to an account?

1. Draw a line through the incorrect amount. 2. Write the correct amount just above the correction in the same space. 3. Recalculate the account balance.

What are the three steps for correcting an amount posted to an incorrect column?

1. Draw a line through the incorrect item in the account. 2. Record the posting in the correct amount column. 3. Recalculate the account balance.

2. List the two steps for opening an account.

1. Write the account title after the word Account in the heading. 2. Write the account number after the words Account No. in the heading.

List the five steps of posting from the general journal to the general ledger.

1. Write the date in the Date column of the account. 2. Write the journal page number in the Post. Ref. column of the account. 3. Write the amount in the Debit or Credit column. 4. Calculate and write the new account balance in the Balance Debit or Balance Credit column. 5. Return to the journal and write the account number in the Post. Ref. column of the journal.

Each thing goes up by?

10

All liability starts with

2

Owner's equity starts with

3

Revenue starts with

4

Expenses starts with

5

What is a correcting entry?

A journal entry made to correct an error in the ledger

•Used to summarize in one place all the changes to a single account •A separate form is used for each account

Account Form

Liquitidy

Assets

13. If a debit is posted to an asset account, the amount of the debit will be subtracted from the previous account balance to determine the new account balance. (p. 98)

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14. If a credit is posted to a liability account, the amount of the credit will be subtracted from the previous account balance to determine the new account balance. (p. 99)

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16. Errors discovered before entries are posted must be corrected with a correcting entry. (p. 109)

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Alphabetical

Everything else

18. If the payment of cash for rent was journalized and posted in error as a debit to Miscellaneous Expense instead of Rent Expense, the correcting entry will include a credit to Cash. (p. 109)

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2. The asset division accounts for Delgado Web Services are numbered in the 200s. (p. 94)

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5. The first digit of account numbers for accounts in the owner's equity ledger division is 4. (p. 94)

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6. The last two digits in a 3-digit account number indicate the general ledger division of the account. (p. 94)

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8. Delgado Web Services arranges expense accounts in chronological order in its general ledger. (p. 95)

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9. The two steps for opening an account are writing the account title and recording the balance. (p. 96)

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19. If an error in posting is made but not discovered until additional postings have been made to the account, the correct posting should be made on the next available line in the correct account. (p. 110)

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20. If an incorrect amount is posted in an account, a line should be drawn through the incorrect amount, the correct amount should be written in above the correction, and the account balance should be recalculated. (p. 111)

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21. All corrections for posting errors should be made in a way that leaves no question as to the correct amount. (p. 111)

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3. The cash account for Delgado Web Services is the first asset account and is numbered 110. (p. 94)

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4. The third division of the chart of accounts for Delgado Web Services is the owner's equity division. (p. 94)

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7. When adding a new expense account between accounts numbered 510 and 520, the new account is assigned the account number 515. (p. 95)

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Which two amounts are compared when proving cash?

The cash balance as shown in the checkbook and the cash balance in the Cash account.

When both debit and credit amounts have been posted to an account, what determines whether the balance is a debit or a credit?

Whenever the debits in an account exceed the credits, the balance is a debit. Whenever the credits in an account exceed the debits, the balance is a credit.

The number assigned to an account is called an

account number

The name given to an account is known as an

account title

An incorrect journal entry should be corrected with an additional journal entry, called a 8. An additional journal entry made to correct an incorrect journal entry. (p. 109)

correcting entry

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current is called

file maintenance

A group of accounts is called a

ledger

A __________________ is prepared as the source document describing the correction to be made.

memorandum

1. Describe the two parts of an account number.

•The first digit indicates in which general ledger division the account is located. •The second and third digits indicate the location of the account within that division.