Accounting Fundamentals Review

An example of an asset account is

A. Cleaning Income. *B. Supplies/Office. Supplies/Office is an asset account. It is something that has value to it that the business owns. C. Bill Johnson, Drawing. D. Rent Expense. Lesson 1

The pages in the Accounts Receivable Ledger are arranged in

Alphabetical order. lesson 5

For the transaction 'paid cash for supplies,' the debit would be to

B The Supplies account. You would debit the supplies account as you are increasing the amount of supplies the business owns. Lesson 2

Why is Accounts Receivable considered an asset account?

Because it is money that the business will receive at a later date. lesson 5

Why are there separate accounts for the amount of a sale and the amount of the tax for that sale?

Because the business has to send in the tax to the proper government agency and cannot consider the amount collected for tax as its money. lesson 5

What accounts are affected and how when a payment on account is received from a customer.

Cash Debit and Accounts Receivable Credit. lesson 5

Why must adjustments be made to the Supplies, Prepaid Insurance, and Merchandise Inventory accounts?

So these accounts will have up-do-date and accurate balances with which to begin the new year, and all the expenses incurred during the year will be considered in determining the net income or net loss of the business. Adjustments are made to these four accounts so that these accounts have the correct balances to begin the new year and also so that all the expenses incurred during the year are considered in figuring a net income or net loss. lesson 9

An example of a mandatory deduction might be

Social Security tax. lesson 6

What is a vendor?

Someone from whom you purchase merchandise and/or supplies. lesson 4

What two classifications of accounts go in the Income Statement section of the worksheet (columns 5 and 6)?

Revenue and expenses. lesson 9

When a customer charges merchandise he purchases, what accounts are affected and how?

Sales Credit, Sales Tax Payable Credit, and Accounts Receivable debit. lesson 5

The account Income Summary is used to

Summarize all the closing entries for revenue, cost, and expenses. Income Summary summarizes revenue, cost, and expense account balances until they are transferred to other General Ledger accounts. lesson 12

What accounts would be affected and how by a transaction to purchase supplies for cash?

Supplies Debit and Cash Credit. Lesson 2

What do the double lines under the column totals in the Journal show?

That the debits and credits are equal. lesson 8

An example of a restrictive endorsement would be

'For Deposit Only to Account 4320.' This is an example of a restrictive endorsement because it restricts or limits what can be done with the check. It can only be deposited into the account with that account number. lesson 7

An example of a blank endorsement would be

'Mary Doe.' A blank endorsement is simply the payee's name. lesson 7

If two partners in a business share the net income equally, this means each partner receives

50% of the net income. lesson 10

An example of an account classification is

A Supplies Expense. B Advertising Expense. *C Liabilities. Liabilities is a classification of accounts. Under this classification would be account titles representing to whom the business owes money. D Cash. Lesson 1

For the transaction 'paid cash for insurance coverage,' the credit would be to

A The Cash account. Whenever cash is paid for any reason, the Cash account is always credited. Lesson 2

The General Ledger is a book of

A Transactions. B Forms. +C Accounts. The General Ledger is indeed a book of accounts and has an account for each account title in the Chart of Accounts for a business. D Dates. Lesson 2

What is meant by an employee who is paid a salary as opposed to an hourly rate?

This employee receives the same pay every pay period, regardless of the hours he/she worked. lesson 6

What would be the advantage of preparing a worksheet more often than once a year?

To keep closer watch on the profit or loss condition of the business. lesson 9

What is the main purpose of preparing a worksheet?

To show that the business made a net income or a net loss. lesson 9

When you post from the journal to the General Ledger, you

Transfer transaction information from the journal to the ledger accounts. lesson 3

What might a business owner do if he is showing a loss for the year?

Try to lower expenses and possibly raise his prices. lesson 9

Gross pay is

Your pay before deductions. lesson 6

An outstanding check is

a check you have written but has not yet cleared the bank. An outstanding check is a check you have written, but the bank has not yet paid or subtracted from your account. Lesson 7

An outstanding deposit is

a deposit that is entered in your checkbook but is not yet showing on your bank statement. An outstanding deposit is one which you have entered into your checking account but which the bank is not yet showing on its records . lesson 7

The accounts in the Accounts Payable Ledger are arranged

alphabetically. lesson 4

Adjusting entries are necessary to

bring certain general ledger accounts up-to-date for the new fiscal period. lesson 11

Accounts in the General Ledger are arranged in what order?

by account classification Lesson 3

The balance in the Cash account in the General Ledger is

carried into the next fiscal period. lesson 12

Transactions in a journal are entered by

chronological order. lesson 3

Closing entries are necessary to

close out certain accounts and prepare them for the new fiscal period. lesson 12

The two classifications of accounts that are arranged alphabetically within their respective classifications are

liabilities and expenses. lesson 3

The main purpose of the Balance Sheet is to

show that the assets = liabilities + owners' equity lesson 10

The Sales account in the General Ledger is closed out

so the account will have no balance and will be ready for the next fiscal period. lesson 12

The Prepaid Insurance account is decreased with an adjusting entry to show

some of the time covered by the premiums has elapsed. lesson 11

The drawing account balance is

subtracted from the beginning capital balance. lesson 10

A debit to Merchandise Inventory in the adjustment column of the worksheet indicates

that the balance will increase. lesson 11

A Post Closing Trial Balance shows

that the balances remaining in the General Ledger are equal. lesson 12

A Schedule of Accounts Payable shows

the vendors that the business owes money to and how much money is owed. lesson 8

When you make a payment on account to a vendor, what does this do to the account balance?

It decreases the balance. lesson 4

What classification of account balances are shown on a Balance Sheet ?

Assets, liabilities, and owners' equity. lesson 10

If an employee is claiming four allowances and this is the maximum he is allowed , this means

He is allowed to claim four allowances as determined by his W-4 form and worksheet. lesson 6

The usual method of figuring an employee's hourly overtime rate of pay is

His regular hourly rate times 1 1/2. lesson 6

What information is contained in a Schedule of Accounts Receivable?

How much money is owed to your business, listed by customer. A Schedule of Accounts Receivable is a listing of all the customers who owe your business money, showing how much they each owe with a total due at the bottom of the form. lesson 8

If you enter a debit transaction into an account with a debit balance it will

Increase the debit balance. lesson 3

If you enter a credit entry in a liability account, what does that do to the balance?

Increases it A credit entry into a liability account will increase the liability. For example if you owe a vendor $500.00 and make a $100.00 credit entry into that account, the credit balance or amount owed is then $600.00. Lesson 4

What do the account numbers under the column totals in the Journal mean?

That the total has been posted to that account in the General Ledger. The numbers under the column totals in the Journal show that the total was posted to that particular account number in the General Ledger. lesson 8

Completing a Balance Sheet report proves

The Balance Sheet proves the equality of debit and credit entries in the General Ledger accounts. Lesson 2

The credit adjustment entry to office supplies shows

The amount of office supplies used during the year. lesson 11

After posting all the transactions in the Journal, what must be true about the General Ledger accounts?

The debits must equal the credits. lesson 8

When you purchase merchandise on account from a vendor, what do you put in the Account Title column of the Journal?

The vendor's name. lesson 4

A deposit ticket is used to

deposit money into a checking or savings account at a bank. A deposit ticket is used to deposit money into a bank. One should be made out for each and every deposit. lesson 7

Income Summary is one account in the general ledger that will zero out when all of the end-of-year work is done because

this account is a 'holding' account for amounts that will be transferred to other general ledger accounts. lesson 11

The Owner's Equity Statement's main purpose is to

update the capital account as of the end of the fiscal period. lesson 10