Accounting Midterm

When the income statement debit column total is greater than the Income Statement Credit column total on a work sheet, the business has a net income. True or False

False

Cash is increased with a debit True or False

True

For a service business, the revenue reported on an income statement is often compared to two items: total expenses and net income. True or False

True

The most common type of withdrawal by an owner from a business is the withdrawal of cash True or False

True

Two financial statements are prepared from the information on the work sheet. True or False

True

When an owner withdraws cash from the business, the transaction affects both assets and owners equity. True or False

True

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account. True or False

True

Withdrawals are assets taken out of a business for the owner's personal use. True or False

True

the length of time for which a business summarizes financial information and reports it financial performance

fiscal period

a fiscal period consisting of 12 consecutive months

fiscal year

adjusting entries must be posted to the general ledger accounts True or False

true

a columnar accounting form used to summarize the general ledger information needed to prepare financial statements

work sheet

The date on a monthly income statement prepared on April 30 is written as a) April 30, 20-- b) For Month Ended April 30, 20-- c) 20--, April 30. d) non of these

For Month Ended April 30, 20--

The normal balance side of a liability account is the a) debit side b) decrease side c) left side d) credit side

Credit Side

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

True

An expense is a decrease in owner's equity resulting from the operation of a business. True and False

True

Asset accounts decrease on the credit side True or False

True

If an amount is written in an incorrect column of a worksheet, the error should be erased and the amount should be written in the correct column

True

Net income on a work sheet is calculated by subtracting the Income Statement Debit column from the Income Statement Credit column True or False

True

The amount of the supplies used during a fiscal period is an expense. True or False

True

a financial statement that reports the value of a business's assets, liabilities, and owner's equity on a specific date

balance sheet

Information needed to repair a balance sheet's Assets section is obtained from a work sheet's Account Title column and a) income statement debit column b) balance sheet debit column c) income statement credit column

balance sheet debit column

On each journal page, the date is written a) for each entry b) only for the first entry c) on the first line of each column d) none of these

for each entry

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

income statement

A form describing the goods or services sold, the quantity, the price and the terms of the sale

invoice

The amount of net income calculated on an income statement is correct if a) it is the same as the net income shown on the worksheet b) debits equal credits c) it is the same as the net income shown on the balance sheet d) none of these

it is the same as the net income shown on the worksheet

A form for recording transactions in chronological order

journal

recording transactions in a journal

journalizing

the difference between total revenue and total expenses when total revenue is greater

net income

The formula for calculating the net income ratio is a) net income divided by total sales b) total sales divided by total expenses c) total sales minus total expenses divided by net income d) none of these

net income divided by total sales

the difference between total revenue and total expenses when total expenses are greater

net loss

When preparing a balance sheet, the amount owner's capital is calculated using amounts obtained from a) the general ledger b) the income statement c) the journal d) none of these

none of these

After the closing entries are posted, the owner's capital account balance should be the same as shown a) on the balance sheet for the fiscal period b) in the worksheet's balance she credit column c) in the work sheet's income statement debit column d) in the work sheet's balance sheet debit column

on the balance sheet for the fiscal period

Accounts used to accumulate information from one fiscal period to the next are a) revenue accounts b) temporary accounts c) expense accounts d) permanent accounts

permanent accounts

cash pad for an expense in one fiscal period that is not used until a later period

prepaid expense

Determining that the amount of cash agrees with the accounting records

proving cash

An invoice used as a source document for recording a sale on account

sales invoice

When cash is paid for supplies, a) supplies is increased b) supplies is credited c) the balance of Supplies is decreased d) none of these

supplies is increased

Income Summary is a(n) a) asset account b) temporary account c) permanent account d) liability account

temporary account

A single line ruled across the journal's amount columns indicates a) the date is the last day of the month b) the totals have been verified as correct c) that columns are to be totaled d) none of these

that columns are to be totaled

When the total expenses are greater than the total revenue a) the income summary account has a credit balance b) the income summary account has a debit balance c) debit equals credit d) none of these

the Income Summary account has a debit balance

a proof of the equality of debits and credits in a general ledger

trial balance

When cash is received from sales, the change in the owner's equity is usually recorded a) on the debit side b) as interest revenue c) in a separate revenue account d) directly in the owner's capital account

in a separate revenue account

When cash is received on account, the amount is recorded in the a) sales credit column and cash debit column b) accounts receivable credit column and cash debit column c) general debit column and accounts payable debit column d) general debit column and cash credit column

Accounts Receivable Credit column and Cash Debit column

When $1500 cash is received on account, a) sales is increased with a Credit and Cash is increased with a debit b) accounts receivable is decreased with a credit and cash is increased with a debit c) accounts receivable is decreased with a debit and cash is increased with a debit d) accounts receivable is increased with a debit and cash is increased with a credit

Accounts receivable is decreased with a credit and cash is increased with a debit

If an amount is recorded on the side of a T account opposite the normal balance side, the account balance is a) increased b) unaffected c) correct d) decreased

Decreased

When a business pays cash on account, a liability account is a) increased by a debit b) decreased by a debit c) decreased by a credit d) increased by a credit

Decreased by a debit

Business ethics are the principles of right and wrong that guide an individual in making decisions. True or False

False

Each asset account has a normal credit balance True or False

False

Only accounts with a balance are listed in the Trial Balance columns of a worksheet

False

The accounting concept Consistent Reporting is being applied when a word processing service business reports revenue per page one year and revenue per hour the next year True or False

False

Information needed to prepare an income statement's Expense section is obtained from a work sheet's Account Title column and a) income statement debit column b) balance sheet debit column c) balance sheet credit column d) income statement credit column

Income statement debit column

The last step in the accounting cycle is to a) record transactions in a journal b) journalize and post closing entries c) prepare a post-closing trial balance d) prepare a work sheet

Prepare a post-closing trial balance

An income statement reports a business's financial a) condition over a specific period of time b) condition on a specific date c) progress on a specific date d) progress over a specific period of time

Progress over a specific period of time

Reporting income when it is earned and expense when they are incurred

accrual basis of accounting

Assuring that financial statements contain all information necessary to understand a business's financial condition is an application of the accounting concept a) adequate disclosure b) objective evidence c) accounting period cycle d) going concern

adequate disclosure

Journal entries recorded to update general ledger accounts at the end of a fiscal period

adjusting entries

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

adjustments

If an error is recorded in a journal entry, a) cancel the error by drawing a neat line through the error b) correct the entry by writing the correct item above the cancelled item c) do not erase the incorrect item d) all of these

all of these

The accounts that appear on the post-closing trial balance are a) assets, liabilities, and owner's capital b) all accounts in the chart of accounts c) all temporary accounts d) revenue, expenses and owner's drawing

assets, liabilities and owner's capital

Reporting income when the cash is received and expenses when the cash is paid

cash basis of accounting

A business form ordering a bank to pay cash from a bank account.

check

Increases in a revenue account are shown on a T account's a) debit side b) left side c) credit side d) none of these

credit side

The entry to record payment of cash to the owner as a withdrawal of equity is a) debit Cash, credit Drawing b) debit Drawing, credit Cash c) debit Cash, credit Accounts Payable d) none of these

debit Drawing, credit Cash

The left side of a T account is the a) debit side b) normal balance side c) equity side d) credit side

debit side

The normal balance side of any revenue account is the a) debit side b) credit side c) left side d) none of these

debit side

Information for each transaction recorded in a journal

entry