Accounting Reviews

On January 31, Company AA recognized their depreciation on Office Equipment. Asset Liability Expense Revenue

overstated no change understated no change

On January 20, Company AA had the balance on Salaries Expense, $3,000. On January 31, Company AA still owed $2,000 of Salaries to employees. How much is the balance for Salaries Expense after adjustments?

5000

6. What is a "T-Account"?

A T-account is an informal term for a set of financial records that use double-entry bookkeeping The term T-account describes the appearance of the bookkeeping entries

What is a "Debit"?

A debit is an accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet In fundamental accounting, debits are balanced by credits, which operate in the exact opposite direction If a firm takes out a loan to purchase equipment, it would debit assets and credit a liabilities account

Q7: Prepaid insurance is

Asset

Prepaid expense (over/understated,credit,debit)

Asset has been used Asset: overstated Expense: understated Credit: Asset Debit: Expense

AA paid cash $500 for wage.

Asset: Decrease Liability: No change Expense: Increase

Accrued Revenues (CR/DR/OVR/UDR)

Asset: understated Revenue: understated DR Asset CR revenue

Which of the following is NOT an appropriate expression of basic accounting equation?

Assets = Liabilities - Equity

Company AA provided catering service for their customer and received cash from their customer.

Cash- Debit Catering Service Revenue- Credit

What is a "Credit"?

Credit refers to an accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet Additionally, on the company's income statement, a debit reduces net income, while a credit increases net income

AA paid cash $5,000 for utility. Utility Expense Cash Utility Payable Accounts Payable

Debit Credit Not related Not related

AA billed customer $1,000 for catering service Accounts Receivable Cash Catering Service Revenue

Debit No change Credit

Company AAA received an investment $100,000 cash by exchanging extra common stock. (Credit or Debit and account)

Debit - Cash Credit - Common Stock

Company AA paid cash $500 for advertising in the local newspaper. Debit Credit

Debit Advertising Expense Credit Cash

Arnold's Asian Restaurant Company purchased office supplies costing $5,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Debit Office Supplies Expense, $3,500; Credit Office Supplies, $3,500

Company AA purchased an equipment $5,000 on account.

Debit- Equipment Credit- Accounts Payable

Company AA paid cash $1,000 for employee's wages

Debit- Wages Expense Credit- Cash

Company AA performed $900 of service for the company BB but has not billed the club as of the end of the accounting period. What adjusting entry must AA make? Debit Credit

Debit: Accounts Receivable Credit: Service Revenue

Company AA purchased a computer for $4,000 on December 1. It is estimated that annual depreciation on the computer will be $600. If financial statements are to be prepared on December 31, Company AA should make the following adjusting entry:

Debit: Depreciation Expense: $50 Credit: Accumulated Depreciation $50

The adjusting entry for unearned revenues results in

Debit: Liability Credit: Revenue

Company AA paid $6,000 for the car insurance for next 6 months in advance.

Debit: Prepaid Insurance Credit: Cash

On January 20, Company AA had the balance on Salaries Expense, $3,000. On January 31, Company AA still owed $2,000 of Salaries to employees. What would be the adjusting entry?

Debit: Salaries Expense $2,000 Credit: Accrued salaries payable, 2,000

On January 16, Company AA received cash $5,000 from BB, and promised to provide service. On January 31, Company AA provided the half of service to BB. What is adjusting entry?

Debit: Unearned Revenue Credit: Service Revenue 2,500

Debits & Credits

Debits and credits are essential to the double entry system. In accounting, debit refers to an entry on the left side of an account ledger, and credit refers to an entry on the right side of an account ledger To be in balance, the total of debits and credits for a transaction must be equal Debits do not always equate to increases and credits do not always equate to decreases. A debit may increase one account while decreasing another For example, a debit increases asset accounts but decreases liability and equity accounts, which supports the general accounting equation of Assets = Liabilities + Equity

Q12: When rent expense increases, asset should

Decrease

Q4: When Liability decreases, Asset should

Decrease

Q5: When Wages Expense account increases, Asset should

Decrease

AA prepaid $2,000 cash for rent for the next month. Cash Prepaid Rent Rent Expense

Decrease Increase No change

Company AA paid cash $1,000 for wages. Asset? Liability? Equity?

Decrease No change Decrease

What is a "Double Entry"?

Double entry fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity

Company AA purchased an equipment ($3,000). They paid cash $2,000, and promised to pay the remainder within 30 days. Equipment Cash Accounts Payable Notes Payable

E- Increase C- Decrease AP- increase NP- no change

Q1: Salaries expense is

Equity

Q2: Wages Expenses are

Equity

Q8: Insurance expense is

Equity

The adjusting entry for unearned revenues results in a debit to an asset account and a credit to a revenue account

False

The revenue recognition principle dictates that revenue be recognized in the period in which it was received rather than when it was earned

False

When accrual basis accounting is applied, adjusting entries are not necessary.

False

Q13: When an asset decreases, either liability should increase , or equity should increase?

False, Asset decreases, Liability should decrease and equity should decrease

Which one is the common set of standard on how to report economic event?

Generally Accepted Accounting Principles

Q3: When an Asset increases, Liability should

Increase

Q6: When notes payable increases, your cash should

Increase

Q14: When room sales revenue increases, either accounts receivable should

Increase or Cash should Increase

Accrued Expense (CR/DR/OVR/UDR)

Incurred Expenses to be paid Expense: Understated Liability: Understated DR: Expense CR: Liability.

Which of the following reflect the balances of prepaid expenses prior to adjustment (i.e., if no adjustments were made): Asset Revenue Expenses

Overstated No change Understated

Which one is the correct explanation of matching principle?

Relating expenses to revenues

Unearned Revenue (CR/DR/OVR/UDR)

Revenue in Liability have been used Liability: Overused Revenue: Understated CR: Revenue Debit: Liability

General Ledger

The general ledger is the record of a company's entire financial transaction history The left side of the general ledger is for debits: assets, expenses, losses and dividends: while the right side of the general ledger is for credits: liabilities, gains, income, revenues and equity In double-entry accounting, every transaction is recorded as both a debit and a credit. For example, when a business pays the electric bill, the dollar amount is entered in the general ledger as a debit to utilities expense, and a credit to cash

You have paid cash for employees' salaries.

Therefore, you are looking at a decrease in cash (credit), and decrease in equity (credit) because your expense decreases your equity. In other words, you have more expense, but your asset decreased.

You have received a cash from room sales revenue.

Therefore, you are looking at an increase in cash (debit), and increase in equity (credit) because your revenue increases your equity.

You borrowed cash from bank.

Therefore, you are looking at an increase in cash (debit), and increase in liability (credit) because you made more debt to pay in the future

You purchased an equipment by paying cash.

Therefore, you are looking at an increase in equipment (debit), and a decrease in cash (credit).

You received cash by issuing extra common stock.

Therefore, you received more cash (debit), and issued extra common stock (credit), which increases your equity.

A contra-asset account is an account whose balance is deducted from a related asset in the financial statements

True

Depreciation is the allocation of the cost of an asset to expense over its useful life in a rational and systematic manner.

True

Accumulated Depreciation is a(n)

contra asset account

Q9: When advertising expense increases, cash should

decrease

Which of the following increases Stockholders' Equity?

earning revenue by providing service

Q10: When accounts payable increases, Asset should

increase

Q:11: When an asset increases, either liability or equity should

increase

When there is an increase in a liability account, an account in asset should

increase or an account in equity should decrease