Bookkeeping Basics - Scenari

3. item is bought using a credit card

A party store recently bought a new helium tank using a credit card. Is the transaction type? 1. Expense 2. Note payable 3. Credit purchase 4. Debit purchase

3. Depreciation is a form of tax adjustment that a evenly spreads out the cost of an asset over its expected lifespan.

A pet store purchases a piece of equipment at a cost of $10,000. It has an expected useful life of 5 years. The company posts an adjusting entry that debits the depreciation expense account $2,000 to recognize the portion of the equipment cost to be recognized as an expense in the first year. What type of entry is this? 1. Accrual 2. Deferral 3. Tax adjustment

Marked - It is important to clearly mark your adjusting entries with notes that specify the affected accounts and the corresponding amounts. This ensures a clear audit trail for future reference and understanding of the entry.

Adjustments should always be ___________ so that it is clear which accounts were affected by the transaction and by how much. Marked Totaled Credited Debited

Making adjustments - After creating the unadjusted trial balance, necessary adjustments are made to correct or update accounts to accurately reflect current revenue and expenses for the accounting period.

After the unadjusted trial balance is created, the process of updating the information for the accounting period is known as: Making changes Making adjustments Making corrections Making substitutions

3. During Step 4 of the accounting cycle accountants or Certified Public Accountants (CPAs) will prepare adjustments and make recommendations. Bookkeepers will need to record the adjusting entries.

After you run the unadjusted trial balance, you must go through Step 4 of the accounting cycle. During this step you will: 1. Debit accounts payable 2. Adjust the cash accounts 3. Prepare adjusting entries

2. Deferral entries remove transactions that belong to a different time period. As the twelve months of prepaid services have not yet been performed, that money should not yet be recognized as revenue and should be deferred.

A cleaning services business receives an advance payment of $1,200 from a customer for a monthly cleaning service to be provided evenly over the course of one year. The payment is posted to Unearned Revenue. What type of entry is this? 1. Accrual 2. Deferral 3. Tax adjustment

2. because it shows the net profits for a business in a given period

A client asks you to provide a financial statement that shows their profit for the past quarter. Which financial statement would you prepare? 1. Balance sheet 2. Income statement 3. Statement of equity 4. Statement of cash flow

1 & 2. The month of June: because the expense helped generate the revenue on June 5th. It must appear on the June financial statements.

A client sells custom designed- wallpapers. This client hired a designer to work on a job delivered June 5th. The designer invoiced for the work June 15th. The client paid the invoice July 2nd. According to the matching principle when would the business recognize this expense? Select all that apply. 1. June 5th 2. June 30th 3 July 2nd

3. when the goods provided and services are completed.

A client sells custom designed- wallpapers. This client landed another job and the customer paid up front on July 28th. The work shipped August 20th. According to the revenue recognition principle when should this revenue be recognized? 1. When the contract was the customer was signed 2. July 28th, when the check from the customer arrived 3. August 20th, when the work was completed and shipped

1 & 2. The month of June: when the job was completed and when books are closed for the period, monthly, is also acceptable.

A client sells custom-designed wallpapers. The job was completed on June 5, but wasn't paid for it until July 15. Based on the revenue recognition principle, when should the business recognize this revenue? Select all that apply. 1. June 5th 2. June 30th 3. July 15th

1. To reflect work performed and billed—but not paid by the customer yet an accrual adjusting entry is made to align the revenue earned with the accounting period in which the work was performed.

A community care service center provided home care nursing services to a client in December but hasn't yet received payment by the end of the month. To reflect the revenue earned in December, an adjusting entry is made to recognize the revenue. What type of entry is this? 1. Accrual 2. Deferral 3. Tax adjustment

A deferral - A deferral adjusts transactions to the appropriate time period. When money is paid in advance for work that has not yet begun, it is deferred to a future accounting period when the work is performed. This aligns the revenue with the corresponding work and ensures accurate financial reporting.

A customer paid in advance for a service. The work has not yet been started and the accounting period has come to an end. Which type of journal entry will need to be made? A deferral An invoice A credit memo An accrual

The balance sheet reports a business's assets, liabilities, and equity at a specific point in time. Alex can use this to determine the financial position on the day needed.

Alex needs to determine what the business's financial position was on March 31st of last year. Which of the following would be the best report to look at? Balance sheet Correctly selected Income statement Correctly unselected Statement of equity Correctly unselected Statement of cash flows

2 allows for a better analysis and decision-making based on the matching of revenue and expenses, regardless of the timing of cash receipts.

Arley operates a retail store that sells clothing and accessories. She has a physical storefront and also sells her products online. She receives payments from customers at the time of purchase, both in-store and online. She also maintains inventory to fulfill customer orders. Arley asks why you are suggesting the accrual method to keep the books. You answer: 1. The accrual method is a standard practice, so I use it for all businesses. That provides you a bigger picture for your business's financials. 2. Your books are more complicated with the inventory selling online and in person. This method will help you have a bigger picture for your businesses financials. 3 The accrual method is a straightforward way of recording all transactions when they occur making it easier for you to track your business financials.

2. best with inventory

Arley operates a retail store that sells clothing and accessories. She has a physical storefront and also sells her products online. She receives payments from customers at the time of purchase, both in-store and online. She also maintains inventory to fulfill customer orders. Which accounting method would be best for this client? 1. Cash-basis accounting 2. Accrual accounting 3. Modified cash-basis accounting

2. consistency principle

As a bookkeeper for a local bakery, you discover that different branches within the bakery chain are using different methods to record inventory. Recognizing the importance of consistency, you implement a standardized inventory valuation method across all branches, ensuring uniformity in reporting. Which of the following are you using? 1. materiality principle 2. consistency principle 3. monetary unit assumption 4. going concern assumption

1. materiality principle

As the bookkeeper for a small manufacturing business, you encounter a minor discrepancy in the inventory records. Upon investigation you discover that the difference amounts to less to less than $50, immaterial in the business's overall financial statements. You decide not to make an adjusting entry for this minor discrepancy, as it does not significantly impact the financial position or decision making of the stakeholders. Which of the following are you using? 1. materiality principle 2. consistency principle 3. monetary unit assumption 4. going concern assumption

2. Mar 10 - Check - Printing shop

As the bookkeeper for a wedding planning business owned by Marta, you tidy up your client's books at the end of the quarter, March 31. On March 10, Marta made a purchase of $468.67 for new marketing materials from a printing shop using the business checking account. Complete the journal entry: Date: ___ Transaction type: ___ Name: ___ Description: Marketing materials Account Name: Checking 1. Mar 31 - Check - Printing shop 2. Mar 10 - Check - Printing shop 3. Mar 10 - Debit - Printing shop

1 , 2, and 4 - checking balance decreases and thus impacted as it was used to make the purchase and the expense account increases because it is marketing material.

As the bookkeeper for a wedding planning business owned by Marta, you tidy up your client's books at the end of the quarter, March 31. On March 10, Marta made a purchase of $468.67 for new marketing materials from a printing shop using the business checking account. You debit the expense account $468.67 and credit the checking account $468.67. Prior to this, the general ledger showed the checking account balance as $2,305.78 and the expense account balance as $380.00. How did this transaction affect the chart of accounts? (multiple choice) 1. The checking account balance will be impacted 2. the expense account balance will increase 3. The expense account balance will be $468.67 4. The checking account balance will be $1,837.11

3. $1,837.11 - the checking balance decreases by $468.67

As the bookkeeper for a wedding planning business owned by Marta, you tidy up your client's books at the end of the quarter, March 31. On March 10, Marta made a purchase of $468.67 for new marketing materials from a printing shop using the business checking account. You debit the expense account $468.67 and credit the checking account $468.67. Prior to this, the general ledger showed the checking account balance as $2,305.78 and the expense account balance as $380.00. What will the checking account balance be in the GL now? 1. $2,774.45 2. $1,925.78 3. $1,837.11

Yes, Assets = Liabilities + Equity on a balance sheet. The left side balances the right side perfectly.

As you scrutinize the balance sheet for an important client, you notice that the total assets of the business don't match up with the combined value of liabilities and equity. Is there an error? Yes / No

2 Fewer expenses than gross profit helped the business make a profit over the period and, as a result, both net income and equity increased.

Based on the information provided, which statement is false? Income - Total Total Income - $9,809.52 Total Cost of Goods Sold - $405.00 Gross Profit - $9,404.52 Total Expenses - $7,819.31 Net Income - $1,585.21 1. The business had fewer expense costs than gross profit. 2. The net income indicates an increase in equity over the period. 3. The net income indicates a decrease in equity over the period.

2. Accrual basis of accounting and cash basis accounting methods are combined keeping the books fairly simple while allowing tracking of invoices.

Bash is a consulting service provider. He offers specialized consulting services to various clients and sends invoices for his services rendered. He receives payments from clients after the completion of his consulting projects. Bash asks why you are suggesting the modified cash-basis method to keep the books. You answer: 1. Modified cash-basis accounting is the best method for your business because it matches income and expenses in the same time period 2. Modified cache basis accounting allows for more accurate tracking of accounts payable and accounts receivable. 3. Modified cache basis accounting is the preferred method for your business because it is the simplest method.

3. because he needs to track invoices using accounts receivables and it is a small business.

Bash is a consulting service provider. He offers specialized consulting services to various clients and sends invoices for his services rendered. He receives payments from clients after the completion of his consulting projects. Which accounting method would be best for this client? 1. Cash-basis accounting 2. Accrual accounting 3. Modified cash-basis accounting

3. gather the necessary documents and identify the relevant accounts associated with the transaction

Client consultation: "I purchased a new computer for on February 2nd for $2,625.00. I'll be using this computer solely for business purposes at my office, since I already have a separate laptop for personal use." What is the first step you'll take to start the accounting cycle for this transaction? 1. Prepare adjusting entries 2. record and post the transactions 3. collect and analyze transactions

2. asset is debited, cash payment is credited

Client question: "I recently started a photo booth business. I bought $15,000 worth of equipment with cash to get started. I am confused on how to log it into the books. What should I do?" What do you say? 1. The photo booths would be categorized as a liability and would be logged as credit in the books because purchasing equipment increases your business's assets overall. 2. The photo booths would be categorized as an asset and would be logged as debit to assets in the books because purchasing equipment increases your business's assets overall. 3. The photo booth would be categorized as equity and would be logged as debit in the books because purchasing equipment decreases your business's assets overall.

2. Economic entity assumption is used here

Client question: "I'm thinking about purchasing another photo booth using my supplier's financing services. Would a second photo booth also be considered an asset? It will also be used to generate revenue." What do you say? 1. It's totally understandable that you would want to recuperate the money you spent to start your business. Deposit the revenue check into your personal account. 2. Based on the consistency principle, the payment can be deposited into your personal account as long as the account is at the same bank. 3. It is understandable you want to recuperate startup costs, but it is important to separate business from your personal accounts.

1. asset is debited, loan is credited

Client question: "I'm thinking about purchasing another photo booth using my supplier's financing services. Would a second photo booth also be considered an asset? It will also be used to generate revenue." What do you say? 1. While the photo booth is an asset, this transaction will add a liability, since you will be financing the photo booth. 2. This transaction would be a credit, as well, since you are increasing your liability to earn more revenue with an additional asset. 3. This transaction would add to the business's equity because it is a credit.

1, 2 and 3 All are true

Client question: "It seems like I really need to look at all of financial reports to understand what is going on with my business. Is that correct?" What do you say? Select all that apply. 1. Yes, each report shows only a small part of the picture. 2. Yes, each report provides unique insights into different aspects of your business's financial performance and position. 3. Yes, by analyzing all three reports together, you can gain a comprehensive understanding of your business's financial performance.

2. Full disclosure principle is used here

Client question: "What information do I need to disclose to a lender when requesting a loan for my business?" What do you say? 1. You only need to provide the lender essential information about your business. 2. It is important to provide the lander with all relative information. 3. You do not need to provide the lender with any additional information other than what was required on a loan application.

Equity is an owner's stake in the company, the owner's investment and withdrawals since the business was founded.

Craig considers the investment in the business he owns as equity. What does this mean? 1. Equity is a decrease in assets or expenses or an increase in liabilities, owner's equity or revenue. 2. Equity is an increase in assets or expenses or a decrease in liabilities, owner's equity or revenue. 3. Equity is an owner's stake in the company, how much the owner has invested into the business or withdrawn from the business over time.

The statement of cash flows summarizes the amount of cash and cash equivalents entering and leaving a business. It measures how well a business manages its cash position, meaning how well it generates cash to pay its debt obligations and fund its operating expenses.

Drew's electric business sold a piece of equipment this accounting period for cash. You can expect the change in cash position resulting from this transaction to show up on the: Balance sheet Income statement Statement of equity Statement of cash flow

The statement of cash flows summarizes the amount of cash and cash equivalents entering and leaving a business. It measures how well a business manages its cash position, meaning how well it generates cash to pay its debt obligations and fund its operating expenses

Ellis, the owner of a yarn store, wants to know where the majority of cash originated from this past quarter. Which financial statement should you refer to? Balance sheet Income statement Statement of equity Statement of cash flows

The income statement shows a business's revenues and total expenses over a period of time. However, it does not show how much cash a business actually has at the present time.

Everest would like to know how much money was spent on operating expenses for their outdoor supply gear store this past month. Which statement should you look at to find this information? Balance sheet Income statement Statement of equity Statement of cash flows

Adjustments - Before producing any financial statements, adjustments should be made and an adjusted trial balance should be created.

Financial reports should be produced after any ____________ have been made. Adjustments Invoices Gross profits Equities

2. As cash is a very liquid asset with very up-to-date-records (bank statements), there's never a need to estimate how much cash a business has. Land owned by the business is recorded at the original purchase price and does not depreciate, so businesses don't need to recognize any changes on the balance sheet until the land is sold.

How do adjusting entries help make the financial statements more accurate in accrual accounting? 1. Adjusting entries are made to more accurately estimate how much cash the business has at the end of the accounting period. 2. Adjusting entries ensure that revenues and expenses are properly recognized and recorded in the correct accounting period, leading to more accurate financial statements in accrual accounting. 3. Adjusting entries are made to adjust the value of any land the business owns based on the current market value.

2 The balance sheet gives a snapshot of assets, liabilities and equity for a given reporting period, but it doesn't show how they have changed.

How is the balance sheet helpful? 1, It gives a partial picture of where money goes, since it shows all the expenses. However, if money was spent to pay back a liability, then that would reflect on the balance sheet. 2. It gives a snapshot of the assets, liabilities, and equity for a given reporting period, but it doesn't show how they have changed. 3. It helps in understanding how cash is generated and utilized within a business, but does not directly reflect the profitability or financial performance of a business. 4. It evaluates business profitability by analyzing changes in retained earnings, which represent accumulated profits over time. However, it may not provide enough information for external users to assess the business's financial performance and position.

1 The income statement gives a partial picture of where money goes, since it shows all the expenses. However, if money was spent to pay back a liability, then that would reflect on the balance sheet.

How is the income statement helpful? 1. It gives a partial picture of where money goes, since it shows all the expenses. However, if money was spent to pay back a liability, then that would reflect on the balance sheet. 2. It gives a snapshot of the equity for a given reporting period, but it doesn't show how that equity has changed. 3. It helps in understanding how cash is generated and utilized within a business, but does not directly reflect the profitability or financial performance of a business. 4. It evaluates business profitability by analyzing changes in retained earnings, which represent accumulated profits over time. However, it may not provide enough information for external users to assess the business's financial performance and position.

3 The statement of cash flows helps in understanding how cash is generated and utilized within a business, but does not directly reflect the profitability or financial performance of a business.

How is the statement of cash flows helpful? 1. It gives a partial picture of where money goes, since it shows all the expenses. However, if money was spent to pay back a liability, then that would reflect on the balance sheet. 2. It gives a snapshot of the assets, liabilities, and equity for a given reporting period, but it doesn't show how they have changed. 3. It helps in understanding how cash is generated and utilized within a business, but does not directly reflect the profitability or financial performance of a business. 4. It evaluates business profitability by analyzing changes in retained earnings, which represent accumulated profits over time. However, it may not provide enough information for external users to assess the business's financial performance and position.

4 The statement of equity evaluates business profitability by analyzing changes in retained earnings, which represent accumulated profits over time. However, it may not provide enough information for external users to assess the business's financial performance and position.

How is the statement of equity helpful? 1. It gives a partial picture of where money goes, since it shows all the expenses. However, if money was spent to pay back a liability, then that would reflect on the balance sheet. 2. It gives a snapshot of the assets, liabilities, and equity for a given reporting period, but it doesn't show how they have changed. 3. It helps in understanding how cash is generated and utilized within a business, but does not directly reflect the profitability or financial performance of a business. 4. It evaluates business profitability by analyzing changes in retained earnings, which represent accumulated profits over time. However, it may not provide enough information for external users to assess the business's financial performance and position.

1, 2, 3 - Typically an accountant or CPA will identify the need for adjusting entries, but the bookkeeper is most often the one who actually records the journal entry.

It is always the _____________ responsibility to identify and make adjusting journal entries. Select all that apply. 1. Bookkeeper's 2. Accountant's 3. CPA's 4. None of the above

4. investments made by the owners and retained earnings

It is important is it to understand the accounting equation. Which items represent equity in it? 1. financial obligations of the business 2. total revenue generated by the business 3. debts owed to creditors 4. investments made by the owners and retained earnings

Journal entry: 6/6 - Check - Hardware store - Dryer purchase - Checking - blank debit - $2,590 credit GL entry: 6/6 - check - hardware store - equipment - -$2,590 - $3,390 Chart of accounts: Checking - 101 - Assets - $3,390 Equipment - 103 - Assets - #23,390

Michelle, the owner of a laundromat, bought a new dryer from a large hardware store chain on June 6 The cost of the purchase was $2,590.00, and it was paid using the business's checking account. What would the journal entry look like? Date: 6/6 - Transaction Type: Check Name: 1. Dryer supply business / 2. Hardware store / 3. laundromat Description: 1. Dryer supply business / 2. Checking / 3. Dryer purchase Account Name: 1. Checking / 2. Credit Card / 3. Asset Debit: 1. Blank / 2. $2,590 Credit: 1. Blank / 2. $2,590 -------------------------------------- What would the GL entry look like? (Beginning balance: $5,980) Date 6/6 - Transaction type: Check Name: 1. Dryer supply business / 2. Hardware store / 3. laundromat Split: Equipment Amount: 1. $2,590 / 2. -$2,590 / 3. $-467 Balance: 1. $3,390 / 2. $8,570 / 3. $5,980 -------------------------------------- Before the hardware store transaction, the checking account balance was $5,980.00 and the equipment asset balance was $20,800.00. What would the Chart of Accounts look like? Account Name: Checking Account Number: 101 Account Category: Assets Bank Balance: 1. $8,570 / 2. $3,390 / 3. $5,980 Account Name: Equipment Account Number: 103 Account Category: Assets Bank Balance: 1. $18,210 / 2. $20,800 / 3. $23,390

Debit PP&E $2,599 Credit Cash $2,599

On August 23, Lou's paving business purchased a new handheld compactor. Lou paid $2,599 in cash for this piece of equipment. How would you record this transaction? Debit or Credit PP&E $2,599 Debit or Credit Cash $2,599

Debit PP&E $32,000 Credit Cash $2,000 Credit Loan Payable $30,000

On July 10, Lou's paving business purchased a new truck for the business. Lou paid a $2,000 cash deposit and obtained a loan for the remaining $30,000. How would you record this transaction? Debit or Credit PP&E for $____ Debit or Credit Cash for $____ Debit or Credit Loan Payable for $____

Debit Cash $280 Credit Revenue $280

On May 8, Lou's paving business was paid $280 by a housing subdivision for paving their parking lot. How would you record this transaction? Debit or Credit Revenue $280 Debit or Credit Cash $280

1. Once you have completed all adjusting entries, you will complete Step 5 of the accounting cycle, preparing the adjusted trial balance which is a listing of the ending balances in all accounts after adjusting entries have been prepared.

Once you have completed all adjusting entries, you will complete Step 5 of the accounting cycle, preparing the: 1. Adjusted trial balance 2. Financial statements 3. Unadjusted balance

3 Both the general ledger and the transaction journal list out individual transactions.

Other than the transaction journal, what is another place that we can view the individual transactions made? 1. Statement of cash flows 2. Income statement 3. General ledger

Both are shown as credits on Trial balance: Deferred revenue credit $500 (liability) Sales revenue credit $3,900 (less the $500 equity)

Record the adjusting entry to reflect the deferral of the revenue by decreasing gift card revenue and increasing deferred revenue by $500. (Unadjusted Trial balance showed sales revenue as a credit for $4,400) Adjusted Trial Balance: Account Name - Debit $amount or Credit $amount Checking - Debit $3,905 Savings - Debit $533 AP - Credit $203 Deferred Revenue - Credit $______ Sales Revenue - Credit $______ COGS - Debit $165 TOTAL - Debit $4,603 TOTAL - Credit $4,603

A business's balance sheet reports its assets, liabilities, and owner's equity on a particular date. The computers are business assets and therefore will be reflected there.

Remy bought 10 computers from an online computer wholesaler for their company. Which financial statement will reflect the book value of these assets? Balance sheet Income statement Statement of equity Statement of cash flows

The statement of equity is used to show the change to the owner's equity in a business during the given reporting period.

Ridley owns a tractor supply business and called to ask how much they had taken out of the business in draws this year and how much retained earnings remains in the business. Which financial statement should you refer to for this information? Balance sheet Income statements Statement of equity Statement of cash flow

The income statement shows a business's revenues and total expenses, including non-cash accounting over a period of time. However, it does not show how much cash a business has at the present time.

Taylor would like to know how much their bicycle shop made this past month. Which financial statement should you look to for this information? Balance sheet Income statement Statement of equity Statement of cash flows

Sales revenue debit $500 (decrease revenue) Deferred/Unearned revenue credit $500 (liability increase - cash collected in advance of delivery of service/goods)

The accountant provided you with the following journal entry to make on behalf of the client. Record the adjusting entry to reflect the deferral of the revenue by decreasing gift card revenue and increasing deferred revenue by $500. Sales Revenue Debit or Credit $500 Deferred Revenue Debit or Credit $500

4. going concern assumption (can the business essentially continue operating and fulfil its obligations)

The business's quarterly financial reports consistently meet or surpass the previous year's sales performance. This consistent and strong sales performance show the business has maintained its operations and financial stability at the same level as last year. Which of the following is this an example of? 1. materiality principle 2. consistency principle 3. monetary unit assumption 4. going concern assumption

This type of request can be tough to navigate. You want to make your client happy, but you don't want to do anything illegal or unethical. It's best to be honest with the dentist and explain that your oath as a bookkeeper prohibits you from accommodating the request. If your client pushes back, chances are it's not the last time he will make a request like this. You have to ask yourself if this is the type of client you want to have.

The dentist you work for had a busier than normal month. He asks you to keep some of the payments received off the books and to not show the bump in income. What would you do? 1. Do as he says? 2. Tell him it's illegal and quit your job 3. Explain that your oath as a bookkeeper prohibits you from accommodating the request.

The adjusted trial balance - shows the total account balances after adjustments have been made.

The document that shows all of the account balances after adjustments have been made is known as: The unadjusted trial balance The general journal The general ledger The adjusted trial balance

The statement of equity is used to show the change to the owner's equity in a company during the given reporting period.

The owner of a coffee shop invested $10,000 into their business this year. You should expect the accumulated amount of the investment in the business to be shown on the: Balance sheet Income statement Statement of equity Statement of cash flows

2. it combines elements of cash and accrual basis accounting methods.

What is a characteristic of the modified cash basis accounting method? 1. It recognizes all transaction on the cash basis. 2. It recognizes revenue when payment is received but expenses are incurred. 3. It follows the accrual accounting principles strictly. 4. It is used exclusively by large corporations.

A tax adjustment - Depreciation is a common tax adjustment and is determined by accountants/CPAs. It is typically added once a year.

What is the depreciation of a vehicle entered as? A decrease in expense A reduction in revenue A missing transaction A tax adjustment

4. refers to the revenue recognition and matching principles

What is the primary characteristic of the accrual counting method? 1. Recognizing the revenues and expenses when cash is received or paid. 2. Reporting financial transaction only when they occur in physical form. 3. Identifying income and expenses based on the physical movement of goods. 4. Recording revenues and expenses when work is performed, regardless of cash flow.

3. by recording equal and opposite debits and credits for each transaction

What is the purpose of double-entry bookkeeping? 1. To track revenue and expenses 2. To calculate net income 3. To ensure accuracy and maintain the balance in accounts 4. To determine tax liability

4 All of the above The balance sheet to verify there is sufficient cash available for Craig to take the draw. The statement of cash flows to be sure there are sufficient funds to cover upcoming obligations. The income statement will provide insights into whether there should be concerns about the ongoing profitability of the business.

What other financial statement should you check before answering Craig's question about the $2,000 draw? 1. Income statement 2. Balance sheet 3. Statement of cash flows 4. All of the above

2 and 4 All of these are possible effects of not depreciating an asset over it's useful life. 3 would have to state overpay taxes since the expense would not be taken

What would be an effect of not depreciating a significant tangible or physical asset over its useful life of the asset? Select all that apply. 1. Failing to depreciate the asset would mean its value would remain unchanged on the balance sheet, potentially leading to an overstatement of total assets. 2. By not recognizing depreciation, the financial statements may not reflect the true profitability and financial performance of the business. 3. Neglecting to account for depreciation may result in an inaccurate tax liability calculation, potentially leading to underpayment of taxes or non-compliance with tax regulations. 4. By not recognizing depreciation, the business may not be properly accounting for the wear and tear or obsolescence of the asset. This can lead to poor planning for the replacement or upgrade of the asset in the future.

1 The sales revenue of mulch increases revenue, resulting in credits to revenue. A credit is a decrease in assets or expenses or an increase in liabilities, owner's equity or revenue.

When Craig sells mulch, the sales revenue appears as credit on his business's books. What does this mean? 1. A credit is a decrease in assets or expenses or an increase in liabilities, owner's equity or revenue. 2. A credit is an increase in assets or expenses or a decrease in liabilities, owner's equity or revenue. 3. A credit is an owner's stake in the company, how much she has invested or withdrawn.

2 The purchase of the equipment increases assets, which results in a debit to assets. A debit is an increase in assets or expenses or a decrease in liabilities, owner's equity or revenue.

When Craig, the owner of a landscaping business, buys equipment, the purchase appears as a debit on his business's balance sheet. What does this mean? 1. A debit is a decrease in assets or expenses or an increase in liabilities, owner's equity or revenue. 2. A debit is an increase in assets or expenses or a decrease in liabilities, owner's equity or revenue. 3. A debit is an owner's stake in the company, how much she has invested or withdrawn.

2. because it shows the totals for the ledger accounts after the adjustments are made.

When creating financial statement for your client, always use the following: 1. Unadjusted trial balance 2. Adjusted trial balance 3. Balance sheet

2. Debit - salary expense is debited (increase) and cash is credited (decrease asset)

When recording the payment of salaries to employees, which side of the salary expense ledger should the transaction be recorded? 1. Credit 2. Debit

1. Credit - accounts payable is a liability (money owed)

When recording the purchase of office supplies purchased on account. which side of the ledger should the accounts payable be recorded? 1. Credit 2. Debit

3. Both sides of the t-chart of the trial balance should be in balance, with total assets (debits) equaling total liabilities minus equity (credits).

When running the unadjusted trial balance, which should always be true? 1. Total equity (debits) will always be less than total liabilities (credits). 2. Total assets (debits) will always be equal to total liabilities (credits). 3. Total assets (debits) and the total liabilities minus equity (credits) will be equal. 4. All of the above.

1 We're looking at the Balance sheet

Which financial statement are you looking at? Total Current Assets - $19,775.61 Total Fixed Assets - $$3,297.33 Total Assets - $23,072.94 Total Liabilities - $7,283.47 Total Equity - $15,789.47 Total Liabilities and Equity - $23,072.94 1. Balance sheet 2. Income statement 3. Statement of cash flows 4. Statement of equity

3 Statement of Cash Flows

Which financial statement are you looking at? 1. Balance sheet 2. Income statement 3. Statement of cash flows 4. Statement of equity Net cash provided by operating activities - $13,587.00 Net cash provided by investing activities - $10,280.00 Net cash provided by financing activities - $5,000.00 Net cash increase for the period - $7,642.48 Cash at the beginning of the period - $15,389.50 Cash at the end of the period - $23,031.98

4 The statement of equity

Which financial statement are you looking at? 1. Balance sheet 2. Income statement 3. Statement of cash flows 4. Statement of equity Owner Investments - $32,750.00 Owner Draws - $3,500.00 Total Owner Investments - $29,250.00 Retained Earnings - $7,687.48 Net Income - $19,789.47 Total Retained Earnings - $27,476.95 Total Equity - $56,726.95

2. GL shows the balance of each account, not the Journal

Which of the following applies to general ledger and chart of accounts but not to a transaction journal? 1. They show account names 2. They show account balances 3. Every transaction is listed chronologically, no matter which account it came from

3. buildings and equipment

Which of the following are assets on the balance sheet? 1. money owed to suppliers 2. investments made by the owners 3. buildings and equipment 4. loans taken by the business

1 All of these are true with one exception: The statement of cash flows actually categorizes cash flows into three main categories: operating activities investing activities financing activities.

Which of the following is FALSE about the statement of cash flows? 1. It categorizes cash flows into three main categories: accounts payable, accounts receivable, and cash on hand. 2. It shows the cash generated or used by the core operations of the business. 3. It provides information about the cash inflows and outflows of a business during a specific period. 4. It helps assess the liquidity and financial health of the business.

3 Sources of business revenue

Which of the following is NOT a component of the statement of equity? 1. Total owner investments 2. Retained earnings 3. Sources of business revenue 4. Owner draws 5. Net income

3 This is false. A balance sheet does provide valuable information, but it should be looked at alongside the income statement and statement of cash flows, to provide the fullest picture possible.

Which of the following statements about a balance sheet is FALSE? 1. Total assets should always be the same as total liabilities plus equity. 2. The balance sheet provides a snapshot of the business at a particular point in time. 3. The balance sheet gives the most complete picture possible of a business's financial position. 4. The balance sheet is structured in the same manner as the accounting equation: assets = liabilities + shareholder equity

2. Straight forward approach to financial reporting

Which statement accurately describes cash basis accounting? 1. Revenues and expenses are recorded when earned or incurred, regardless of when cash is received or paid. 2. Revenues and expenses are recognized on financial reports when cash is received or paid, rather than when work is performed. 3. Revenues and expenses are reported based on the market value of goods and services exchanged. 4. Revenues and expenses are recognized on financial reports when work is performed, regardless of when cash is received or paid.

2. Record to machinery & equipment and a credit card accounts. At the end of the accounting cycle, post the summarized entries for tangible assets and the credit card debt to the GL

You have the receipt for the computer purchase and the credit card statement showing the transaction. After reviewing the client's chart of accounts, you determine that this purchase will impact the tangible assets/machinery and equipment account category. Additionally, since it's a long-term asset, it will be subject to depreciation over time. What is the next step you must take with regards to this transaction? 1. Prepare adjusting entries 2. Record and post the transactions 3. Prepare unadjusted trial balance

3. monetary unit assumption (one currency across the board, ignore inflation or currency fluctuations)

You're a bookkeeper for a retail store, and your task is to record daily sales transactions. The store accepts currency payments, including USD, EUR, and GBP. However, the financial records are only showing USD. Which of the following is being used? 1. materiality principle 2. consistency principle 3. monetary unit assumption 4. going concern assumption

1. debit expense; credit checking

You're looking at the transaction journal for a nail salon business. Imagine today is Oct 2. You should see one entry made for today: a bulk nail polish purchase of $290.55 from a checking account, categorized as an expense. As the bookkeeper, would you: 1. debit expense account; credit checking account 2. debit both 3. credit both 4. credit expense; debit checking account

1. Economic entity assumption

You're the bookkeeper for a small coffee shop. You found out your client does not have a separate business account for the shop. You inform them it's a best practice to separate business and personal accounts. Which accounting principle are you using? 1. economic entity assumption 2. reliability assumption 3. full disclosure principle 4. conservatism assumption

4. conservatism assumption (exclude the potential gain because it is uncertain while a potential loss would be shown)

You're the bookkeeper for a small construction business. The business has bid on a large contract, but the results from the bid are still a month away. This is the largest contract with potential gains. Which accounting principle are you using? 1. economic entity assumption 2. reliability assumption 3. full disclosure principle 4. conservatism assumption

2. reliability assumption

Your client has bought a new coffee machine for the shop and paid cash. They cannot locate the receipt and have no record of the purchase. You inform them that since there is no supporting documentation for the purchase, it cannot be recorded. Which accounting principle are you using? 1. economic entity assumption 2. reliability assumption 3. full disclosure principle 4. conservatism assumption

2 income statement

Your client is seeking clarity on the relevance of different financial statements for specific tasks. Client question: "I don't really understand which financial statement I am looking at and how each statement is helpful. Can you help me?" Look at the portions of the financial statements below and answer the questions that follow. Total Revenue - $12,758.52 Total Cost of Goods Sold - $1809.00 Gross Profit - $10,949.52 Total Expenses - $6,413.38 Net Income - $4,536.14 Which financial statement are you looking at? 1. Balance sheet 2. Income statement 3. Statement of cash flows 4. Statement of equity

3. Assets and Revenue

Your client owns a business mowing lawns. They completed a mow services for a mini mall and billed the property manager for the service. Which balances will change? 1. Liabilities and Expenses 2. Liabilities and Owner's Equity 3. Assets and Revenue

An accrual - An accrual concerns future payments or expenses. When a product or service has been delivered to a customer and the customer has yet to pay, the revenue has been earned and should be reflected on the books. This is accomplished through an accrual adjusting entry.

Your client provided a service to a customer and they have yet to pay. The accounting period is ending today. Which type of journal entry will need to be made? A deferral An accrual A missing transaction A tax adjustment

3. It has to make sense to the business

Your client says they aren't sure how often they should prepare financial reports and want to know their options. Based on the periodicity assumption, you advise them they can run their accounting cycle: 1. Annually 2. Quarterly 3. Within certain designated periods of time 4. Monthly monthly

1. Ethics key component: Confidentiality guides us here

Your client, Maxine, owns two thriving coffee shops. She has plans to open a third shop sometime in the next year. You've met and are friendly with her whole family. You run into her brother, Marty, and he casually brings up the third shop. Marty says, "I'm so proud of Max. I can't believe how well her shops are doing. Is she really able to fund a new shop so soon?" What do you say? 1. She's a great boss, but you understand that I can't divulge any information about the business. 2. I know! I'm so impressed with her. She's so smart and I think a new shop is for sure going to happen! 3. I'm sorry, but I'm not allowed to talk to you.

Checking $3,905 Total $4,603

Your client, a knitting supply store, has reached the end of their accounting period and needs your help preparing the unadjusted trial balance, recording the adjusting entries, and preparing the adjusted trial balance. Client question : "We sold $500 worth of gift cards this month and need them to be properly recorded in the books before we run our financial reports. The accountant needs our unadjusted trial balance Tuesday to prepare the adjusting entries." Trial Balance: Account Name - Debit $amount or Credit $amount Checking - Debit $___________ Savings - Debit $533 AP - Credit $203 Sales Revenue - Credit $4,400 COGS - Debit $165 TOTAL - Debit $_______ TOTAL - Credit $4,603

3. full disclosure principle (the information is relevant to the lender/investor and will be disclosed on the financial statements or accompanying notes)

Youre a bookkeeper for a tech startup, and the CEO informs you the business is in advanced negotiations to secure a significant investment from a venture capital firm. This investment will have a substantial impact on the business's financial position and future prospects. There is a lawsuit pending that hasn't been settle. Which accounting principle are you using? 1. economic entity assumption 2. reliability assumption 3. full disclosure principle 4. conservatism assumption

True. Double-entry accounting requires it

debit = credit is a cardinal rule of accounting. True or False