Business Accounting Final
When assets are recorded at original value, they are recorded under the
historical cost principle
Source documents provide objective, verifiable evidence of business transactions.
True
Source documents provide the input for the accounting process
True
If the book value of an asset is $12,500 and the accumulated depreciation is $3,500, the original cost of the asset is
$16,000
When posting an adjusting entry to the general ledger, write
"adjusting" in the item column.
An asset cost $33,000. It has an expected useful life of 5 years and an expected salvage value of $3,000. Depreciation expense for the first year of the asset's life using the straight-line method is
$6,000
Owner's equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner's equity at the end of the period is
$75,000
A typical account number for a contra-account would be
185.1
The third pair of columns on a 10-column work sheet prepared at the end of the period would be the
Adjusted Trial Balance columns
The second pair of columns on a 10-column work sheet prepared at the end of the period would be the
Adjustments columns
The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the
Balance sheet columns
Posting from the journal to the ledger does NOT involve which of the following steps?
Enter the description of the entry
A computer workstation cost $35,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $5,000 per year.
False
A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.
False
A list of all the accounts used by a business is called a trial balance.
False
When the trial balance indicated that the ledger is in balance, you can assume there are no errors in the ledger.
False
purchase invoices received from suppliers provide information about cash payments
False
the cash basis of accounting and the accrual basis of accounting result in the same measure of net income
False
The Item column in the general ledger is used to describe special entries not including the following entries
Forwarding entries
The balance sheet reports
Liabilities
Purchase invoices received from suppliers provide information about
Purchases of goods or services
The 10-column work sheet is used to facilitate the preparation of the income statement, the statement of owner's equity, and the balance sheet.
True
The first pair of columns on a 10-column work sheet would be the
Trial balance columns
A complete set of all the accounts used by a business is known as the general ledger.
True
A separate line in the two-column journal should be used for each account title.
True
Depreciation matches the cost of an asset against the revenues it will produce.
True
Each entry in the journal affects two or more accounts.
True
The Income Statement columns of a work sheet include all revenue and expense accounts
True
If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n)
accrual basis of accounting
Corrections in accounts should NOT be
covered completely
Net income is shown on the work sheet as a
debit in the income statement column
The cost of an asset that is subject to depreciation is called
depreciable cost
Matching the cost of an asset with the revenue it is expected to produce is called
depreciation
The Posting Reference column of the journal provides a cross-reference between the
journal and ledger
If a business records revenue when it is received and records the purchase of a building as an asset and makes adjustments to allocate the cost of the building over many accounting periods, the business accounting system is a (n)
modified cash basis of accounting
The accounts in the chart of accounts are arranged in
numerical order
The matching principle in accounting requires the matching of
revenue earned with the expenses incurred to produce the revenue
Copies of sales tickets or sales invoices issued to customers or clients provide information about
sales of goods or services
Corrections in accounts should be made by
the ruling method
The simplest form of journal is one with
two columns
Adjusting entries does not always affect both the income statement and the balance sheet.
False
After posting journal information to the ledger accounts, a check mark should be entered in the posting reference column of the journal to indicate that the transaction item has been posted.
False
If the total of the income statement credit column, before determining net income or net loss, exceeds the total of the income statement debit column, the result is a net loss for the year.
False
Recording adjustments on the work sheet has no effect on the ledger accounts
True
Net income is shown on the work sheet as a(n)
credit in the Balance Sheet columns
To find an error, you should do all of the following EXCEPT
erase questionable entries
To record wages earned but not paid under the modified cash accounting method,
no entry is required
Information about cash disbursements can be obtained from check stubs and carbon copies of checks.
True
Source documents begin the process of entering transactions in the accounting system.
True
The Description column of a two-column journal is used to enter the titles of the accounts affected by each transaction, together with a description of the transaction
True
The amount of depreciation taken each period will be the same using the straight-line mehtod
True
The chart of accounts includes the account titles in numerical order
True
The flow of data through the accounting information system includes analyzing transactions, journalizing, posting, and preparing a trial balance.
True
The historical cost principle allows for assets to be recorded at actual cost.
True
The journal provides the information needed to transfer the debits and the accounts in the ledger
True
The ledger is a reliable source of information only when all of the transactions entered in the journal have been posted.
True
The only correct way to change the balance of a ledger account is to make a journal entry.
True
The owner's capital account in the last two columns of the work sheet is not up-to-date because it does not yet include net income and withdrawals of the current period.
True
The process of copying the debits and credits from the journal to the ledger accounts is known as posting.
True
The purpose of a journal is to provide a chronological record of all transactions completed by the business
True
Supplies originally cost $600, but only $150 worth of supplies were used this period. The adjusting entry would be
debit supplies expense, $150; credit Supplies, $150.
To record the purchase of assets on account under the modified cash basis of accounting method,
debit the asset and credit Accounts Payable
The adjusting entry for the depreciation of office equipment for the period includes
debiting Depreciation Expense-Office Equipment and crediting Accumulated Depreciation-Office Equipment
If the owner of a company invested cash in a business enterprise, the transaction would include
debiting cash and crediting capital
Cash is used to pay for a car for personal use by the owner. The transaction includes
debiting drawing and crediting cash
If cash is paid for worker salaries, the transaction includes
debiting salaries expense and crediting cash
The payment of a utility bill (like electricity) for the month would include
debiting utilities expense and crediting cash
Instead of T accounts, businesses are more likely to use a
four-column account
Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash
False
Almost any document that provides information about a business transaction is included in the chart of accounts.
False
An account in the chart of accounts is assigned a number at random.
False
Entering transactions in a journal is called posting
False
What does the credit balance in the Accumulated Depreciation account represent?
the amount of depreciation taken in the past years
Every entry in the journal should include all of the following EXVCEPT
the balance of the accounts affected
The time an asset is expected to last is called its
useful life
Plant assets provide benefits over a long period of time
True
In some cases, erasures are better for correction than the ruling method
False
In some cases, erasures are better for corrections than the ruling method
False
It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal
False
The balance sheet reports assets, liabilities, and owner's equity for a specific period of times.
False
The chart of accounts includes assets, liabilities, and owner's equity accounts only
False
The formula to calculate straight-line depreciation is depreciable cost times the expected life of the asset
False
The main advantage of a two-column account is that it maintains a running balance
False
The posting reference, amount, and description are the three items of information about each transaction that should be entered in the ledger accounts.
False
To make the posting process easier, posting reference entries are made at the same time that transactions are entered in the two-column journal
False
The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the
Income Statement columns
The depreciation system used by many businesses for tax purposes is the
Modified Accelerated Cost Recovery System
In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column?
Owner's equity is not up-to-date-
The business or professional person using the cash basis of accounting takes the view that there is no revenue until it is received in such a form that it can be spent.
True
The cash basis of accounting is used by some small businesses and by most individuals for tax purposes.
True
The purpose of a trial balance is to prove that the totals of the debit and credit balances in the ledger accounts are equal.
True
Under the cash basis of accounting, a certain expense may be incurred in one period but not entered until the following period.
True
While certain distinctive problems may arise in keeping the accounts of any specific enterprise, the principles of accounting on the cash basis are generally the same
True
Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about
cash receipts
An account used with a related account to bring about a decrease in the net amount of the two account balances is call a(n)
contra-account
The steps in the journalizing process include all of the following EXCEPT
enter the balance