Practical Accounting Procedures 1

On a statement of owner's equity, beginning capital is $30,000, Net Income for the year is $11,000 and Drawing for the year is $6,000, the ending capital amount would be

$35,000

Financial Statements

A firm issues periodic reports called

When expenses are greater than revenue

A net loss results

Identify the account below that is classified as an asset account and would appear on the left side of the accounting equation

Accounts receivable

An independent certified public accountant

All financial statements submitted to the SEC by publicly owned corporations must include an auditor's report prepared by

When recording a business transaction into the journal, certain steps are followed. Identify the statement below that is CORRECT regarding the journalizing process.

An explanation is indented and entered on the line underneath the last credit in the entry.

CPA

An independent accountant who provides accounting services to the public for a fee is a

If a business receives $5,000 on account from clients who owed money for services previously billed, identify the effect on the accounting equation

Asset remain the same and owner's equity remains the same

The rent paid for future months is a(n)

Assets

Given the options below, identify the correct accounting equation formula

Assets = liabilities + owners equity

When the owner withdraws cash for personal use

Assets decrease and owners equity decreases

The statement of financial position is another term for which financial statement?

Balance sheet

The Statement of Owner's Equity is calculated as follows

Beginning capital + net income - withdrawals + additional investments = ending capital

Identify the accounts below that would ALL appear on the balance sheet.

Cash, Accounts Payable, Owner's Capital (ending balance)

Bertrand Inc. performed services for clients in the amount of $1,350 on credit. If this transaction had been posted in error to the Cash account instead of the Accounts Receivable account, what correcting entry would be necessary?

Debit Accounts Receivable $1,350; credit Cash $1,350

A business earns $4,000 from various charge account clients. To record this transaction, the business would:

Debit Accounts Receivable; Credit Revenue

The journal entry to record the payment of salaries for the month is:

Debit Salaries Expense; Credit Cash

Generally Accepted Accounting Principles (GAAP)

Identify the statement below that represents what GAAP stands for

Prepaid rent will increase

If a business issued a check for $1,000 to pay for two-months rent in advance, analyze the effect on the firms' assets, liabilities and owner's equity

Choose the option below that reflects the correct order in which to prepare the three financial statements

Income statement; statement of owner's equity; balance sheet

Which of the following accounts is NOT a nominal account?

Office Supplies

make decisions

Owners and managers need financial information in order to

Identify the type of accounts that would appear on a firm's income statement

Revenues and expenses

Which of the following accounts is not a permanent account?

Salaries Expense

The ending capital balance appears on which of the following statement(s)?

Statement of owner's equity and balance sheet

Developing generally accepted accounting principles

The Financial Accounting Standards Board is responsible for

Assets and liabilities are reported on

The balance sheet

Which of the following statements is CORRECT?

The general ledger contains the accounts that are used to prepare the financial statements.

The securities and exchange commission

The government agency that has final authority over the financial reporting of publicly owned corporations is

The financial statement that is prepared first is

The income statement

Capital

The owner's investment or equity in a business is called

The income statement shows

The results of operations for a period of time

Auditing

The review of financial statements to assess their fairness and adherence to GAAP is

Balance Sheet

Which financial statement is reported as of a specific date?

The Cash account has a $15,000 debit balance. A $5,000 credit entry and a $7,000 debit entry are posted to the account. The final balance of the Cash account is

a $17,000 debit balance.

If a journal entry that contains an error has already been posted,

a correcting entry should be journalized and posted

Business papers, such as checks, invoices, receipts, letters, and memos, that furnish proof that a transaction has taken place are called

accounts

When an entry is made in the general journal,

accounts to be debited should be listed first.

The classification and normal balance of the accounts receivable account is:

an asset with a debit balance

Debits are used to record increases in

assets and expenses.

When the owner invests cash in a business

assets and owner's equity increase

Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business?

debit Ty Knott, Drawing, and credit Cash

Debits are used to record

increases in assets

Credits are used to record

increases in liabilities and owner's equity.

A company purchased equipment costing $15,000. They paid $1,000 right away and agreed to pay the balance in 30 days, the journal entry to record the purchase of equipment would include

a debit to Equipment for $15,000, a credit to Cash for $1,000 and a credit to Accounts Payable for $14,000.

The journal entry to record a payment made in January for rent for the months of February and March would include

a debit to Prepaid Rent and a credit to Cash.

The journal entry to record the withdrawal of cash by Sue Snow, the owner, to pay a personal utility bill would include

a debit to Sue Snow, Drawing and a credit to Utilities Expense.

The journal entry to record the payment of a monthly utility bill would include

a debit to Utilities Expense and a credit to Cash.

The Net Income amount from the Income Statement is transferred to which of the following statements?

the statement of owner's equity

If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by

9

Accounts Payable

Amounts that a business must pay in the future are known as

A business performed $6,000 of services. Their customer paid $1,000 of the amount owed right away but charged the remaining amount. To record this transaction, the business would: Correct Answer

Debit Cash $1,000 and Debit Accounts Receivable $5,000; Credit Fee Income $6,000

A business purchases equipment costing $4,000. They pay $1,500 right away and charge the remaining amount. To record this transaction, the business would:

Debit Equipment $4,000; Credit Cash $1,500 and Credit Accounts Payable $2,500

On December 5, Honor Consulting Services issued a check to purchase $800 in office supplies. The journal entry to record this transaction is:

Debit Office Supplies for $800 and credit Cash for $800.

Which of the following statements is CORRECT?

If an error in a journal entry is discovered before the entry is posted to the general ledger, the entry can simply be erased and replaced with the correct journal entry.

The journal entry to record the sale of services on credit should include

a debit to Accounts Receivable and a credit to Fees Income.

The journal entry to record the receipt of cash from credit clients on account would include

a debit to Cash and a credit to Accounts Receivable.

When equipment is purchased on credit

assets and liabilities increase

The general ledger accounts are usually arranged in the following order:

first the balance sheet accounts, then the income statement accounts.

Which of the following represents the proper sequence for preparing the financial statements?

income statement, statement of owner's equity, balance sheet

The normal balance of an account is the

increase side of the account

The total of the figures on the left side of a Cash account is $25,800. The total of the figures on the right side is $14,100. The balance of this account

is $11,700 and would be recorded on the left side of the account.

The first place a transaction is recorded is in the

journal

The process of transferring the data from the journal to the general ledger is called:

journalizing

Which of the following increase owner's equity?

revenues

The "Net Income" or "Net Loss" is transferred from the income statement to the

statement of owner's equity

When an entry is made in the general journal,

the accounts to be credited should be indented.