Week 1 ACCT211
Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is
$5,750
Describe the order in which a company prepares financial statements.
1. Income statements 2. Statement of Returned earnings 3. Balance sheet 4. Statement of Cash flows
On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $______ (100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $______ (100/3,600) of insurance expense would be reported at the time of purchase.
100 3600
A calendar year-end reporting period is defined as a ______(1 / 3 / 12) -month period which ends on ______(December/January/March) 31st.
12 December
A calendar year-end reporting period is defined as a _______ (1 / 3 / 12) -month period which ends on December/January/March) 31st.
12 December
Jacob's Chocolates had beginning retained earnings of $4,000; net income of $10,000; and dividends of $300, calculate the ending balance in the retained earnings account. Multiple choice question.
13,700
Boaz Company had beginning of year assets of $100 million and end of year assets of $120 million. Boaz's net income is $5 million. Calculate Boaz Company's return on assets. Round your answer to 1 decimal place.
4.5%
Which of the following statements is (are) correct regarding a T-account? (Check all that apply.)
A T-account may be used as a tool to visualize the effects of a transaction. A T-account represents a ledger account. A T-account will show the debit and credit effects of transactions.
Which statement best describes a T-account?
A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.
It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account
A chart of accounts
It is a collection of all accounts with their activity and balances that exist in a business.
A general ledger
It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred
A journal
What is a plant asset?
A plant asset refers to a long-term tangible asset used to produce and sell products or services.
The correct definition of an "account" includes which of the following?
A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item
In defining a reporting period, which of the following statements is (are) correct?
A reporting period is determined by the business. A reporting period can be one month, one quarter or one year. A one-year reporting period is known as the fiscal year.
Which of the following is the best definition of a source document in the accounting process?
A source document identifies and describes transactions and is the basis for entering an event into the accounting system.
Which of the statements below is correct regarding the difference between a temporary account and a permanent account?
A temporary account will not appear on a post-closing trial balance.
It is a list of each account and its balance at any given time and is used to verify that debits = credits
A trial balance
Which of the following statements explains what a trial balance is?
A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.
Identify what accounting is by selecting the correct statement.
Accounting records business transactions and communicates financial information.
Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)
Accounts Payable Equipment Retained earnings, 12/31 Cash Supplies
Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.)
Adjustments involve increasing both an expense and a liability account. Examples of accrued expenses are wages expense and interest expense. They are reported on an income statement. They refer to costs that are incurred in a period, but are both unpaid and unrecorded.
Which statement is correct regarding entering transactions into the accounting equation?
After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.
When recording transactions into the accounting equation, which of the following statements are correct? (Check all that apply.)
After recording the transaction, total assets will always equal total liabilities plus equity. The accounting equation must always remain in balance.
Identify the correct definition of an asset:
An asset is a resource that a business owns or controls
By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries _ (expense/payable) account and _ (debit/credit) the Salaries _ (expense/payable/unearned) account.
Blank 1: expense or expenses Blank 2: credit Blank 3: payable
Closing means to transfer account balances from ______ (asset/liability/permanent/temporary) accounts so that they will start with a _______ (contra/larger/zero) balance at the beginning of the next period.
Blank 1: temporary Blank 2: zero
Which list of accounts below, identifies only accounts that would appear on a balance sheet.
Common Stock, Equipment, Accounts Payable
Which of the following statements describes why accrual accounting better reflects a business's performance?
Comparability of financial statements is improved. Expenses are always recognized in the period in which they are incurred. Revenues are always recorded in the period in which they are earned.
Which of the following statements correctly explains how to prepare a trial balance? (Check all that apply.)
Compute the total of debit balances and the total of credit balances. List each account title and its amount from the ledger. Verify that the total debit balances equals the total credit balances.
On December 28, I. Greasy Catering Company completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below. Multiple choice question.
Debit Accounts receivable for $600.
J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.
Debit Cash; credit Common stock
A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below. Multiple choice question.
Debit Interest expense for $30. Credit Interest Payable for 30$
For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.
Debit Interest receivable for $600.
An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate the December 31 adjusting entry by choosing the correct statement below.
Debit Unearned revenues for $400.
Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?
Debit accounts receivable and credit services revenue
Place the steps in the adjusting process in the correct order in which they would be performed.
Determine what the current account balance is Determine what the current account balance should be record an adjusting entry
Given the accounts below, choose all of the ones that affect equity.
Dividends Expenses Revenues Common Stock
All of the following are part of the FASB conceptual framework
Elements Qualitative characteristics Objectives Recognition and measurement
Which of the following statements describes the expense recognition (matching) principle?
Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process.
Which set of accounts below would have a normal debit balance?
Expenses; Dividends; Cash
A(n) _____ user of accounting information does not directly run the organization.
External
True or false: Return on assets is computed as Net Income divided by Total Assets.
False
A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.
Insurance expense would be debited for $300.
Which statement below defines accounting?
It identifies, records, and communicates business transactions.
Which of the following statements is the best definition of the Chart of Accounts?
It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.
A plant asset can be defined by which of the following statements? (Check all that apply.)
It is a tangible long-term asset. It is reported on the balance sheet. It has a life within the business greater than one year or the current operating cycle, whichever is longer. Its original cost (minus any salvage value) is expensed over its useful life.
When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.
List each account title and its amount from the ledger. Compute the total of debit balances and the total of credit balances. Verify that the total debit balances equals the total credit balances.
Which of the following statements correctly explains how to prepare a trial balance? (Check all that apply.)
List each account title and its amount from the ledger. Compute the total of debit balances and the total of credit balances. Verify that the total debit balances equals the total credit balances.
Which of the following would be considered a source document in an accounting system? (Check all that apply.)
Payroll records Sales receipt Checks Purchase order
Which of the following is correct regarding posting a transaction?
Posting means to transfer journal information to a ledger.
Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)
Prepaid insurance Supplies Prepaid rent
Which of the statement(s) below define(s) an asset? (Check all that apply.)
Resources with expected future benefits An amount owned Resources controlled by the business
Identify which of the following lists of accounts would belong on the statement of retained earnings.
Retained earnings and Dividends
Choose the account(s) below, that would have a normal credit balance. (Check all that apply).
Revenues Accounts Payable Unearned Revenues Common Stock
$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)
Service revenue would be credited for $700. Unearned revenue would be debited for $700.
$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Multiple select question.
Service revenue would be credited for $700. Unearned revenue would be debited for $700.
Which of the following financial statements report(s) the financial position of a business over a period of time? (Check all that apply.)
Statement of retained earnings Statement of cash flows Income statement
Which of the following accounts is considered a prepaid expense?
Supplies
$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)
Supplies expense would be debited for $300. Supplies would be credited for $300.
$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?
Supplies expense would be debited for $600.
Which of the following statements below lists the rules of entering transactions into the accounting equation?
The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.
When recording transactions into the accounting equation, which of the following statements are correct?
The accounting equation must always remain in balance. After recording the transaction, total assets will always equal total liabilities plus equity.
What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)
The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. The adjusted trial balance is used to prepare financial statements.
Explain the difference between the unadjusted and the adjusted trial balance.
The adjusted trial balance is prepared after adjusting entries have been recorded and posted.
Which of the following describes accrued revenue?
The adjustment causes an increase in an asset account and an increase in a revenue account. Accounts receivable is usually increased when accruing revenues. They refer to earnings which have been earned but not yet billed. They refer to revenues that are earned in a period, but have not been received and are unrecorded.
What are Generally Accepted Accounting Principles?
The concepts and rules that govern financial accounting practice.
Describe the final step in the adjusting process. Multiple choice question.
The final step is to create an adjusting journal entry to get from step 1 to step 2.
Which of the following statements explain(s) how the accounting equation applies to businesses?
The relation of assets, liabilities and equity is reflected in the equation. The equation applies to all transactions and events. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation states that Assets = Liabilities + Equity.
Which of the following statements explain(s) how the accounting equation applies to businesses? (Check all that apply.)
The relation of assets, liabilities and equity is reflected in the equation. The equation applies to all transactions and events. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation states that Assets = Liabilities + Equity.
The correct definition of a balance sheet includes which of the following statements? (Check all that apply.)
The statement reports assets, liabilities and equity at a point in time. The statement reports the equality of the accounting equation at any point in time. The statement reports the financial position of a company at a point in time.
Which of the following statements best represents the accounting equation?
The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.
Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)
They are also called deferred revenues. They are a liability. They are reported on a balance sheet. They refer to cash received in advance of performing a service or product.
Which of the following describes accrued revenue? (Check all that apply)
They refer to earnings which have been earned but not yet billed. The adjustment causes an increase in an asset account and an increase in a revenue account. They refer to revenues that are earned in a period, but have not been received and are unrecorded. Accounts receivable is usually increased when accruing revenues.
Identify which of the following formulas correctly defines how to calculate the debt ratio.
Total liabilities/Total Assets
True or false: Dividends are resources paid to the stockholders.
True
Identify which group of accounts may require adjustments at the end of the accounting period.
Unearned revenue; Supplies; Prepaid rent
Explain what unearned revenues are by choosing the correct statement below.
Unearned revenues refer to cash received in advance of providing a service or product.
A graphical presentation of data to help in understanding their significance is called data _____
Visualization
Which of the accounts below are considered accrued expenses?
Wages expense, Interest expense
Identify which of the following statements is correct as to why accounting is important.
We live in an information age whereby accounting information impacts everyone.
Determine which of the following transactions may require adjustments. (Check all that apply.)
a 24-month insurance policy was prepaid Six months of rent were paid in advance. Supplies were purchased at the beginning of the year, but not all were used. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. Equipment was purchased in the middle of the year.
A process of analyzing data to identify meaningful relations and trends is called data ______
analysis
When does the closing process take place?
at the end of an accounting period
The FASB conceptual framework consists of all of the following except:
concepts
StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December: (Select all that apply).
credit services revenue debit accounts receivable
A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)
debit to Insurance expense for $400. credit to Prepaid insurance for $400.
L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be ______ (debited/credited) on the ______ (left/right) side of the T-account and the Common stock account would be _____ (debited/credited) on the ______ (left/right) side of the T-account.
debited, left Credited, right
An account is a record of increases and _____ in a specific asset, liability, equity, revenue or expense.
decreases
The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time. (Select the accounts below which will correctly complete this question.)
dividends
An external user of accounting information
does not directly run the organization
Generally accepted accounting principles (GAAP) wants information to have: (Check all that apply).
faithful representation relevance
The _____ is the first financial statement to be prepared.
income statement
After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) _____ in total liabilities or equity.
increase
A trial balance is a(n) (list/balance/chart) _____ of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of _____ account balances. Use one word for each blank.
list credit
According to the fraud triangle, the three factors that must exist for a person to commit fraud include __, __, and __.
opportunity pressure or incentive rationalization
According to the fraud triangle, the three factors that must exist for a person to commit fraud include __, __, and __. (Check all that apply).
opportunity rationalization pressure or incentive
Transferring entries from the journal to the ledger is called (posting/preparing/journalizing)
posting
An employee that is having trouble paying his personal bills might exhibit the following fraud factor:
pressure
The revenue recognition principle states that revenue:
should be recorded when goods or services are provided to customers at an amount expected to be received
