Accounting 1 Final

A

Which of the following statements is CORRECT. a. The general ledger contains the accounts that are used to prepare the financial statements. b. Some companies use the general ledger instead of a general journal. c. When entries are posted from the general journal to the general ledger the account number is written in the Posting Reference column in the general ledger. d. When entries are posted from the general journal to the general ledger, the page number is written in the Posting Reference column in the general journal.

B

Adjusting Entries are a. corrections of errors. b. updating entries for preciously unrecorded expenses or revenues. c. not required. d. will always affect cash.

True

If an adjustment is not recorded for supplies used, the firm's assets will be overstated.

D

On October 1, 2016, Jay Walker Company purchased a one-year insurance policy for $660. The correct adjusting entry on December 31, 2016, is a. debit Insurance Expense $660; credit Prepaid Insurance $660. b. debit Insurance Expense $495; credit Prepaid Insurance $495. c. debit, Prepaid Insurance $55; credit Insurance Expense $55. d. debit Insurance Expense $165; credit Prepaid Insurance $165.

C

On the worksheet, the Balance Sheet columns should balance a. before the net income amount is added to the Balance Sheet Debit column. b. after the net income amount is added to the Balance Sheet Debit column. c. after the net income amount is added to the Balance Sheet Credit column. d. before the net income amount is added to the Balance Sheet Credit column.

True

One of the purposes of closing entries is to transfer net income or net loss for the period to the owner's capital account.

False

The expenses for a period are reported on the balance sheet.

True

The post closing trial balance contains balance sheet accounts only.

F

The statement of owner's equity is prepared from the data in the Income Statement section of the worksheet.

True

The supplier's invoice is the source document for a purchase on credit transaction.

False

Al Dunn Bakery bought a new oven for $1280. Al paid $300 as a cash down payment and will pay the balance in 30 days. Total assets increased by $1080.

A

All of the following are examples of the most common types of credit sales, except a. closed-account credit cards. b. business credit cards. c. bank credit cards. d. cards issued by credit card companies.

C

Assuming a periodic inventory system is used, freight charges on merchandise purchases should be debited to a. the Purchases account. b. the Accounts Payable account. c. the Freight In account. d. the creditor's account in the subsidiary ledger.

C

Assuming a periodic inventory system, the journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid and added to the invoice is: a. debit Purchases $965; credit Accounts Payable $965 b. debit Accounts Payable $965, debit Freight in $65; credit Purchases $900 c. debit Purchases $900, debit Freight In $65; credit Accounts Payable $965 d. debit Accounts Receivable $965; credit Sales $965

C

Modern Candy, a wholesaler, sold a crate of candy for $200 on account, to a customer with credit terms of 1/10, n/30. If the customer pays within the discount period, how much cash will Modern Candy receive when it is paid? a. $220 b. $202 c. $198 d. $180

A

One purpose of closing entries is to a. transfer the results of operations to owner's equity. b. reduce the owner's capital account balance to zero so that the account is ready for the next period. c. adjust the ledger account balances to provide complete and accurate figures for use on financial statements. d. close all accounts so that the ledger is ready for the next accounting period.

True

Posting references are part of the audit trail.

A

Postings to the accounts payable ledger should be made a. daily. b. weekly. c. monthly. d. at the end of the fiscal period.

False

The entry to close an expense account requires a credit to the Income Summary account.

A

The objective of internal control of purchases is to a. create written proof that purchases and payments are authorized. b. create a disciplined work environment. c. make the sales process more complex. d. create more organized invoices.

False

The owner's capital account is closed at the end of each accounting period.

B

The process of transferring the data from the journal to the general ledger is called: a. footing b. posting c. transposing d. journalizing

False

The safest endorsement on a check is a full endorsement.

C

The total of the balances in the creditors' accounts should agree with the balance of a. the Purchases account in the general ledger. b. the Accounts Receivable account in the general ledger. c. the Accounts Payable account in the general ledger. d. the Sales account in the general ledger.

C

To find the balance due from an individual customer, the accountant would refer to a. the general journal. b. the Sales account in the general ledger. c. the accounts receivable subsidiary ledger. d. the Accounts Receivable account in the general ledger.

True

A business transaction is a financial event that affects the resources of a business.

False

A check that has a full endorsement can be further endorsed by any bearer and therefore, is not as safe as a check with a blank endorsement.

False

A merchandising business sells goods that it produces.

B

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1200; Prepaid Insurance, $500; Eqiupment, $36,200 and Cash, $40,650. One the same date, SloMo owed the following creditors: Simpson Supply Company, $12,000; Allen Office Equipment, $9,500. The total assets for the SloMo Delivery Service are a. $42,350 b. $78,550 c. $76,850 d.$41,850

B

Business papers, such as checks, invoices, receipts, letters, and memos, that furnish proof that a transaction has taken place are called a. ledgers. b. source documents. c. debit entries. d. accounts.

B

Choose the optional below that reflects the correct order in which to prepare the three financial statements a. Balance Sheet; Income Statement; Statement of Owner's Equity b. Income Statement; Statement of Owner's Equity; Balance Sheet c. Income Statement; Balance Sheet; Income Statement

C

Identify the accounts below that are ALL classified as temporary accounts. a. Wages Expense, Accumulated Depreciation, Fees Income b. Accounts Receivable, Depreciation Expense, Fees Income c. Owner's Drawing, Depreciation Expense, Income Summary d.Owner's Drawing, Owner's Capital, Income Summary

B

On a worksheet, a net loss is a. recorded in the Income Statement Debit column. b. recorded in the Balance Sheet Debit coumn. c. recorded in the Balance Sheet Credit column. d. not recorded.

False

Service charges and other deductions listed on the bank statement have already been recorded in the business records.

C

The journal entry to record the withdrawal of cash by Sue Snow, the owner, to pay a personal utility bill would include a. a debit to Sue Snow, Capital, and a credit to Cash. b. a debit to Utilities Expense and a credit to Cash. c. a debit to Sue Snow, Drawing and a credit to Cash. d. a debit to Sue Snow, Drawing and a credit to Utilities Expense.

False

The monthly bank statement should be received and reconciled by the employee who deposits cash receipts and writes the checks.

B

The owner of the business would like to see both the debit and credit entry for specific transaction, he would look in a. the chart of accounts. b. the journal. c. the source document. d. the ledger.

False

Transactions completed with a debit card appear on a statement separate from other banking transactions.

B

The first two closing entries to the Income Summary account indicate a debit of $53,000 and a credit of $64,000. The third closing entry would be a. debit Capital $11,000; credit Income Summary $11,000. b. debit Income Summary $11,000; credit Capital $11,000. c. debit Revenue $64,000; credit Expenses $53,000. d. debit Income Summary $11,000; credit Drawing $11,000.

B

Upon collection of the amount due on an interest-bearing promissory note from a customer, the accountant would debit Cash, credit Notes Receivable, and a. debit Interest Expense. b. credit Interest Income. c. credit Interest Expense. d.debit Interest Income.

False

When an owner invests assets in a business, the capital account is debited.

False

When cash is collected from accounts receivable, the total amount of assets increases.

False

When transactions are entered in a general journal, the asset accounts are listed first, followed by the liability and owner's equity accounts.

True

When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities and owner's equity.

C

If a business issued a check for $1000 to pay for two months rent in advance, analyze the effect on the firms' assets, liabilities and owner's equity. a. Cash will increase. b. Accounts Payable will decrease c. Prepaid Rent will increase d.Owner's Capital will increase

False

The entry to replenish petty cash includes a debit to Petty Cash Fund and a credit to Cash.

B

The financial statement that is prepared first is a. up to the accountant b. the income statement c. the balance sheet d. the statement of owner's equity

C

Which of the following accounts would be closed? a. Accounts Receivable b. Accumulated Depreciation c. Supplies Expense d. Joan Wilson, Capital

C

Which of the following accounts will not normally have a zero balance after the closing entries have been posted? a. Income Summary b. Fees Income c. The owner's capital account d. Rent Expense

A

Which of the following accounts would not be involved in any of the closing entries? a. Accounts Payable b. Fred Sanford, Drawing c. Income from Services d. Advertising Expense

C

Which of the following describes the Sales Returns and Allowances account? a. A revenue account with a normal credit balance. b. An expense account with a normal debit balance. c. A contra revenue account with a normal debit balance. d. A contra expense account with a normal credit balance.

B

A consecutive, twelve-month accounting period is called a(n) a. accrual year. b. fiscal year. c. accounting year. d. adjusted year.

True

A ledger account contains a complete record of the individual transaction activity in each account.

True

A schedule of accounts payable is a list of all balances owed to creditors.

False

A subsidiary ledger is a ledger that contains accounts of a single type.

True

A subsidiary ledger is a ledger that contains accounts of a single type.

D

A total of $3200 in supplies ws purchased during the year. At the end of the year $700 of the supplies were left. The adjusting entry needed at the end of the year is: a. debit Supplies $2500; credit Supplies Expense $2500 b. debit Supplies Expense $3200; credit Supplies $3200 c. debit Supplies Expense $700; credit Supplies $700 d. debit Supplies Expense $2500; credit Supplies $2500

C

Accumulated Depreciation, Equipment, is shown as: a. a liability on the Balance Sheet b. a reduction of Capital on the Statement of Owner's Equity c. a contra asset on the Balance Sheet d. an expense on the Income Statement

A

During its first year of business, XYZ Inc. purchased $2400 of supplies. By the end of the year, only $500 of supplies remain in the supply cabinet. Determine the amount to be reported in the Supplies account in the Adjusted Trial Balance section of the worksheet prepared on December 31. a. $500 b. $1900 c. $2400 d. $2900

A

During the year, a firm purchased $56,970 of merchandise and paid freight charges of $12,680. If the total purchases returns and allowances were $6,495 and purchase discounts were $2,050 for the year, what is the net delivered cost of purchases? a. $61,105 b. $69,650 c. $72,349 d. $35,745

D

Identify the item below that is NOT one of the steps in an accounting cycle. a. prepare the financial statements b. prepare the post-closing trial balance c. journalize and post the adjusting entries d. prepare invoices for customers

D

Identity the entry below that records the acquisition of office supplies on account. a. debit Office Supplies; credit Cash b. debit Office Supplies; credit Accounts Receivable c. debit Accounts Payable; credit Office Supplies d. debit Office Supplies; credit Accounts Payable

False

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.

C

If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by a. 2 b. 7 c. 9 d. 5

True

Increases in the owner's drawing account are recorded with debits.

True

Letters are used to label the debit and credit parts of an adjustment on the worksheet.

D

Purchases is a temporary _______ account. a. liability b. asset c. revenue d. expense

True

Revenue is a subdivision of owner's equity.

A

Sales Returns and Allowances have the effect of a. decreasing total revenue. b. increasing total revenue. c. increasing expenses. d. increasing assets.

C

The "Net Income" or "Net Loss" is transferred from the Income Statement to the a. balance sheet b. chart of accounts c. statement of owner's equity d. trail balance

B

The Posting Reference column of a journal is used to a. record the date on which an amount is posted to a ledger account. b. record the number of the ledger account to which the information is posted. c. record the number of amounts posted to that ledger account since the beginning of the current accounting period. d. record the page number of the ledger account.

False

The Purchases Returns and Allowances account has a normal debit balance.

B

The Purchases account is a. a permanent account. b. a temporary account. c. a subsidiary account. d. a liability account.

True

The accounts payable ledger provides information about the individual accounts for all creditors.

A

Trial balances are prepared in a certain order. Given the choices below, which one depicts the trial balances in the correct order in which they would be prepared? a. trial balance, adjusted trial balance, post-closing trial balance. b. adjusted trial balance, trial balance, post-closing trial balance. c. post-closing trial balance, adjusted trial balance, trial balance. d. trial balance, post-closing trial balance, adjusted trial balance.

False

When a business makes a sale on a bank credit card, the business is responsible for collecting from the customer.

False

When a customer pays within a certain time, he is eligible to receive a trade discount.

False

When a sales department needs goods, it sends the purchasing department a purchase invoice.

True

When an accounts payable subsidiary ledger is used, the entry to Accounts Payable requires two posting references in the general journal.

True

Withdrawals by the owner for personal use do not affect net income or net loss of the business.

A

___________ are required to collect sales tax from customers, make periodic payments to the taxing authority, and pay the taxes due when reports are filed. a. Retailers b. Wholesalers c. Manufacturers d. Distributors

C

One purpose of closing entries is to give zero balances to a. asset and liability accounts. b. liability and capital accounts. c. revenue and expense accounts. d. expense and capital accounts.

True

Outstanding checks are checks that are recorded in the journal but have not been paid by the bank.

D

A company purchases equipment costing $15,000. They paid $1000 right away and agreed to pay the balance in 30 days, he journal entry to record the purchase of equipment would include a. ad debit to Equipment for $15,000 and a credit to Cash for $15,000 b. a debit to E1uipment for $1000 and a credit to Cash for $1000 c. a debit to Equipment for $14,000 and a credit to Accounts Payable for $14,000. d. a debit to Equipment for $15,000, a credit to Cash for $1000 and a credit to Accounts Payable for $14,000.

D

A credit policy that is too tight results in a. high level of losses at the expense of decreases in sales volume. b. high level of losses at the expense of increases in sales volume. c. low level of losses at the expense of decreases in sales volume. d. low level of losses at the expense of increases in sales volume.

B

Which of the following is a common example of the distribution channel? a. Manufacturer sells to Customer who sells to Wholesaler who sells to Retailer b. Manufacturer sells to Wholesaler who sells to Retailer who sells to Customer c. Manufacturer sells to Retailer who sells to Wholesaler who sells to Customer d. Customer sells to Wholesaler who sells to Retailer who sells to Manufacturer

A

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements. a. Trial Balance b. Income Statement c. Statement of Owner's Equity d. Balance Sheet

C

Which of the following is not one of the three basic types of businesses? a. Service b. Merchandising c. International d. Manufacturing

A

Which of the following statements is correct? a. Purchases Discounts is a contra expense account and carries a credit balance. b. Purchases Discounts is an expense account and carries a debit balance. c. Purchases Discounts is an asset account and carries a credit balance. d. Purchases Discounts is an expense account and carries a credit balance.

D

Which of the following statements is correct? a. The purchase requisition is the form sent to a supplier to order goods. b. The Purchases account is reported as an asset on the balance sheet. c. To the customer, a supplier's invoice is a sales invoice. d. The credit terms, 2/10, n/30, allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice, otherwise payment is due in full in 30 days.

B

A firm's bank reconciliation statement shows a book balance of $15,820, an NSF check of $400, and a service charge of $20. Its adjusted book balance is a. $16,240. b. $15,400. c. $15,440. d. $16,200.

C

Which of the following statements is not correct? a. If the post-closing trial balance does not balance, there are errors in the accounting records. b. The audit trial should be used to trace data through the accounting records to find and correct errors. c. The balance of the owner's capital account, as reflected on the post-closing trial balance, will match the amount reported on the income statement. d. The balance of the owner's capital account on the adjusted trial balance will usually be different than that reported on the post-closing trial balance.

False

The balance of the Sales Returns and Allowances account is subtracted from the balance of the Accounts Receivable account in the Assets section of the balance sheet.

F

The balances of the revenue accounts are recorded in the Trial Balance Credit column, the Adjusted Trial Balance Credit column, and the Balance Sheet Credit column of the worksheet.

True

After all the transactions have been posted, the totals of the balances in the accounts receivable subsidiary ledgers should equal the balance of the Accounts Receivable account in the general ledger.

D

After the worksheet has been completed, the next step in the accounting cycle is to a. journalize the closing entries. b. post the closing entries. c. prepare the post-closing trial balance. d. prepare the financial statements.

B

The account numbers from the ledger are recorded in the Posting Reference column of the general journal a. as the transaction is journalized. b. after each amount is posted. c. after all entries on the journal page have been posted. d. as the first amount written in the journal.

C

The amount of the purchases for a period is presented in a. the Liabilities section of the balance sheet. b. the Revenue section of the income statement. c. the Cost of Goods Sold section of the income statement. d. the Expenses section of the income statement.

D

The amount of the trade discount taken by the customer is: a. recorded as an expense. b. recorded as a revenue. c. recorded as a liability. d. not recorded as sales are recorded net of trade discounts.

D

Which of the following statements is not correct? a. Generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the asset. b. The book value of a long-term asset is reduced each year as depreciation is recorded. c. Buildings and trucks are examples of long-term assets. d. Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.