Accounting 100 - complete comprehensive study set (2018) Part 1

Accounting Clerk

responsible for record keeping for a part of the accounting system.

Allocating the cost of long-term assets over their expected useful lives is called:

depreciation

The financial interest in a company is called ___________________.

owner's equity or equity

To prepare the Statement of Owner's Equity, which of the following items from a worksheet are used: Check all that apply.

owner's investments from the Balance Sheet section. owner's withdrawals from the Balance Sheet section. net income from the income Statement section. owner's capital, from the Balance Sheet section.

The purpose of accounting is to provide information to:

owners, investors and creditors, management, and government taxing authorities

Sometime Company makes purchases on account from a commonly used supplier. These amounts that a business must pay to the suppler in the future are called accounts __________________.

payable

Single and double lines have significant meanings on financial statements. Identify which of the following statements are accurate:

single lines can show the amounts above it are being added

Book value is:

the difference between the cost of a long-term asset and accumulated depreciation.

The balance sheet shows

the financial position of a business at a given time.

The entry to transfer a net loss to the owner's capital account would include a debit to

the owner's capital account and a credit to Income Summary.

The Balance Sheet is also called:

the statement of financial position. Explanation The balance sheet reports that the resources owned by the business are equal to the claims due creditors plus the claims the owners hold on those resources.

If a transaction is properly analyzed and recorded,

the total amount debited will equal the total amount credited.

When a business collects an account receivable

total assets do not change.

When equipment is purchased for cash,

total assets do not change.

All adjusting entries include which of the following: Check all that apply.

Balance sheet accounts. Income statement accounts.

Any financial event that changes the resources of a firm is known as a(n):

Business transaction or transaction

Turner Company purchased equipment for $2,500 in cash. This transaction would be recorded with a debit entry to the ___________________ account:

Equipment

Identify which assets below are depreciated: Check all that apply.

Equipment Buildings

When analyzing an owner's drawing account:

Increases - Are shown on the left-hand side of the T account Decrease - Are shown on the right-hand side of the T account.

The owner's capital ending balance is carried from the balance sheet to the statement of owner's equity.

False The owner's capital ending balance is carried from the statement of owner's equity to the balance sheet.

J. Brody Landscaping's adjusted trial balance shows one revenue account, Fees Income. It has a credit balance of $3,500. The journal entry to close this account will include a debit to which account:

Fees Income

A manager wants to know the cost of supplies used during the period. Which financial statement reports that information?

Income Statement

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

Income statement, statement of owner's equity, balance sheet.

A nonprofit organization such as a public school is a(n):

Social Entity.

A company's net income amount appears on the Income Statement. It also appears on the

Statement of Owner's Equity

There are 9 steps in the accounting cycle. Match the action to the correct step in the accounting cycle.

Step 1 - Analyze Transactions Step 2 - Journalize the transactions Step 3 - Post the journal entries Step 4 - Prepare a worksheet Step 5 - Prepare financial statements Step 6 - Record adjusting entries Step 7 - Record closing entries Step 8 - Prepare a post closing trial balance Step 9 - Interpret the financial information

Fancy Painting Company purchased office supplies for $500 in cash. This transaction would be recorded with a debit to the __________________ account.

Supplies

Mitra Ankur Assoc. purchased equipment on account from Carefree Equipment Inc. for $500. This transaction would increase the equipment account and increase the ______________________________ account.

accounts payable

The financial interest in a company is called _____________.

equity

When revenue is greater than expenses for the period, the result is

net income

Adjusting Entries are:

updating entries for previously unrecorded expenses or revenues.

funds taken from the business by the owner for personal use are called _____________________.

withdrawals

Account balances normally appear on the decrease side of the account.

False

Debts or obligations of a business are known as:

liabilities

Revenue is recorded when cash is collected from charge-account clients.

False

assets and liabilities are reported on

the balance sheet

Equipment costing $27,000 with an estimated salvage value of $2,040 and an estimated life of 4 years was purchased on October 31, 2019. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2019?

$1,040 Explanation ($27,000 - $2,040)/48 months = $520 per month * 2 months = $1,040

The Cash T-account had a debit balance of $15,000 on January 1. From January 2 through January 4, the following transactions occurred: January 2: received $2,500 on account from a charge customer January 3: paid rent of $1,000 Janaury 4: purchased equipment with a cost of $10,000. Paid $3,500 down with the remainder due in February. What is the balance of cash after these transactions have been recorded?

$13,000

Jones Consulting provided $1,000 of consulting services on credit to a customer. This transaction would be recorded with a debit to which account?

Accounts Receivable

Vera Book keeping reported the following amounts on its December 31 Balance Sheet: Equipment: $6,000; Accumulated Depreciation $4,000. The book value of the equipment is $____________________(omit$/cents).

$2,000

Ito Consulting Company's general ledger shows a beginning credit balance in the H. Ito, Capital account of $1,000. The closing entries resulted in a debit to the account of $500 and a credit to the account of $2,000. The ending balance in the H. Ito's Capital account is:

$2,500 Credit

On December 1, a company purchased equipment costing $10,000. The equipment has an expected useful life of 3 years and a salvage value of $1,000. The company uses straight-line method of depreciation. Determine the amount of depreciation expense that will be recognized each month:

$250 ($10,000 - 1000) /useful life.

A journal entry that contains more than one debit or credit, is called a _______________________ entry.

Compound

The balance of Owner, Capital, at January 1 was $47,000. During the month of January, the net income for the business was $8,000, and the owner withdrew $15,000 for personal use. What amount would be reported as the balance of Owner, Capital at January 31 on the firm's statement of owner's equity? 1) $55,000 2) $40,000 3) $24,000 4) $70,000

$40,000

The balance of Accounts Receivable was $5,000 on February 1. On February 2, the company billed charge customers for $500. On February 3, the company received $300 cash on account from its customers. What was the balance of Accounts Receivable after these transactions were recorded?

$5,200 debit

An account that has a normal balance that is opposite that of a related account is called a _________________ account.

Contra

Equipment costing $15,000 with an estimated salvage value of $1,080 and an estimated life of 4 years was purchased on October 31, 2019. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2019?

$580 Explanation ($15,000 - $1,080)/48 months = $290 per month × 2 months = $580

At the end of the month, Kim consulting had the following accounts: Cash, $23,120; Accounts receivable, $200; Prepaid Rent, $360; Supplies, $600, and Equipment, $41,250. On the same date, Kim Consulting owed the following creditors: Gomez Supply, Inc., $2,000; and Smith Equipment, $2,700. What are the total assets of Kim Consulting?

$65,530

Based on the following selected account balances, determine net income: Cash, $20,000 Accounts Receivable, $1,000 Accounts payable, $750 Fees Income, $10,000 J. Gibrone, Captial, $12,000 Rent Expense, $1,200 Utilities Expense, $900

$7,900

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

Auditing.

A manager wants to know the book value of the firm's equipment. Which financial statement reports that information?

Balance Sheet

MacGyver Company bought equipment on January 3, 2019, for $52,000. At the time of purchase, the equipment was estimated to have a useful life of five years and a salvage value of $4,000. Using the straight-line method, the amount of one year's depreciation is:

$9,600. Explanation: ($52,000 - $4,000)/5 years = $9,600 per year

Arrange the following sections of the income statement in the correct order.

1. Title 2. Revenue 3. Expenses 4. Net Income

A manager wants to know the total accounts payable of the business. Which of the following financial statements reports that information?

Balance Sheet

Of the four steps shown below, identify which step in the accounting cycle comes first:

1. Analyze Transactions. 2. Journalize the transactions. 3. Post the journal entries. 4. Prepare a worksheet. 5. Prepare financial statements. 6. Record adjusting entries. 7. Record closing entries. 8. Prepare a post-closing trial balance. 9.Interpret the financial information.

The steps to analyze the effects of a business transaction include (select all that apply): Check all that apply.

1. Analyze the financial event 2. Apply the left-right rules for each account affected. 3. Make the entry in T-account form.

There are four steps in the closing process place the steps in the correct order:

1. Transfer the balance of the revenue account to the Income Summary account. 2. Transfer the expense account balances to the Income Summary account. 3. Transfer the balance of the Income Summary account to the owner's capital account. 4. Transfer the balance of the drawing account to the owner's capital account.

A company issued a check in the amount of $6,000 to pay insurance for the following six months. This transaction would be recorded with:

A debit to prepaid insurance. A credit to Cash.

Identify the correct statements about posting: Check all that apply.

A process of transferring data from the journal to the record of final entry. Records the information to the general ledger. The third step of the accounting cycle.

All depreciation taken on an asset during its useful life is recorded in the ____________________ account.

Accumulated Depreciation

Which of the following are correct steps to calculate the balance of an account? Check all that apply:

Add the figures on each side of the account. Enter the total in small pencil figures called a footing. Subtract the smaller total from the larger total.

Journal entries that are made to update accounts for previously unrecorded items, such as supplies used, are called:

Adjusting Entries

The Adjusted Trial Balance section of the worksheet is computed by adding which sections of the worksheet: Check all that apply.

Adjustments section Trial Balance section

The group of accounting educators who perform research to determine the possible effects on financial reporting and the economy, and then offer their opinions about proposed FASB statements is the:

American Accounting Association (AAA). Explanation The AAA is a group of accounting educators; its members research possible effects of a proposed FASB statement and offer their opinions to the FASB. The FASB develops generally accepted accounting principles (GAAP). The AICPA is a national association for certified public accountants. The SEC oversees the financial information provided by publicly owned corporations to their investors and potential investors.

Match the classification to the correct term.

Asset - Show the property that a business owns Liability - Show the debts of the business. Owner's Equity - Show the owner's financial interest in the business.

identify which of the following items would appear on the balance sheet:

Assets Owner's Equity Liabilities

Identify the correct statements: Check all that apply.

Assets increase on the (debit) side. Liabilities increase on the right (credit) side. Owner's equity decrease on the left (debit) side.

Identify which of the following steps are used to prepare the Income Statements Section of the worksheet: Check all that apply.

Calculate the total of the Debit and Credit columns. Extend the revenue account balances from the Adjusted Trial Balance to the credit columns of the Income Statement Sections. Extend the expense account balances from the Adjusted Trial Balance to the debit columns of the Income Statement Sections.

Identify which of the following is not a correct statement about the use of a worksheet:

Can be less useful if a company has many accounts. "hint" The worksheet can be more useful if a company has many account

R. Sims Cleaning Co.'s adjusted trial balance shows the drawing account has a debit balance of $1,000. The journal entry to close this account will include a debit to the R. Sim's __________________ account, and a credit to the R. Sim's ___________________ account.

Capital, Drawing

The statement of owner's equity reports the changes that occurred in the owner's financial interest during the reporting period. Place the following parts of the statement of owner's equity in the correct order that it would be reported:

Capital, January 1, 2016 Net Income Withdrawals Capital, December 31, 2016

An entry on the right-hand side of a T account is called a:

Credit

Raj Associates Paid $2,900 for salaries. This transaction would be recorded with which of the following entries?

Credit Cash for $2,900. Debit Salaries Expense for $2,900.

Mitra Associates purchased equipment for $5,000, by paying $1,000 cash and agreeing to pay the balance in 30 days. This transaction would be recorded with which of the following entries? Check all that apply.

Credit to Cash for $1,000. Credit to Accounts Payable for $4,000. Debit to Equipment for $5,000.

When cash is received from charge customers who owed money for services previously billed, the firm's liabilities decrease.

False

On April 1, Zola Company paid $3,000 rent in advance for three-month period. The $3,000 was debited to the Prepaid Rent account. The necessary adjustment on April 30 would include a:

Credit to prepaid rent for $1,000.

On January 1, a firm paid $3,000 rent in advance for a three-month period. The $3,000 was debited to the Prepaid Rent account. The necessary adjustment on January 31 will include a:

Credit to prepaid rent for $1,000.

A company issued a check for $500 to an office supply vendor in partial payment of an open account balance. This transaction would be recorded with a:

Debit to accounts payable. Credit to cash.

A company pays $3,500 for weekly salaries. This transaction would be recorded with a debit to the salaries _________________ account and credit to the ___________________ account

Expense, Cash.

Identify which items are on the income statement: Check all that apply.

Expenses Net income Revenues

Identify which of the following accounts appear on an income statement:

Fees income Utilities Expense Salaries Expense

When reviewing a post-closing trial balance, identify which accounts should have a zero balance:

Fees income Wages expense Drawing

A worksheet

Is a tool used to help determine the effects of adjusting journal entries on account balances.

Which of the following is not true?

It is recommended that the chapter quiz on Connect be completed before starting the chapter homework on Connect.

Jason Thompson withdrew $500 from his company personal expenses. This transaction would be recorded with a debit to which account?

Jason Thompson, Drawing.

Business transactions are recorded in a _____________________, which is a diary of business activities.

Journal

Identify which of the following long terms assets is not depreciated:

Land

Also known as the record of final entry, the _____________________ keeps account records on a special form that makes it possible to record all data efficiently.

Ledger

Place the following headings of an income statement in proper order:

Mendez Bookkeeping Services Co. Income Statement Month Ended August 31, 20XX

The income statement shows the results of a business operations for a specific period of time. When expenses are greater than revenue, this is called ___________________________.

Net Loss

Moon Consulting's Worksheet for the month of December showed the following totals in the Income Statement Section: total debits of $14,000; and total credits of $12,000. These totals can be used to determine that:

Net Loss equals $2,000

Identify which of the following items are on the statements of owner's equity.

Net income Capital, Beginning Balance Withdrawals

Adjusting Entries can contain which of the following:

One income statement account and one balance sheet accounts.

The eighth step in the accounting cycle is to prepare the post closing trial balance. The post closing trial balance is prepared to: Check all that apply.

Prove the equality of total debits and credits. Confirm revenue, expense, and drawing accounts have zero balances.

Identify the correct statement about the accounting equation:

Owner's equity increases on the right (credit) side

An organization that has two or more owners who are legally responsible for the debts and taxes of the business is a:

Partnership

An account that is kept open from one accounting period to the next, such as cash, is called a __________________ account.

Permanent

The process of transferring data from the journal to the ledger is known as _______________________.

Posting

Common errors that cause the trial balance debit and credit columns not to balance include (select all that apply): Check all that apply.

Recording an amount incorrectly from a transaction. Making an error when calculating the account balance.

What does the accounting process involve?

Recording, classifying, summarizing, interpreting and communicating financial information about a business.

Which of the following types of accounts would normally have a credit balance?

Revenue accounts and liability accounts.

The fees earned account is always increased on the (left/right) __________________-hand side of the T account.

Right.

Ronny and Assoc. issued a check for $2,400 to pay salaries. This transaction would be recorded with a debit entry on the left-hand side of which account:

Salaries Expense

Which of the following statements is not correct?

The credit portion of a general journal entry is always recorded first.

Why is accounting called the "language of business"?

The results of the accounting process--financial statements--communicate essential information about a business to concerned individuals and organizations.

What is the purpose of accounting?

To gather and communicate financial information about a business.

Using the worksheet, net income can be calculated by taking the difference between:

Total credit and total debits in the income statement section.

An audit trail makes it possible to: Check all that apply.

Trace information Locate errors Prevent fraud

An error where numbers are switched, for example, entering 120 instead of 210, is called a:

Tranposition

A statement to test the accuracy of total debits and credits after transactions have been recorded is called the __________________________________.

Trial Balance

A business transaction affects at least two different accounts.

True

A firm purchased telephone equipment for cash. By mistake, the person who recorded the transaction debited Utilities Expense instead of Office Equipment. The error was discovered after the data posted. The correcting entry should contain:

a debit to Office Equipment and a credit to Utilities Expense. Explanation Office Equipment should be increased with a debit, and Utilities Expense decreased with a credit.

On a balance sheet, Accumulated Depreciation—Equipment is reported

as a deduction from the cost of the equipment.

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

auditing. Explanation Auditing is the review of financial statements to assess their fairness and adherence to generally accepted accounting principles. On the other hand, accounting is the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. An accounting system is designed to accumulate data about a firm's financial affairs, classify the data in a meaningful way, and summarize it in periodic reports called financial statements. Management advisory services involve helping clients improve their information systems or their business performance.

In which of the following transactions would Utilities Expense be debited:

both A and B The company paid a utility bill on account. The company received a bill for utilities to be paid the following month.

On May 1, Chadha Associates paid $6,000 rent in advance for a six-month period. The $6,000 was debited to the Prepaid Rent account. The Necessary adjustment on May 31 would include which of the following entries: Check all that apply.

credit to prepaid rent for $1,000. debit to rent expense for $1,000.

A company paid the telephone bill of $200. This transaction would (debit/credit) ____________________ the cash account, and (debit/credit) _____________________ the utilities expense account.

credit, debit

Managerial accounting is the branch of accounting concerned with providing financial information to

executive management

A special owner's equity account that is used only in the closing process to summarize results of operation (net income or net loss) is called the _________________ account.

income summary

The financial affairs of a business and the financial affairs of the owners should be

kept totally separate.

The three financial statements are linked together because the:

net income from the income statement is used on the statement of owner's equity and the ending balance of the capital account, computed on the statement of owner's equity, is used on the balance sheet. Explanation The three financial statements are linked together because the net income from the income statement is used on the statement of owner's equity and the ending balance of the capital account, computed on the statement of owner's equity, is used on the balance sheet.

In the general ledger, accounts are typically in financial statement order. Place the accounts in the order they would appear in the ledger:

1. Assets 2. Liabilities 3. Owner's equity 4. Revenues 5. Expenses

The following items appear in a year-end Statement of Owner's Equity. Place them in the correct order of appearance:

1. Capital, January 1, 20xx. 2. Net Income. 3. Withdrawals 4. Increase (decrease) in Capital 5. Capital, December 31, 20xx

To become a Certified Public Accountant (CPA), an individual:

All of the Above: Must have a certain number of college credits in accounting courses. Pass the Uniform CPA Examination. Fulfill the experience requirements of the state of practice. Explanation To become a CPA, an individual must have a certain number of college credits in accounting courses, demonstrate good personal character, pass the Uniform CPA Examination, and fulfill the experience requirements of the state of practice. CPAs must also follow the professional code of ethics.

Identify the users of financial information.

All types of businesses need and use financial information. Users of financial information include owners and managers, employees, suppliers, banks, tax authorities, regulatory agencies, and investors. Nonprofit organizations need similar financial information.

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.

The journal entry to record the performance of services for cash would include

a debit to Cash and a credit to Fees Income.

A ledger account form that shows the balance of the account after each entry is posted is called a:

Balance ledger form.

An owner's financial interest in the business is called equity, or _________________.

Capital

Gill's Consulting issued a check in the amount of $400 to pay the monthly utilities bill. This transaction would be recorded with a credit entry on the right-hand side of which account:

Cash

Helen Jone's Hair Salon collects $800 cash for services provided during the day. This transaction would be recorded with a debit entry on the left-hand side of which account:

Cash

Journal entries that transfer the net income or net loss to the owner's equity account are called:

Closing entries

Identify which of the following are correct steps to prepare the adjusted trial balance section of the worksheet: Check all that apply.

Combine the figure from the Trial Balance section and the Adjustments section of the worksheet. Compute the Debit and Credit column totals in the adjusted Trial Balance.

Identify the correct lines of a balance sheet heading:

Company Name Balance Sheet MM/DD/YYYY

Identify which items appear on the title of an income statement: Check all that apply.

Company Name Income Statement For the Year Ended 2014

The correct heading of an income statement includes the following lines:

Company Name. Income Statement. For the Period Ended MM/DD/YY.

Varsha Associates purchased Office Equipment for $5,000 cash. This transaction would be recorded with a debit to which account?

Equipment

Identify the long-term assets listed below: Check all that apply.

Equipment Furniture Land

An owner's financial interest in the business is called capital or _________________.

Equity

Accountants have important roles in the accounting system, Identify which of the following activities are the responsibility of the accountant (select all that apply):

Establishes the records and procedures that make up the accounting system. Supervises the operation of the system.

The costs of any materials, labor, supplies, and services used to produce revenue is called a(n)

Expense

The normal balance of a contra asset account is a debit.

False

True or false: all companies, both public and private, must report to the Securities and Exchange Commission.

False

When analyzing a transaction using a T account, increases for all accounts are shown on the left-hand column.

False

Keeping financial records and preparing financial reports as part of the staff of federal, state or local governmental units is known as ___________ accounting.

Governmental

Interpreting financial statement helps understand which of the following:

How much cash does the company have? How much do customers owe the business? How much does the business owe suppliers?

The ninth step in the accounting cycle is interpreting the financial statements. Interpreting financial statements includes identifying which of the following questions:

How much does the business owe suppliers? How much cash does the company have? How much is net income?

A(n) (increase/decrease) __________________ to an expense account is shown on the left-hand side of the T account.

Increase

A(n) (increase/decrease) ___________________ to the prepaid rent account is shown on the left-hand side of the T account.

Increase

When analyzing accounts receivable:

Increases - Are shown on the left-hand side of the T account. Decreases - Are shown on the right-hand side of the T account

The first place a transaction is recorded is in the:

Journal

The entry to close the Depreciation Expense account would include a debit to

The Income Summary account and a credit to the Depreciation Expense account.

The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available.

True

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

True

all homework and quizzes must be completed on Connect.

True

any student who has not completed a total of three assignments on Connect will be dropped from the class.

True

The adjusting entry to account for use of prepaid insurance consists of:

a debit to Insurance Expense and a credit to Prepaid Insurance. Explanation The journal entry increases insurance expense to reflect the insurance used by debiting the insurance account, and the asset account prepaid insurance is credited to reduce that balance.

Wally's Window Washing Co. owed an outstanding balance to Industrial Supplies Co. for supplies purchased the month before. On June 30, Wally issued a check to Industrial Supplies for $550 to pay the balance in full. Wally's payment on June 30 would decrease cash and decrease ____________________.

accounts payable

Speedy Delivery Company completed a delivery and billed the customer for $980. This transaction would be recorded with a debit entry on the left-hand side of which account:

accounts receivable

Book Keeper

responsible for recording business transactions

Chanda Mosson invested on additional $5,000 in Mosson Home Repairs Co. during the month of December. This transaction would affect which financial statement:

statement of owner's equity

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

statement of owner's equity.

An accounting system is designed to do which of the following activities: Check all that apply

summarize information in financial statements. accumulate data about firm's financial activities. classify the data in a meaningful way.

The book value of long-term assets is reported on

the balance sheet.

The book value of long-term assets is reported on:

the balance sheet. Explanation The balance sheet will report the balance in the long-term asset accounts on one line, and then the balance in the contra asset account accumulated depreciation on the next, and then report the difference between the two, the book value, as the amount in the right hand column of the balance sheet.

The adjusting entry to account for the use of supplies consists of

a debit to Supplies Expense and a credit to Supplies.

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

a debit to Utilities Expense and a credit to Cash.

Wally's Window Washing Co. owed an outstanding balance to industrial Supplies Co. for supplies purchased the month before. On June 30, Wally issued a check to Industrial Supplies for $550 to pay the balance in full. Wall's payment on June 30 would decrease cash and decrease _____________________.

accounts payable

Miguel Guzman Co. purchased office equipment on account from Sunny Office Equipment for $750. Analyze this transaction and identify which of the following sections of the accounting equation would increase: Check all that apply.

accounts payable office equipment

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

accounts payable.

Companies sometimes sell services to customers on account. These amounts owed by customers are known as _________________________.

accounts receivable

a payment for future months' rent is a(n)

asset

On a company's income statement, when revenues and expenses are equal, this is known as ________________________.

break even

Transactions in a journal are initially recorded in:

chronological order.

A series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information is called the ___________________________________.

Accounting cycle. The Accounting Cycle.

To record the purchase of equipment by paying cash, the accountant would debit Equipment and credit Accounts Payable.

False

Which of the following groups contain only accounts that normally have credit balances?

Fees Income and John Smith, Capital Explanation Liabilities (such as Accounts Payable), revenues (such as Fees Income), and the owner's capital account (such as John Smith, Capital) normally have credit balances because those accounts increase with credits. On the other hand, assets (such as Accounts Receivable and Equipment), expenses (such as Salaries Expense), and the owner's Drawing account normally have debit balances because those accounts increase with debits.

A small pencil figure written at the base of an amount column showing the sum of the entries in the column showing the sum of the entries in the column is called a:

Footing.

G. Jone's Consulting Company's adjusted trial balance shows the drawing account has a debit balance of $3,000. The journal entry to close this account will include a debit to he ______________ account, in the amount of $3,000.

G. Jones, capital

A ________________ is financial record used for entering all types of business transactions.

General Journal.

The ______________ provides a permanent, classified record of all accounts used in a firm's operation.

General Ledger

The master reference file for the accounting system is called the ____________________. It provides a permanent, classified record of all accounts used in a firm's operation.

General Ledger.

Al Dunn Bakery bought a new oven for $1,380. Al paid $300 as a cash down payment and will pay the balance in 30 days. True or false: total assets increased by $1,080.

True

Amounts earned from the sale of goods or services is called revenue.

True

Debts or obligations of a business are known as liabilities.

True

Prepaid expenses, such as prepaid rent and prepaid insurance, are recorded as assets when purchased.

True

Public accounting firms provide three major types of services: auditing, tax accounting, and management advisory services.

True

The amount of net income or net loss is needed to complete the statement of owner's equity.

True

The post-closing trial balance contains permanent accounts only.

True

The process of posting to the general ledger requires that you compute new balances in at least two accounts.

True

The results of the accounting process is communicated to the users of accounting information.

True

A company purchased equipment for $500. The company made a $100 cash down payment, with the remaining balance due in 30 days. The journal entry to record the purchase of equipment is

a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.

The entry to close the Income Summary account may include:

a debit to Income Summary and a credit to the owner's capital account.

The adjusting entry to account for the expiration of prepaid insurance consists of

a debit to Insurance Expense and a credit to Prepaid Insurance.

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 payment of salaries should include

a debit to Salaries Expense and a credit to Cash.

The journal entry to record the withdrawal of cash by Sue Snow, the owner, for personal use would be recorded as

a debit to Sue Snow, Drawing and a credit to Cash.

Assume that a firm has the following information in its analysis of its business transaction during its first year of business: fees income of $7,000, an investment by the owner of $5,000, salaries expenses of $4,000, and withdrawals of $2,000. What is the total amount of owner's equity that will be reported on the firm's balance sheet?

$6,000

Assume that, after analyzing its business transaction, a firm has the following ending balances: accounts payable $3,400, accounts receivable $2,000, cash $1,000, capital $3,600, equipment $3,000, prepaid rent $600, and supplies $400. What is the total amount of assets that will be reported on the firm's balance sheet?

$7,000 Explanation The assets reported on the balance sheet would include: cash $1,000, accounts receivable $2,000, supplies $400, prepaid rent $600, and equipment $3,000. These assets would total $7,000. The fundamental accounting equation remains in balance since assets of $7,000 equal liabilities (accounts payable) of $3,400 plus owner's equity (capital) of $3,600.

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

Accounts payable Explanation Accounts payable are amounts a business must pay in the future. On the other hand, accounts receivable are claims for future collection from customers, capital is the financial investment in a business, and an expense is an outflow of cash, use of other assets, or incurring of a liability.

The group of accounting educator who perform research to determine the possible effects on financial reporting and the economy, and then offer their opinions about proposed FASB statements is the:

American Accounting association (AAA).

The review of financial statements to assess their fairness and adherence to generally accepted accounting principles is known as ____________.

Auditing

As the owner of a small business, you have decided to expand your locations. In order to expand, you must apply for a loan. What type of information will you need to provide to the lender?

Current sales and expenses figures, anticipated saless and expenses, and the cost of the expansion.

Why are generally accepted accounting principles needed?

GAAP help to ensure that financial information fairly presents a firm's operating results and financial position.

Many accounting firms offer management advisory services. These services help clients by offering which of the following activities (select all that apply):

Improve information systems. Improve business performance.

What are financial statements?

Periodic reports that summarize the financial affairs of a business.

Chadha Assoc. signed a lease to rent office space for $1,000 per month. The firm prepaid the first three months rent in advance, for a total of $3,000. This transaction would increase which account(s)?

Prepaid Rent

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

Securities and Exchange Commission (SEC).

You plan to open a business with two of your friends. You would like to form a corporation, but your friends prefer the partnership form of business. What are some of the advantages of the corporate form of business?

The share holders are not responsible for the debts and taxes of the corporation. Corporations can continue in existence indefinitely.

One requirement for becoming a CPA is to pass the:

Uniform CPA Examination

The Process by which financial information about a business is recorded, classified, summarized, interpreted and communicated to interested parties is known as (accounting / book keeping / auditing) _________________.

accounting

Bill Jones Tree Trimming bills his clients for his services. Bill's customers are allowed 30 days to pay. Amounts owed by these clients are known as ____________________________.

accounts receivable

During July, Brad's Bookkeeping Services billed clients a total of $14,000 for services provided during the month. During August, Brad Received $10,000 cash from these customers. The receipts in August would increase cash and decrease ______________________.

accounts receivable

Petra invested an additional $2,000 in Petra Associates during the month of June. This transaction would appear as:

an increase in the statement of owner's equity

When a business sells services on credit:

assets increase and revenues increase. Explanation When a business sells services on credit, revenues increase because the company has earned the revenue. The customer has promised to pay in the future, and that claim for future collection is an asset, accounts receivable. The fundamental accounting equation remains in balance.

The financial statements submitted by a corporation to the SEC include the auditor's report. The auditor's report:

confirms that the financial information is prepared in conformity with generally accepted accounting principles. Explanation The auditor's report contains the auditor's opinion about the fair presentation of the operating results and financial position of the business. The auditor's report also confirms that the financial information is prepared in conformity with generally accepted accounting principles.

Amounts that a business must pay in the future are known as liabilities. The companies or individuals to whom the amounts are owed are called ________________.

creditors

Hernandez Consulting issued a check for $390 to pay the utilities bill. This transaction would have which of the following effects on the accounting equation:

decrease in cash increase in utilities expense

The income statement shows the results of business operations for a specific period of time. This statement shows details of the following categories (select all that apply):

expenses revenues

Charlie started an Auto Repair Company and contributed an automotive lift and other equipment he personally owned to the company. This equipment would be recorded at the current worth called _______________.

fair market value

assets = liabilities + owner's equity is known as the:

fundamental accounting equation

Moira's Oil Change Co. provides quick oil changes. During the week Moira received $3,675 cash for services provided to customers. Which parts of the accounting equation would be affected by these receipts?

increase cash increase revenues

Wendy's Window Cleaning bills customers for cleaning services. The customers have 30 days to pay the balance in full. Wendy provides services to a customer and sends a bill for $450. This transaction affects which parts of the accounting equation:

increases cleaning revenue increases accounts receivable

Financial statements must be prepared in a specific order so that information from the preceding financial statement may be placed into the next financial statement. Identify which of the following statements is correct regarding preparation of financial statements:

net income from the income statement is placed into the statement of owner's equity

The following are all characteristics of a sole proprietorship except:

A sole proprietorship is legally separate from its owner. Explanation A sole proprietor is legally responsible for all debts, taxes and other liabilities of the business.

What are the three types of business entities?

Sole proprietorship, partnership and corporation.

How is the ownership of a corporation different from that of a sole proprietorship?

A sole proprietorship is a business entity owned by one person. A corporation is a separate legal entity that has a legal right to own property and do business in its own name.

The financial statement that describes the firm's assets, liabilities, and owner's equity on a given date is called a(n):

Balance Sheet

Jorge Hernandez opened a consulting business by depositing $15,000 into a business checking account in the name of Hernandez Consulting. This Business transaction would increase:

Capital Cash

Which of the following is not a service typically provided by a public accounting firm?

Investing services Explanation Public accounting firms provide accounting services for other companies. Usually, they offer three services: auditing, tax accounting, and management advisory services.

Which of the following is a legitimate government agency?

Securities and Exchange Commission (SEC). Explanation The SEC overseas the financial information provided by publicly owned corporations to their investors and potential investors.

Accountant

Supervise other accounting positions and prepare financial statements.

The Securities and Exchange Commission (SEC) oversees the financial information provided by publicly owned corporations. Identify which of the following statements is correct about the SEC:

The SEC can suspend trading of a company's shares on the stock exchange. The SEC has the final say on financial accounting issues faced by publicly traded companies.

Identify and discuss career opportunities in accounting.

There are many job opportunities in accounting. Accounting clerk positions, such as accounts receivable clerk, accounts payable clerk, and payroll clerk, require the least education and experience. Bookkeepers usually have experience as accounting clerks and a minimum of one to two years of accounting education. Most entry-level accounting positions require a college degree or significant experience as a bookkeeper. Accountants usually specialize in one of three major areas: public, managerial, or governmental accounting. Some accountants work for public accounting firms and perform auditing, tax accounting, or management advisory functions. Other accountants work in private industry where they set up and supervise accounting systems, prepare financial reports, prepare internal reports, or assist in determining the prices to charge for the firm's products. Still other accountants work for government agencies. They keep track of public funds and expenditures, or they audit the financial records of businesses and individuals to determine whether the records are in compliance with regulatory laws, tax laws, and other laws. The Securities and Exchange Commission, the Internal Revenue Service, the Federal Bureau of Investigation, and Homeland Security employ many accountants.

What is the purpose of the auditor's report?

To obtain the objective opinion of a professional accountant from outside the company that the statements fairly present the operating results and financial position of the business and that the information was prepared according to GAAP.

Accounting provides financial information about a business or organization in order for interested parties to make decisions.

True

Property owned by a company is known as business assets.

True

Lee Pepper Consulting purchased supplies for $500 cash. This transaction would (increase/decrease) ______________ the cash account, and (increase/decrease) _______________ the supplies account

decrease and increase

If liabilities are $4,000 and owner's equity is $15,000, assets are

$19,000.

Dollar signs are used on income statements that are prepared on plain paper, that is, not on ruled form.

True

Increases in assets and expenses are both recorded with debits.

True

On June 1, Woodbridge Company purchased machinery for $6,500. The machinery has a useful life of five years, and salvage value of $500. True or false: Depreciation on the machinery for the month ended June 30 is $100.

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.

True

The entry to close the revenue account Fees Income requires a debit to Fees Income and a credit to Income Summary.

True

Place the lines of the Balance Sheet heading in the correct order:

1. Company Name 2. Balance Sheet 3. MM/DD/YYYY

A company issued a check for $6,000 to pay rent for the next three months. This transaction would debit the ________________ account, and credit the __________________ account

Prepaid Rent, Cash.

Gonzo's Grooming Company issued a check in the amount of $3,000 to pay rent for the next three months. This transaction would be recorded with a debit entry to the _______________ account.

Prepaid rent.

Some of the activities performed by managerial accountants includes (select all that apply):

Preparing tax forms. Preparing financial statements. Preparing internal reports.

The owner's drawing account is closed by debiting

The owner's capital account and crediting the owner's drawing account.

When an entry is made in the general journal,

accounts to be debited should be listed first. Explanation Instructions for making entries in the journal include the following: After writing the day of the transaction in the Date column, enter the account to be debited. Write the account name close to the left margin of the Description column, and enter the amount on the same line in the Debit column. Then, enter the account to be credited on the line beneath the debit. Indent the account name about one-half inch from the left margin. Enter the amount on the same line in the Credit column. Accordingly, the account or accounts to be debited should be listed before the accounts to be credited.

When the firm pays its utility bill upon receipt of that bill:

assets decrease and expenses increase. Explanation The use of the utilities by the business is an expense. Note that expenses decrease (rather than increase) owner's equity. When a firm pays its utility bill upon receipt of that bill, the firm's cash, an asset, decreases. Utility expense increases. The fundamental accounting equation remains in balance.

A company's worksheet for the month of June shows Prepaid Rent with a $4,000 debit balance on the Trial Balance section and shows a $1,000 credit in the Adjustments section. The balance for Prepaid Rent in the Adjusted Trial Balance section would be:

$3,000

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

Assume that a firm has the following information in its analysis of its business transactions during its first year of business: fees income of $7,000, an investment by the owner of $5,000, salaries expenses of $4,000, and withdrawals of $2,000. What is the total amount of owner's equity that will be reported on the firm's balance sheet?

$6,000 Explanation The statement of owner's equity for the first year of operations would report the following: beginning capital of $0 (since it is a new company) plus investments of $5,000 plus net income of $3,000 (or revenues of $7,000 minus expenses of $4,000) less withdrawals of $2,000 equals ending capital of $6,000. That ending capital balance would then appear in the owner's equity section of the firm's balance sheet.

Collin Consulting Company's general ledger shows a beginning credit balance in the B. Collin, Capital account of $4,000. The closing entries resulted in a debit to the account of $1,000 and a credit to the account of $3,000. The ending balance in the B. Collin, Capital account is:

$6,000 credit

MacGyver Company bought equipment on January 3, 2019, for $34,400. At the time of purchase, the equipment was estimated to have a useful life of 5 years and a salvage value of $920. Using the straight-line method, the amount of one year's depreciation is

$6,696 Explanation ($34,400 - $920)/5 years = $6,696 per year

Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage value. Under the straight-line method, monthly depreciation will be

$600.

Centrum Services purchased $36,000 worth of equipment. The equipment has an estimated useful life of five years and no salvage value. Using the straight-line method, the depreciation for the first month is:

$600. Explanation The formula for straight-line depreciation is (Cost minus Salvage value) divided by Estimated useful life. As such, the annual depreciation is ($36,000 minus $0) divided by 5 years equals $7,200 per year. Depreciation for the first month would be $7,200 per year divided by 12 equals $600 per month.

Dora's Delivery Company has $12,000 of total assets and $4,000 of total owner's equity. Therefore, liabilities must equal $_____________________.

$8000

Equipment cost $40,800 and is expected to be useful for 4 years and have no salvage value. Under the straight-line method, monthly depreciation will be:

$850. Explanation ($40,800 - $0)/48 months = $850 per month

Place the steps for analyzing business transaction in the appropriate order:

1. Analyze the financial event. 2. Apply the rules of debit and credit 3. Make the entry in T-account form to help analyze the transaction (optional) 4. Record the complete entry in general journal form.

If the trial balance does not balance, which of the following procedures can help identify an error (select all that apply)? Check all that apply.

1. Check the arithmetic. If the columns were originally added from top to bottom, verify the total by adding from bottom to top. 2. Check that the correct account balances were transferred to the correct trial balance columns. 3. Check the arithmetic used to compute the account balances. 4. Check that each transaction was recorded correctly in the accounts by tracing the amounts to the analysis of the transaction. Check the arithmetic on the trial balance. Check the arithmetic used to compute the account balances. Check that the correct account balances were transferred to the correct trial balance columns.

Place the headings of an income statement in the correct order:

1. Company Name 2. Income Statement 3. For the Period Ended MM/DD/YY

Place the headings of the Statement of Owner's Equity in correct order:

1. Company Name 2. Statement of Owner's Equity 3. For the Period Ended MM/DD/YYYY

Place the steps to post the general journal to the general ledger in the correct order:

1. Enter the date. 2. Enter the amount in the appropriate Debit or Credit column. 3. Compute the balance.

Place the steps to prepare a trial balance in the correct order:

1. Enter the trial balance heading. 2. List the accounts names in the order they appear on the financial statements. 3. Enter the ending balances of each account in the appropriate debit or credit column. 4. Total the debit column; total the credit column. 5. Compare the total debits with total credits.

The first step in analyzing a business transaction is to describe the financial event. Place the following financial event analysis steps in the correct order.

1. Identify the property. 2. Identify who owns the property. 3. Determine the amount of increase of decrease.

Financial statements must be prepared in a specific order so that information from the preceding financial statement may be placed into the next financial statement. Organize the following statements into the correct order of preparation:

1. Income Statement 2. Statement of Owner's Equity 3. Balance Sheet.

Financial statements should be prepared in a specific order. Organize the statements below in the order of preparation:

1. Income statement 2. Statement of owner's equity 3. Balance Sheet

Using the accounting cycle, identify the correct order that financial data flows through the accounting system:

1. Source documents are analyzed. 2. Transactions are recorded in the general journal. 3. Transactions are posted from the general journal to the general ledger. 4. Financial information is proved, adjusted, and summarized on the worksheet. 5. Financial information is reported on financial statements.

Arrange the following sections of the statements of owner's equity, for a one year period, in the correct order. ↑↓ Place these in the proper order.

1. Title 2. Capital, January 1, 2016 3. Net Income 4. Less withdrawals 5. Increase in Capital 6. Capital, December 31, 2016

Singh Consulting Company's general ledger shows a beginning credit balance in the T. Singh, Capital account of $600. The closing entries resulted in a debit to the account of $300 and a credit to the account of $500. The ending balance in the T. Singh, Capital account is $__________________ (omit $/cents).

800

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

9. Explanation A transposition is an accounting error involving misplaced digits in a number. If the difference is evenly divisible by 9, there might be a transposition. A transposition occurs when the digits of a number are switched. For example if 357 is written or input as 375, the difference is 18, which is evenly divisible by 9.

Identify the correct statements about straight-line depreciation: Check all that apply.

= (cost - salvage value)/estimated useful life Method results in equal amount of depreciation being charged each accounting period.

Identify the correct statement about straight-line depreciation: Check all that apply.

= (cost - salvage value)/estimated useful life. Method results in equal amount of depreciation being charged each accounting period.

Compare and contrast the three types of business entities.

A sole proprietorship is owned by one person. The owner is legally responsible for the debts and taxes of the business. A partnership is owned by two or more people. The owners are legally responsible for the debts and taxes of the business. A corporation is a separate legal entity from its owners. Note that all three types of business entities are considered separate entities for accounting purposes.

A written record of the assets, liabilities, and owner's equity of a business is called a(n) ___________________.

Account.

Define Accounting

Accounting is the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. Accurate accounting information is essential for making business decisions.

What are generally accepted accounting principles?

Accounting standards that are changed and refined in response to changes in the environment in which businesses operate.

Best consulting Co. issued a check for $1,000 to an office supply vendor in partial payment of an open account balance. This transaction would be recorded with a debit entry to the _________________ account:

Accounts Payable

Black Consulting Company purchased equipment for $5,000. This amount is to be paid in the 60 days. This Transaction would be recorded with a credit entry to the __________________ account.

Accounts Payable

Simmons Associates paid $2,000 to Office Mart as payment on account for Invoice 9923. This transaction would be recorded with a debit to which account?

Accounts Payable

Which of the following accounts would not be involved in any of the closing entries?

Accounts Payable

A company paid $500 by check for office supplies that it had previously purchased on credit. This transaction would debit the _________________ account, and credit the _________________ account.

Accounts Payable, Cash

Which of the following are helpful tools for students in this course?

All of these. Solutions to key problems, posted on the professor's web page. The Check My Work function in Connect. Lecture notes.

A chain of references that make it possible to trace information, locate errors, and prevent fraud is called the ___________________.

Audit Trail

Hernandez Associates provided services to a customer and collected $2,000 cash. This transaction would be recorded with a debit to which account?

Cash

Ito Consulting collected $5,000 from a credit customer. This transaction would be recorded with a debit to which account?

Cash

Sarah Woo invested $10,000 into her company. This transaction would be recorded by the company with a debit to which account?

Cash

Which of the following accounts is not closed?

Cash

Guzman Consulting Company paid $4,000 cash for a computer for the office. This transaction would decrease ______________ and increase _______________.

Cash and Equipment

Fortuna Consulting purchased supplies for $250 cash. Analyze this transaction and identify which of the following sections of the accounting equation would be increased or decreased:

Cash would decrease Supplies would increase

A company collected $980 cash from previously billed customers. This transaction would debit the __________________ account and credit the __________________ account

Cash, Accounts Receivable

A company collects $500 from a credit customer for an outstanding balance. This transaction would be journalized with a debit to the ____________________ account and a credit to the _______________________ account.

Cash, Accounts Receivable.

A company provides consulting services to a customer and collects $500 cash. This transaction would be recorded with a debit to the __________________ account and a credit to the ____________________ account.

Cash, fees income

An independent accountant who performs financial audits is a:

Certified Public Accountant (CPA) Explanation Only accountants who are CPAs may perform financial audits (that is, review of financial statements to assess their fairness and adherence to generally accepted accounting principles).

What are the names of three accounting job positions?

Clerk, Book Keeper and Accountant.

Accumulated depreciation is a ________________ asset account; therefore, it increases with a (debit/credit) ___________________.

Contra, Credit

On august 1, Super Flooring Company Paid $3,000 rent in advance for a three-month period. The $3,000 was debited to the Prepaid Rent account. The necessary adjustment at August 31 would include a (debit/credit) ___________________ to the prepaid rent account in the amount of $ _______________________ (omit $/cents).

Credit, $1,000

A company pays office salaries of $3,200. This transaction would (debit/credit) ___________________ the cash account, and (debit/credit) _________________ the salaries expense account.

Credit, Debit

A company purchased equipment for $2,000 in cash. This transaction would (debit/credit) ___________________ the cash account, and (debit/credit) ______________________ the equipment account.

Credit, Debit

An owner of a company withdrew $1,000 of his original cash investment. This transaction would (debit/credit) ___________________ the cash account, and (debit/credit) ________________________ the drawing account.

Credit, Debit

If an error is discovered before the entry is posted, the correction will be made:

Cross out the incorrect item and write the correct date above it.

Diya Associates performed services for $1,000 cash. This transaction would be recorded with which of the following entries?

Debit Cash for $1,000. Credit Fees Income for $1,000.

Diya Associates received $2,500 in cash from credit customers. This transaction would be recorded with which of the following entries?

Debit Cash for $2,500. Credit Accounts Receivable for $2,500.

Which of the following records depreciation for the period?

Debit Depreciation Expense, credit Accumulated Depreciation

On December 1, 2013, Seasons Company purchased a six-month insurance policy for $6,000. What is the adjusting entry to record insurance expired at December 31, 2013?

Debit Insurance Expense, $1,000, credit Prepaid Insurance, $1,000

A purchase of office equipment for $380 cash is journalized as:

Debit Office Equipment; Credit Cash

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

Anna Conda Landscaping service received a bill for the utilities used during September. The bill will be paid in October. The journal entry to record the utility bill received is:

Debit Utilities Expense; Credit Accounts Payable

A company completed services and billed customers for $800. This transaction would (debit/credit) __________________ the accounts receivable account, and (debit/credit) __________________ the fees income account.

Debit, Credit

An double-entry accounting system involves recording the effects of each transaction as:

Debits and Credits

On January 1, ABC Catering purchased an oven for $5,000. The oven is expected to last five years and have no salvage value. Select the adjusting entry made on December 31, to record the depreciation of the oven for one year.

Depreciation Expense........... $ 1,000 Accumulated Depreciation-Equipment...... $ 1,000 Explanation ($5,000−0)/5 years = $1,000

A special type of owner's equity account set up to record the owner's withdrawal of cash from the business is called the _______________ account.

Drawing

The post closing trial balance should show zero balances for which of the following accounts types: Check all that apply.

Drawing Expense Revenue

Which of the following items are true regarding preparation of the balance sheet:

Ending capital is carried from the statement of owner's equity to the balance sheet.

Identify the correct steps to prepare a trial balance: Check all that apply.

Enter the trial balance heading. Total the debit column; total the credit column. Enter the ending balances of each account in the appropriate debit or credit column

Which of the following decreases owner's equity?

Expenses Explanation Expenses and withdrawals decrease owner's equity. Revenues increase (rather than decrease) owner's equity. Cash is an asset, and in and of itself, has no impact on owner's equity. Likewise, liabilities have no impact on the total of owner's equity, without knowing what else might have been impacted when the liability was created.

Which of the following types of accounts normally have debit balances?

Expenses and Assets Explanation Asset, expenses, and the owner's drawings account normally have debit balances because those accounts increase with debits. On the other hand, liabilities, revenues, and the owner's capital account normally have credit balances because those accounts increase with credits.

When a business collects an account receivable:

Explanation The collection of accounts receivable increases the cash account but decreases accounts receivable by the same amount, resulting in no change for the total assets. Revenues and owner's equity are not affected by the collection, as the revenue is recorded when earned, not when the payment is received. The fundamental accounting equation remains in balance.

A company has assets 0f $56,320 and liabilities of $29,500. True or false: The owner's equity is $85,820.

False

A company has equipment that cost $24,000, with accumulated depreciation of $4,000. True or false: the book value of the equipment is $28,000.

False

A list of the accounts used by a business to record financial transaction is called the trial balance.

False

Debit entries increase asset, drawing, expense and liability accounts.

False

Examples of long-term assets include cash, accounts receivable, supplies, equipment, buildings and land.

False

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

False

Increases in assets and revenue are both recorded with debits.

False

The entry to transfer net income to the owner's capital account would include a debit to the owner's capital account and credit Income Summary.

False

The normal balance side of a liability account is the debit side.

False

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

False

Net income appears on which two financial statements?

Income Statement Statement of owner's equity

A special owner's equity account that is used only in the closing process to summarize the results of operations (net income or net loss) is called the

Income Summary

The __________________ keeps account records on a special form that makes it possible to record all data efficiently.

Ledger

The cash account is always increased on the (left/right) _____________________-hand side of the T account.

Left

The supplies account is always increased on the (left/right) ____________________-hand side of the T account.

Left.

Identify which of the following items appear on an income statement: Check all that apply.

Net income Fees income Supplies Expense

The statement of owner's equity uses which of the following items from a worksheet:

Net income from the income statement.

The Income Statement section of the worksheet shows total debits of $700 and total credits of $1,000. The income Statement will show:

Net income totaling $300. When credits (revenue accounts) are less than debits (expense accounts), the difference results in net loss.

A company's worksheet for the month of March showed the following totals in the Income Statement Section: total debits of $11,000; and total credits of $8,000. These totals can be used to determine that:

Net loss equals $3,000.

Identify which of the following are true regarding the use of a worksheet: Check all that apply.

Permits quick preparation of the financial statements. Helps determine that all adjustments have been made. Should not be used to report to external parties.

The process of transferring the data from the journal into the ledgers is called:

Posting

A company pays $2,400 cash to prepay the next two months rent. This transaction would be journalized with a debit to the ____________________ account and a credit to the ___________________ account.

Prepaid Rent, Cash

The financial interest in a business is called (assets/liabilities/equity) ______________________________.

Proprietorship

Examples of business transactions include: Check all that apply.

Purchases Sales Payments Receipts of cash

Gill's Home Repairs Co. wrote a $1,000 check to Raj Gill for Personal use. This transaction would decrease cash and decrease:

Raj Gill, Capital

On July 1, Sidney Consulting Services paid $18,000 for 12 months of advance rent on its office building. Select the adjusting entry made on December 31, to record the amount of rent that had expired during the year.

Rent Expense........... $ 9,000 Prepaid Rent................ $ 9,000 Explanation: $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000)

One purpose of closing entries is to give zero balances to

Revenue and expense accounts.

An estimate of the amount that may be received by selling or disposing of an asset at the end of its useful life is called _________________ value.

Salvage

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

Securities and Exchange Commission (SEC). Explanation The SEC oversees the financial information provided by publicly owned corporations to their investors and potential investors. The SEC has delegated the job of determining proper accounting standards to the accounting profession. However, the SEC has the final say on matters of financial reporting by publicly owned corporations. To fulfill its responsibility, the accounting profession (specifically, the FASB) develops generally accepted accounting principles (GAAP). The FTC and IRS are also interested in financial information about privately and publicly owned companies. The FTC receives financial information from radio and television stations, while the IRS is interested in financial information to determine income taxes.

Which organization has the final say on financial accounting issues faced by publicly owned corporations?

Securities and Exchange Commission.

Match the following accounting error to the correction definition:

Slide - 980.00 instead of 98.00. Transposition - 45.00 instead of 54.00.

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

Statement of owner's equity and balance sheet

A company purchased office supplies for $500 in cash. This transaction would debit the ______________ account, and credit the ______________ account.

Supplies, Cash

Net income or loss can be calculated by taking the difference between the debit and credit columns in the Income Statement Section of the worksheet, and verified by:

Taking the difference between the debit and credit columns in the Balance Sheet Section of the worksheet.

Net income or loss can be calculated by taking the difference between the debit and credit columns in the Income statement Section of the worksheet, and verified by:

Taking the difference between the debit and credit columns in the Balance sheet section of the worksheet.

Tax accounting involves which of the following activities (select all that apply):

Tax Compliance Tax Planning

An account whose balances is transferred to another account at the end of the account period, such as fees income or wages expense, is called a ___________________________ account.

Temporary

Net income can be calculated by taking total credit less total debits in the Income Statement Section of the worksheet, and verified by taking:

The Balance Sheet Debit column subtracted from the amount in the Credit column.

Net income can be calculated by taking total credits less total debits in the Income Statement Section of the worksheet, and verified by taking:

The Balance Sheet Debit column subtracted from the amount in the Credit column.

Net income can be can be calculated by taking total credits less total debits in the Income Statement Section of the worksheet, and verified by taking:

The Balance Sheet Debit column subtracted from the amount in the Credit column.

How are generally accepted accounting principles developed?

The FASB develops proposed statements and solicits feedback from interested individuals, groups and companies. The FASB evaluates the opinion received and votes on the statement.

Describe the process used to develop generally accepted accounting principles.

The SEC has delegated the authority to develop generally accepted accounting principles to the accounting profession. The Financial Accounting Standards Board handles this task. A series of steps used by the FASB includes issuing a discussion memorandum, an exposure draft, and a statement of principle. The SEC oversees the Public Company Accounting Oversight Board that was created by the Sarbanes-Oxley Act. The Board regulates financial reporting by accountants and auditors of publicly held companies. Each year, firms that sell stock on stock exchanges or in over-the-counter markets must publish audited financial reports that follow generally accepted accounting principles. They must submit their reports to the SEC. They must also make the reports available to stockholders.

Which of the following is not a provision of the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act allows accountants to offer a broad range of consulting services to publicly traded companies that they audit. Explanation The Sarbanes-Oxley Act prohibits (rather than allows) accountants from offering a broad range of consulting services to publicly traded companies that they audit. The Sarbanes-Oxley Act does require accounting firms to change the lead audit or coordinating partner and the reviewing partner for a company every five years. Additionally, it is a felony to "knowingly" destroy or create documents to "impede, obstruct or influence" any existing or contemplated federal investigation.

Which of the following are correct statements about the process of journalizing in the general journal:

The account that is being credited should be slightly indented within the description column. The description should refer to the source of the information.

Which of the following statements is correct?

The cost of supplies used represents an expense of the business.

Identify which of the following are correct statements about the process of journalizing in the general journal:

The debit is recorded on the first line of the entry. The description should refer to the source of the information. The date should be entered year first, then the month and day.

Which of the following accounts will not normally have a zero balance after the closing entries have been posted?

The owner's capital account

The Net Income amount from the Income Statement is used as a line item on which statement?

The statement of owner's equity Explanation The amount of net income is added to beginning capital on the statement of owner's equity in order to derive the ending balance of the owner's capital.

A compound entry in the general journal is made to close expense accounts.

True

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

True

After the closing entries are posted, the balance of the owner's capital account is equal to the Owner, Capital amount shown on the balance sheet.

True

When cash is paid to a creditor, the firm's liabilities decrease.

True

Identify which of the following accounts are temporary accounts:

Utilities Expense Fees Income

Rory Consulting wrote a check for $250 to pay for the monthly utility bill. This transaction would be recorded with a debit to which account?

Utilities Expense.

Identify the accounts that would not appear on a company's balance sheet:

Withdrawals

On October 25, 2019, the company paid $33,600 rent in advance for the six-month period (November 2019 through April 2020). On December 31, 2019, the adjustment for expired rent would include:

a $11,200 debit to Rent Expense. Explanation $33,600/6 months = $5,600 per month; 5,600/mo. * 2 months = $11,200

The Cash account has a $15,000 debit balance on January 1. On January 2, a $5,000 credit entry and a $7,000 debit entry are posted to the Cash account. The balance of Cash after these entries are posted is

a $17,000 debit balance.

The Accounts Payable account has a $5,000 credit balance. An entry for the payment of $2,000 on the amount owed is recorded and posted. The new balance of the Accounts Payable account is:

a $3,000 credit balance. Explanation The payment would reduce the normal credit balance of the accounts payable account by $2000, with the remainder of $3,000, a normal credit balance. ($5,000 - $2,000 = $3,000)

On December 1, 2013, the company paid $24,000 rent in advance for a six-month period (December 2013 through May 2014). On December 31, 2013, the adjustment for expired rent would include

a $4,000 credit to Prepaid Rent.

Davarshi Delivery Co. owns three delivery vehicles, and a small building and land where the vehicles are stored. These items are known as Devarshi Delivery Co.'s ____________________.

assets

The balance sheet reports a business's financial condition on a certain date. Identify which of the following items are found on a balance sheet:

assets liabilities owner's equity

When equipment is purchased on credit,

assets and liabilities increase. assets increase and liabilities increase. Explanation When equipment is purchased on credit, the business receives property in the form of equipment and a creditor now has a financial interest in the business. The equipment, an asset, increases. Purchasing on credit is also referred to as buying on account. Amounts that a business must pay in the future are known as accounts payable. Accounts payable, a liability, also increases. The fundamental accounting equation remains in balance.

When the owner invests cash in a business,

assets and owner's equity increase. assets increase and owner's equity increases. Explanation When the owner invests cash in a business, the business receives property in the form of cash and the owner now has a financial interest in the business. The cash, an asset, increases. The owner's financial interest in the business, called equity or capital, also increases. The fundamental accounting equation remains in balance.

When the owner withdraw cash for personal use:

assets decrease and owner's equity decreases.

When the owner withdraws cash for personal use,

assets decrease and owner's equity decreases.

When the owner withdraws cash for personal use:

assets decrease and owner's equity decreases. Explanation Withdrawals are funds taken from the business by the owner for personal use. When the owner withdraws cash for personal use, the firm's cash, an asset, decreases. Withdrawals are not a business expense, but a decrease in the owner's equity. The fundamental accounting equation remains in balance.

Modern products paid cash to a creditor. To record this transaction, the accountant would:

debit Accounts Payable and credit Cash. Explanation Cash is reduced by the payment, and therefore the cash account, an asset, is credited. The amount owed the creditor is reduced by the payment, and therefore the account payable account is debited.

The journal entry to record an investment of cash by John Lee, owner of the business, would

debit Cash and credit John Lee, Capital

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

debit Income Summary $11,000; credit Capital $11,000

On September 1, 2019, Jay Walker Company purchased a one-year insurance policy for $1,560. The correct adjusting entry on December 31, 2019, is:

debit Insurance Expense $520; credit Prepaid Insurance $520 Explanation $1,560/12 months = $130 per month × 4 months = $520

On November 1, 2019, Peaches Consulting Service paid $4,800 for 12 months of advance rent on its office space. The correct adjusting entry on December 31, 2019, to show the amount of rent that had expired would include:

debit Rent Expense $800; credit Prepaid Rent $800 Explanation $4,800/12 months = $400 per month * 2 months = $800

A total of $3,200 in supplies was 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:

debit Supplies Expense $2,500; credit Supplies $2,500

A total of $3,950 in supplies was purchased during the year. At the end of the year $1,000 of the supplies were left. The adjusting entry needed at the end of the year is:

debit Supplies Expense $2,950; credit Supplies $2,950 Explanation $3,950 - $1,000 = $2,950

Woo Consulting Services purchased office supplies on account for $500. This transaction would be recorded with which of the following entries?

debit Supplies for $500. credit Accounts Payable for $500.

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

debit to Accounts Receivable and a credit to Fees Income. Explanation The journal entry to record the sale of services on credit should include a debit to Accounts Receivable (to increase this asset account) and a credit to Fees Income (to increase this revenue account, which increases owner's equity).

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

debit to Cash and a credit to Accounts Receivable. Explanation The journal entry to record the receipt of cash from clients on account would include a debit to Cash (to increase this asset account) and a credit to Accounts Receivable (to decrease this asset account).

Woo Consulting Services purchased office equipment on account for $3,500. This transaction would be recorded with which of the following entries? Check all that apply.

debit to Equipment for $3,500. credit to Accounts Payable for $3,500.

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. Explanation 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 (which increases this asset account) and a credit to Cash (which decreases this asset account). The amount cannot be recorded as an expense until the month in which the office space is occupied.

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 Cash. Explanation 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 (to increase this account, which decreases owner's equity) and a credit to Cash (to decrease this asset account). The payment of personal expenses cannot be recorded as an expense of the business.

The adjusting entry to account for use of supplies consists of a:

debit to Supplies Expense and a credit to Supplies. Explanation The adjusting entry to account for the use of supplies consists of a debit to Supplies Expense (to increase that expense account) and a credit to Supplies (to decrease that asset account).

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

debit to Utilities Expense and a credit to Cash. Explanation The journal entry to record the payment of a monthly utility bill would include a debit to Utilities Expense (to increase this expense account, which decreases owner's equity) and a credit to Cash (to decrease this asset account).

On March 1, Lucky Advertising Company paid $600 for a six-month insurance policy. The $600 was debited to the Prepaid Insurance account. The necessary adjustment on March 31 will include which of the following entries: Check all that apply.

debit to insurance expense for $100. credit to prepaid insurance $100.

On August 1, a firm bought supplies for $500. The $500 was debited to the Supplies account. An inventory of supplies at the end of August showed that items costing $200 were on hand. The necessary adjustment will include a:

debit to supplies expense for $300.

When revenue is earned from charge-account sales, the accountant

debits Accounts Receivable and credits a revenue account.

Kim's cleaning Co. owed an outstanding balance to Industrial Supplies Co. for cleaning supplies purchased in August. On September 15, Kim issued a check to Industrial Supplies for $295 to pay the balance in full. The transaction on September 15 would have what affect on Kim's accounting equation?

decrease accounts payable decrease cash

Sanchez Painting Co. hired two employees during the month of March. At the end of the month, Sanchez paid the employees a total of $10,000. This transaction would (increase/decrease) __________________ cash and (increase/decrease) __________________ wages expense.

decrease and increase

Simmons Personal Training Co. issued a $500 check to the owner for personal use. This transaction would have which of the following effects on the accounting equation:

decrease cash decrease capital

On Friday, Betty's Grooming paid its employees a total of $2,000. This transaction would have which of the following effects on the accounting equation:

decrease cash increase wages expense

San Company calculated equipment depreciation for the month of $800. The necessary adjusting entry will include a debit to _____________________ expense and credit to ___________________ deprecation in the amount of $800.

depreciation, accumulated

A company purchased equipment for $2000 on account. The balance is due in 90 days. This transaction would debit the ____________________ account, and credit the _____________________ account.

equipment, accounts payable

Identify which of the following types of accounts are closed to the income summary account: Check all that apply.

expense revenue

The costs that a business incurs in order to operate are called ______________________.

expenses

After the revenue and expense accounts of V. Nayak Repair Co. are closed, the Income Summary account has a credit balance of $13,000, which is net income for the month. The journal entry to close income summary includes a debit to the __________________ account.

income summary

C. George Delivery Co.'s adjusted trial balance shows two expense accounts: wages Expense with a debit balance of $12,000 and Advertising Expense with a debit balance of $3,000. The journal entry to close these accounts will include a debit to which accounts(s):

income summary

The normal balance of an account is the:

increase side of the account. Explanation The normal balance of an account is the increase side of the account.

Chloe's Child Care issued a check for $250 to pay the utilities bill. This transaction would decrease cash and:

increase utilities expense

When analyzing the supplies account:

increases - are shown on the left-hand side of the T account. decreases - are shown on the right-hand side of the T account.

Jose Guzman Co. provides $700 of painting services to a customer and allows the customer 30 days to pay. This transaction increases painting revenue and:

increases accounts receivable

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

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

The total of the figures on the left side of a Cash account is $33,800. The total of the figures on the right side is $15,700. The balance of this account:

is $18,100 and would be recorded on the left side of the account. Explanation $33,800 debit (left) - $15,700 credit (right) = $18,100 debit (left).

The equipment account is always increased on the (left/right) ___________________-hand side of the T account.

left

a company's balance sheet lists the following categories (select all that apply):

liabilities assets owner's equity

Owners and managers need financial information in order to

make business decisions.

The income statement shows the results of the business operation for a specific period of time. When revenue is greater than expenses for the period, the result is called ____________________________________.

net income

on the income statement, when expenses are greater than revenue, the result is called a:

net loss

The process of transferring data from the journal to the ledger is known as:

posting. Explanation The process of transferring data from the journal to the ledger is known as posting.

Expense items acquired, recorded, and paid for in advance of their use are called:

prepaid expenses prepaid rent

Angel Consulting paid six months of liability insurance in advance, for a total of $3,600. This transaction would decrease cash and increase:

prepaid insurance

The Sarbanes-Oxley Act Includes which of the following provisions:

prohibits the destruction or creation of documents to impede a federal investigation.

The Posting Reference column of a journal is used to:

record the number of the ledger account to which the information is posted. Explanation The posting reference recorded in the journal is the general ledger account number that was impacted by the account listed in journal and is used to trace the transaction to its impact on account balances.

Amounts earned from the sale of good or services is called _______________.

revenue

The accounts payable account is always increased on the (left/right) _____________________-hand side of the T account.

right

The owner's capital account is always increased on the (left/right) __________________-hand side of the T account.

right

When J. Simmons, the owner, invests in her business, the transaction would be entered on the:

right side of the J. Simmons, Capital T account. Explanation When J. Simmons, the owner, invests in her business, the transaction would be entered on the left side of the Cash account (to increase that asset account) and the right side of the J. Simmons, Capital T account (to increase that owner's equity account).