Accounting Chapter 6 Test

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cash basis of accounting

Reporting income when the cash is received and expenses when the cash is paid

True

T/F: Adjusting entries must be posted to the general ledger accounts

False

T/F: Journals, ledges, and work sheets are considered permanent records.

True

T/F: Net income on a work sheet is calculated by subtracting the INcome Statement Debit column total from the Income statement credit column total

False

T/F: Only accounts with balance are listed on a trial balance

False

T/F: The accounting concept Consistent Reporting is being applied when a delivery business reports reveune for the number of deliveres made one year and the amount of revenue recieved for the deliveres made the next year

True

T/F: The balance ikn Prepaid Insurance after adjusting entries are recorded represents the amount of insurance premium still remaining

True

T/F: The balance in Supplies Expense after adjusting entries are recorded represents the amount of supplies used during the fiscal period.

False

T/F: The best way to prevent erros is to use a calculator

False

T/F: The four questions asked when analyzing an adjustment are : Why? Where? When? and How?

False

T/F: The heading on a work sheet contains the name of the business, the name of the report, and the date of the report

False

T/F: The income statement and balance sheet are prepared from the Trial Balance columsn on the work sheet.

False

T/F: The two accounts affected by the adjustment for insurance are Prepaid INsurance Expense and Insurance.

True

T/F: The two accounts affected by the adjustment for supplies are Supplies and Supplies expense.

income statement

A financial statement showing the revenue and expenses for a fiscal period

balance sheet

A financial statement that reports the value of a business's assets, liabilities, and owner's equity on a specific date

fiscal year

A fiscal period consisting of twelve consecutive months

Prepaid insurance

Cash paid for an expense in one fiscal period that is not used until a later period

adjustments

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

An expense should be reported in the same fiscal period that it is used to produce revenue.

Explain how the concept of Matching Expenses with Revenue relates to adjustments.

True

T/F: Totaling and ruling the Adjustments columns of a work sheet are necessary to prove the equality of debits and credits

True

T/F: If errors are found on a work sheet, they must be erased and corrected before any further work is completed.

True

T/F: Most errors occur in doing arithmetic

False

T/F: A fiscal period must be 12 months in length

True

T/F: If the difference between the totals of Debit and Credit columns, it might be because a general ledger account balance was recorded in the wrong Trial Balance column.

True

T/F: When two column totals are not in balance on the work sheet, the difference between the two toals is calculated and checked.

Consistent Reporting

The accounting concept _____________________________ is applied when the same accounting procedures are followed in the same way in each accounting period.

net loss

The difference between total revenue and total expenses when total expenses are greater

net income

The difference between total revenue and total expenses when total revenue is greater

fiscal period/accounting period

The length of time for which a business summarizes its financial information and reports its financial performance

work sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

accrual basis of accounting

Generally accepted accounting principles (GAAP) require the use of the _____________________________________

Balance Sheet Credit column

In which Balance Sheet column is net income recorded on the work sheet?

Balance Sheet Debit column

In which Balance Sheet column is net loss recorded on the work sheet?

adjusting entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period

1. What is the balance of the account to be adjusted? 2. What should the balance be for this account? 3. What must be done to correct the account balance? 4. What adjustment is made?

List the four questions asked in analyzing an adjustment on a work sheet.

accrual basis of accounting

Reporting income when it is earned and expenses when they are incurred

Supplies Expense Insurance Expense

What accounts are increased from zero balances after adjusting entries for supplies and prepaid insurance are journalized and posted?

-Summarize general ledger account balances to prove that debits equal credits -Plan needed changes to general ledger accounts to bring account balances up to date -Separate general ledger account balances according to the financial statements to be prepared -Calculate the amount of net income or net loss for a fiscal period

What are the reasons that Accountants Use a Work Sheet?

There may be errors in the accounting records. There may be errors in calculations. An amount may be entered in the wrong column.

What are three errors that could occur when preparing a worksheet?

The difference between two column totals can be divided evenly by 9

What is one way to check for an error caused by transposed numbers?

Subtract the smaller total from the larger total to find the difference.

What is the first step in checking for arithmetic errors when two column totals are not in balance?

Name of the business, name of report, and date of report

What is written on the three-line heading on a work sheet?

Slide

What term is used to describe an error that occurs when numbers are moved to the right or left in an amount column?

Balance Sheet Credit column

Where is the information obtained to journalize adjusting entries?

All general ledger accounts are listed in the Trial Balance columns of a work sheet, even if some accounts do not have balances.

Which general ledger accounts are listed in the Trial Balance columns of a work sheet?

To update general ledger accounts at the end of a fiscal period

Why are adjusting entries journalized?


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