Accounting Chapter 6 Test
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?
