Financial Accounting Exam 1

Jacob's Chocolates had beginning retained earnings of $ 4,000; net income of $10,000 ; and dividends of $300, calculate the ending balance in the retained earnings account .

$13,700

Sheldon Company had beginning retained earnings of $1,000 , net income of $ 5,000, and dividends of $250 . The ending balance in the retained earnings account is

$5,750

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

A chart of accounts

From the following statements identify the correct def of a liability

A company's obligation to provide assets, products or services to others

It is a collection of all accounts with their activity and balances that exist in a business.

A general ledger

It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred

A journal

It is a list of each account and its balance at any given time and is used to verify that debits = credits

A trial balance

Identify what accounting is by selecting the correct statement

Accounting is a system that identifies, records and communicates financial information

To record a sale on account, the company should debit:

Accounts receivable

An ____ is a supplementary record created to maintain a separate account for each customer

Accounts receivable ledger

The ____ of accounts receivable method uses several percentages to estimate the allowance

Aging

Notes receivable is considered an

Asset

When financial statements are prepared , unexpired prepaid accounts are recorded as ____ and the expired portion of the prepaid account is reported as a(n ) ______.

Assets expense

Prepaid accounts are ________ that represent prepayments of future expenses and are increased with a ______.

Assets Debit

On August 1 , Harris Co. determines that it cannot collect $200 from its customer , L. Dash . Harris Co. uses the direct write - off method , so they will record the write- off of this account by debiting :

Bad debt expense

An expense of selling on credit accounts of customers who do not pay Also called uncollectible accounts

Bad debts

The statement reports the financial position of a company at a point in time. The statement reports the equality of the accounting equation at any point in time. The statement reports assets, liabilities and equity at a point in time.

Balance sheet

Examples of assets

Building, cash, accounts receivable

To record a customer's check in full payment for a sale that was made the prior month , the company should debit the ______ account.

Cash

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Chart of accounts

The allowance for doubtful accounts is a ____ asset account and has a normal credit balance

Contra

If customers pay at an unexpected date under the allowance method then we make 2 entries

Debit accounts receivable credit allowance for D.A then debit cash credit accounts receivable

Allowance method

Debit allowance for D.A credit Accounts receivable

Zino Company determines that a customer balance of $200,from Hollis Co. is uncollectible . Zino uses the allowance method to account for bad debts . The entry to write off the uncollectible balance will include a:

Debit allowance for D.A credit Accounts receivable

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit cash, credit common stock

Smith Company purchased $100 of supplies for her business and paid immediately . She would record this transaction in the accounting equation by which of the following ?

Decrease cash, increase supplies

Which set of accounts below would have a normal debit balance?

Expenses, Dividends, Cash

A(n) _____ user of accounting information does not directly run the organization.

External

The SEC has delegated the task of standard setting to

FASB

T/F: assets are claims (by creditors) against the company

False

The details behind the financial statement are often disclosed in the

Footnotes to the statement

The principle that states that a company should report the details behind the financial statements which would impact users decisions is called the

Full disclosure principle

The ______ is a record containing all accounts used by a company

General ledger

The accounting assumption which presumes that a business will continue operating is called the

Going concern

The ____ is the first financial statement to be prepared

Income statement

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation .

Increase cash by $4,000, increase common stock by $4,000

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock . Record this transaction in the accounting equation of the new business by:

Increasing cash, increasing common stock

Charge from using money loaned from one entity to another

Interest

Which statement below defines accounting?

It identifies, records, and communicates business transactions.

The accounting assumption related to expressing transactions and events in monetary units is called the

Monetary unit

An asset consisting of a written promise to receive a definite sum of money on demand or on specific future dates

Notes receivable

Choose the most accurate definition of dividends

Outflows of cash or other assets paid to the owners of a corporation

The person whom the note is payable

Payee

Transferring entries from the journal to the ledger is called

Posting

An employee that is having trouble paying his personal bills might exhibit the following fraud factor

Pressure

Identify which of the following lists of accounts would belong on the statement of retained earnings

Retained earnings and Dividends

Given the list of accounts below, identify which of them would appear on a balance sheet. (Check all that apply.)

Retained earnings(12/31), Equipment, Cash, Accounts payable, Supplies

The ____ recognition principle states that revenue is recognized when goods or services are provided to customers and at an amount expected to be received

Revenue

Which organization has the legal authority to create generally accepted accounting principles

SEC

A ____ identifies and describes transactions and is the basis for entering an event into the accounting system.

Source document

Payroll records purchase order sales receipt checks

Source documents

To record the purchase of supplies for cash, the correct entry into the accounting equation would include an increase to ______and a decrease to _____

Supplies cash

common and unique accounts used by a business. which accounts are being used by a company and their balances at any given time. increases and decreases in all accounts in a business.

The general ledger

Which of the following statements best represents the accounting equation

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners

Bad Debts % of sales

Total credit sales x % uncollectible= adjustment debit bad debts expense credit allowance for D.A

The allowance for doubtful accounts is a contra asset account that equals

Total uncollectible accounts

T/F: A T-account may be used as a tool to visualize the effects of a transaction. A T-account will show the debit and credit effects of transactions. A T-account represents a ledger account .

True

T/F: A reporting period can be one month, one quarter or one year. A one -year reporting period is known as the fiscal year. A reporting period is determined by the business .

True

T/F: Dividends are resources paid to the owners of a corporation

True

T/F: Dividends are resources paid to the stockholders

True

T/F: Notes receivable is classified as an asset. It is the promise of another entity to pay a specific sum of money on a specified future date. Another name for a note receivable is a promissory note.

True

T/F: Posting means to transfer journal information to a ledger .

True

T/F: the accounting equation must always remain in balance

True

A graphical presentation of data to help in understanding their significance is called data

Visualization

Written promise to pay a specified amount of money

promissory note

A ____ is an amount due from another party

receivable

The ____ method of estimating bad debts uses both past and current receivables information to estimate the allowance amount. Specifically, each receivable is classified by how long it is past its due date.

Aging of receivables

The _____ method of accounting for bad debts records estimated bad debts expense in the period when the related sales are recorded

Allowance

A company has $ 150,000 of credit sales during the year and estimates that $ 1,000 of its accounts receivable will be uncollectible . The adjusting entry will include a credit to:

Allowance for D.A

Which of the following statements defines an asset

An amount owned Resources with expected future benefit Resources controlled by the business

Identify the correct definition of an asset

An asset is a resource that a business owns or controls

A process of analyzing data to identify meaningful relations and trends is called data ______

Analytics

On Nov.1, Lyons Company pays $2,400 cash for supplies . Show how to use T-accounts to record this transaction by selecting the correct answer below

Cash credited supplies debited

What is considered cash

Coins, money orders, checks

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common stock, Equipment, Accounts payable

An account is a record of increases and ______ in a specific asset, liability, equity, revenue or expense.

Decreases

The _____ method of accounting for bad debts records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense

Direct write off

The statement of retained earnings explains changes in equity from net income(or loss) and from any ____ over a period of time

Dividends

When using the accounting equation, recording the purchase of equipment for cash would include an increase to the ______ account and a decrease to the _____ account.

Equipment cash

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by

Increasing equipment, decreasing cash

A 90- day note is signed on October 21. The due date of the note is:

January 19th

When entering transactions in a ______ Total dollar amount of debits must equal the total dollar amount of credits. Credited accounts should be indented.

Journal

A ____ is. a business entity legally separate from its owners who are referred to as members

LLC

An amount owed to a creditor A creditors claims against the assets of a business these are a ______

Liability

A trial balance is a ___ of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of ____ account balances

List credit

One who signed the note and promised to pay at maturity

Maker

Day that the principal and interest must be paid

Maturity date

The ____ principle states that accounting information is based on actual cost

Measurement

Amount that the signer of a note agrees to pay back when it matures, not including interest.

Principal

To compute interest due on a maturity date , multiply _____ times _____ times time expressed in fraction of year

Principal interest

A _____ is a business entity owned by one person

Proprietorship

According to the fraud triangle, the three factors that must exist for a person to commit fraud are .

Rationalization Pressure Opportunity

Generally Accepted Accounting Principles (GAAP) wants information to have

Relevance Faithful representation

A _______ represents a ledger account and is a tool used to understand the effects of one or more transactions.

T-account

What are the generally accepted accounting principles

The concepts and rules that govern financial accounting practice.

T/F: Prepaid accounts are assets that represent prepayments of future expenses

True

T/F: The accounting equation must always remain in balance . After recording the transaction, total assets will always equal total liabilities plus equity

True

T/F: after recording the transaction total assets will always equal total liabilities plus equity

True

amounts due from customers for credit sales

accounts receivable

An external user of accounting

does not directly run the organization