Tracking Assets and Sales

Judy just had her hair cut and styled. Her stylist, Monique, hands her a sales slip for $100 for the service. Judy takes the sales slip to the front desk and pays the $100 with her credit card. A. Cash sale B. Credit sale

A. Cash sale This was a cash sale.

What transactions impact assets? Select all that apply. A. Depreciation B. Accrued Employee Vacation Payable C. Inventory D. Received bill for repairs, due next week E. Sales transactions

A. Depreciation C. Inventory E. Sales transactions Assets are impacted by sales transactions, inventory, and depreciation.

Assets ($1,000 cash, $5,000 equipment) = Liabilities ($1,000 accounts payable) + Equity ($5,000) The cleaning business is hired to clean a personal office. They are paid $250 cash for their services. What accounts are affected by the cleaning job? A. Equity and Assets B. Equity and Liabilities C. Assets and Liabilities D. Equity only E. Assets only F. Liabilities only

A. Equity and Assets Equity and assets are affected by the cleaning job.

In a lease agreement which is the party who owns the asset and is renting it out? A. Lessor B. Lessee

A. Lessor

Assets ($1,000 cash, $5,000 equipment) = Liabilities ($1,000 accounts payable) + Equity ($5,000) Scenario 2: How does this $250 cash change the cleaning business's accounting equation? Let's balance it. Assets - $1,000 or $1,250 = Liabilities - $1,000 or $1,250 Equity - $5,000 or $5,250

Assets - $1,250 (Cash) = Liabilities - $1,000 (Accounts payable) Equity - $5,250

When the shirts are sold for a total of $4,000, you must calculate the cost of goods sold (COGS). To determine the COGS, subtract the total cost of the beginning inventory and purchases made during the accounting period from the total cost of the remaining inventory. The original purchase price of the shirts was $2,000, and an additional $300 was spent on shipping and handling. What is the COGS? A. $4,000 B. $2,300 C. $1,700

B. $2,300 To calculate COGS, subtract the total cost of the beginning inventory ($2,000) and purchases made ($300 shipping) during the accounting period from the total cost of the ending inventory ($0 as all shirts sold). This means COGS was $2,300.

What should you record as gross sales? A. $2,000 B. $4,000 C. $6,000

B. $4,000 Gross sales are $4,000.

Bob owns a landscaping business and just completed yard work for his customer, Susan. Bob leaves an invoice on the front door for the service. A. Cash sale B. Credit sale

B. Credit sale This was a credit sale.

To increase an asset you would? A. Credit B. Debit

B. Debit

The itemized bill of goods sold or services provided. A. Transaction journal B. Invoice C. Accounts payable D. Accounts receivable

B. Invoice

Compare the receipt to the journal entry. Is the date entered correctly? A. No. The date should be 4/21/2023, not 4/25/2023. B. No. The date should be 4/26/2023, not 4/25/2023. C. Yes. Everything is recorded correctly.

B. No. The date should be 4/26/2023, not 4/25/2023.

Which of the following describes bad debt? Select all that apply. A. Increases profit B. Reduces profit C. Appears as profit on a profit and loss report D. Appears as an expense on an income statement

B. Reduces profit D. Appears as an expense on an income statement Bad debt is recorded as an expense on the income statement and reduces a business's profit.

What is the importance of adding a disclosure to new financial reports after fixing inventory errors? A. To ensure the new reports are legally compliant B. To provide transparency and inform readers about the adjustments made C. To highlight the presence of errors in the financial statements D. To confuse readers with unnecessary information

B. To provide transparency and inform readers about the adjustments made Adding a disclosure to new financial reports after fixing inventory errors is important to provide transparency. It informs readers about the adjustments that were made, why they were necessary, and ensures that anyone reviewing the reports understands the changes made to the financial statements. This promotes transparency and helps readers accurately interpret the financial information.

When are promissory notes typically drafted? Select all that apply. A. When invoicing, as invoices and promissory notes are the same thing B. When one business provides a loan to another business, referred to as inter-company loans C. When converting overdue payments to a note and charging interest

B. When one business provides a loan to another business, referred to as inter-company loans C. When converting overdue payments to a note and charging interest Promissory notes are typically created for inter-business loans and when adding interest to overdue payments.

How businesses keep track of the money they are owed. A. Transaction journal B. Invoice C. Accounts payable D. Accounts receivable

D. Accounts receivable

In which statement would you find assets listed? A. Profit and loss statement B. Statement of cash flows C. Income statement D. Balacne Sheet

D. Balacne Sheet Assets, liabilities, and equity are all components of the balance sheet.

Sergio's shoe repair shop is working on classifying all their assets. Which of the following would classify as an asset? Select all that apply. A. A mobile shoe repair van B. Employee payroll C. Leather, rubber, and stitching materials D. Vendor invoices E. Shoelaces, shoe polish, and bunion pads

A. A mobile shoe repair van C. Leather, rubber, and stitching materials E. Shoelaces, shoe polish, and bunion pads Assets are anything that adds value to a business. Anything and everything that the business owns is an asset.

To decrease an asset you would? A. Credit B. Debit

A. Credit

Which of the following describes notes payable? Select all that apply. A. Money a business owes B. Invoice to a client C. Considered an asset D. Considered a liability

A. Money a business owes D. Considered a liability Notes payable is money that a business owes, and is considered a liability.

Which of the following would be classified as fixed (long-term) assets? Select all that apply. A. Patents and copyrights B. Accounts receivable C. Property, plant, and equipment (PP&E) D. Inventory E. Domain name and trademark F. Cash and cash equivalents

A. Patents and copyrights C. Property, plant, and equipment (PP&E) E. Domain name and trademark Long-term or fixed assets are acquired for the long-term benefit of the business, as they will be used beyond a year and are not quickly converted into cash. Examples include PP&E, patents, copyrights, domain names, and trademarks.

Assets such as six months of insurance premiums, or a subscription to a software program. A. Prepaid expenses B. Accounts receivable C. Intangible assets D. Investments

A. Prepaid expenses Prepaid expenses are expenses you've paid in advance, such as six months of insurance premiums. These are assets because the cost has already been incurred.

Sheera, the owner of a carpet and flooring business, had a great year last year and wants to invest some of her profits in a money market account. What type of asset would this be? Select the best answer. A. Fixed-intangible B. Current asset C. Fixed-accounts receivable D. Current-PP&E

B. Current asset A money market account is an investment and therefore is classified as a current or short-term asset.

In a lease agreement which is the party paying the rent to use the asset? A. Lessor B. Lessee

B. Lessee

What is the purpose of conducting regular inventory counts in a business? A. To ensure compliance with tax regulations. B. To identify discrepancies and prevent inventory shrinkage. C. To track customer preferences and buying patterns. D. To calculate the net profit of the business.

B. To identify discrepancies and prevent inventory shrinkage. Regular inventory counts help businesses identify differences between recorded inventory and the actual count. These counts help detect inventory shrinkage caused by theft, damage, or loss.

Money a customer owes after a number of months have passed with no payment. A. Accounts receivable B. Accounts payable C. Doubtful accounts D. Accounts uncollectible

C. Doubtful accounts

Which of the following is an example of raw materials? A. Finished computers in a retail store B. Shirts awaiting packaging in a warehouse C. Fabrics used in clothing manufacturing D. Completed orders waiting for shipment

C. Fabrics used in clothing manufacturing Raw materials are the basic materials or substances used in the production or manufacturing process of goods. Fabrics used in clothing manufacturing are considered raw materials as they are transformed and processed further to create finished clothing items.

Alan is the owner of a barbecue restaurant. He wants to add a soft-serve ice cream option to his menu, but he doesn't have a soft-serve ice cream machine and can't afford to purchase it outright yet. Which option should he choose to acquire the machine? A. Borrow one from another restaurant until he can afford his own B. Purchase it anyway and just go deeper in debt C. Lease it with a capital/financing lease D. Lease it with an operational lease

C. Lease it with a capital/financing lease Because he intends to take ownership of the machine, he should use a capital or financing lease.

Business A loans business B $25,000, at a 10% compounded annual interest rate, to be paid back in two months. Business B's first payment, due in November, is half the loan amount principal plus interest. What's the interest? A. $102.74 B. $106.16 C. $205.48 D. $212.33

C. $205.48 The interest due on the first payment is $205.48. 25000*.1*(31/365)

The store later had to pay $500 cash to acquire a rare original of choreography notes from a Broadway musical. Recording this transaction would include: A. A debit to the cash account of $500 because cash is being reduced B. A debit to the liabilities account of $500 because the insurance is increasing C. A credit to the cash account of $500 because the cash is being reduced D. A debit to the liabilities account of $500 because the insurance is decreasing

C. A credit to the cash account of $500 because the cash is being reduced You would credit the cash account $500 because the cash is being reduced. Remember, a credit decreases an asset account, and a debit increases it.

Marisol, the owner of a vacation rental business, won an award for best rental in the state. The award came with a cash prize of $1,500. What should you record? Select the best answer. A. A credit to the cash account of $1,500 B. A debit to the revenue account of $1,500 C. A debit to the cash account of $1,500 D. A credit to the accounts receivable account of $1,500

C. A debit to the cash account of $1,500 Because cash is increasing, you would debit of the cash account $1,500.

Money a business owes to others for goods or services. A. Transaction journal B. Invoice C. Accounts payable D. Accounts receivable

C. Accounts payable

Copyrights, patents, intellectual property, domain name, trademarks, and goodwill all fall into this category. A. Investments B. Prepaid expenses C. Intangible assets D. Property, plant, and equipment

C. Intangible assets Intangible assets are assets that have no physical manifestation, such as copyrights, patents, and intellectual property.

The business purchased inventory as follows: 100 units at $5 each on January 1st 200 units at $7 each on March 1st 150 units at $6 each on May 1st If the business sold 250 units of the product in July, what would be the value of the remaining inventory according to the FIFO method? A. $100 B. $550 C. $1,250 D. $1,800

C. $1,250 To determine the ending inventory value, we need to consider the remaining units that were not sold. The remaining inventory consists of: 50 units from March 1st (200 - 150) 150 units from May 1st To calculate the value of the ending inventory, we multiply the number of units by their respective costs: Ending inventory value = (50 units x $7 per unit) + (150 units x $6 per unit) Ending inventory value = $350 + $900 Ending inventory value = $1,250 Therefore, the value of the ending inventory for the business, according to the FIFO method, would be $1,250.

After the first payment, business B owes $12,500 of the initial $25,000 loan, at a 10 percent compounded annual interest rate. Business B's second payment is the remaining amount, plus interest, due in January. What's the interest? A. $212.33 B. $205.48 C. $106.16 D. $102.74

C. $106.16 The interest due on the second payment is $106.16. 12500*.1*(31/365)

After posting the cleaning service to the books, what is the new equity account balance? A. $250 B. $1,250 C. $5,250

C. $5,250 $5,250 is the new equity account balance.

A theatrical memorabilia store received a donation of $1,000 cash. As their bookkeeper, what would the entry to the cash account be? A. A credit to assets of $1,000 B. A credit to liabilities $1,000 C. A debit to assets of $1,000 D. A debit to liabilities $1,000

C. A debit to assets of $1,000 Your journal entry would include a debit of $1,000 to cash, an asset account, because cash is increasing.

When a business realizes a customer will not repay a debt, the money moves to accounts uncollectible. How is money from accounts uncollectible posted? A. As loss B. As liability C. As bad debt

C. As bad debt Money from accounts uncollectible is posted as bad debt.

How frequently should inventory be counted and inventory errors corrected? A. Once a month B. Once a quarter C. At least once a year D. Only when financial statements are reviewed

C. At least once a year Inventory should be counted and inventory errors corrected at least once a year. While some businesses may count inventory more frequently, it's essential to ensure that all inventory is counted and any errors are addressed at least once annually.

A business records cash sales through a POS system. What type of record is that considered? A. Manual B. Standard C. Automatic D. Physical

C. Automatic By processing transactions through a POS system, a business is making an automatic record of the sale.

"The cost of the soft-serve machine was $4,500. I paid $1,000 down and financed $3,500 on a lease." What actions should the bookkeeper take when recording this purchase to complete the journal entry so it is properly balanced? Select all that apply. A. Credit PP&E $4,500 B. Debit PP&E $3,500 C. Credit Lease Payable $3,500 D. Debit PP&E $4,500 E. Credit Lease Payable $4,500

C. Credit Lease Payable $3,500 D. Debit PP&E $4,500 You debit PP&E the full amount of the machine because assets have a natural debit balance. And you credit Lease Payable the remainder of the amount left to be paid because liabilities have a natural credit balance.

A trading card business made a sale of one of their rare trading cards for $8,000. What actions should you take to record the sale? Select all that apply. A. Credit the cash account $8,000 B. Debit the sales (revenue) account $8,000 C. Credit the sales (revenue) account $8,000 D. Debit the cash account $8,000

C. Credit the sales (revenue) account $8,000 D. Debit the cash account $8,000 By debiting cash and crediting sales, you will properly record the sale.

A plumbing and heating business purchases a new pump for their truck. Which type of asset would this be? Select the best answer. A. Fixed-Intangible B. Current-PP&E C. Fixed-PP&E D. Current-Inventory

C. Fixed-PP&E A pump is equipment and an asset that is intended for long-term use. It is therefore a fixed asset and classified as PP&E.

Priya, the owner of an antique store needs to know how her business is doing and how she can improve the performance. Which statement should Priya be looking at to know how she can improve the performance of her business? A. Balance statement B. Cash flow statement C. Income statement (P&L)

C. Income statement (P&L) The income statement (P&L) will help her know how the business can improve performance.

In terms of an accounting equation, any singular transaction may affect accounts on... A. Strictly on one side of the equation only B. Always on both sides of the equation C. None of the above

C. None of the above A transaction may affect accounts on only one side of the equation, or on both sides of the equation.

What is the primary difference between perpetual inventory systems and periodic inventory systems? A. Perpetual systems update the inventory account only at regular intervals, while periodic systems continuously update the inventory account. B. Perpetual systems are simpler to set up compared to periodic systems. C. Perpetual systems provide real-time inventory visibility, while periodic systems lacks real-time inventory tracking. D. Perpetual systems calculate the cost of goods sold at the end of the accounting period, while the periodic systems record it immediately.

C. Perpetual systems provide real-time inventory visibility, while periodic systems lacks real-time inventory tracking. Perpetual inventory systems continuously update the inventory account as products are bought and sold, providing real-time visibility of inventory levels.

Select the option that correctly represents the components included in the cost of goods sold (COGS). A. Rent expenses. B. Marketing and advertising costs. C. Raw materials and parts used to make the product. D. Utilities and overhead costs.

C. Raw materials and parts used to make the product. The cost of goods sold (COGS) includes raw materials and parts used to make the product. Rent, marketing, advertising, utilities, and overhead costs are recorded elsewhere the books.

How do you calculate the cost of goods sold (COGS)? A. Add the beginning inventory to the ending inventory. B. Subtract the ending inventory from the beginning inventory. C. Subtract the total cost of the beginning inventory and purchases made during the accounting period from the total cost of the ending inventory. D. Subtract the cost of goods sold from the purchases.

C. Subtract the total cost of the beginning inventory and purchases made during the accounting period from the total cost of the ending inventory. COGS represents the cost of the inventory that was sold during a specific period. To determine the COGS, subtract the total cost of the beginning inventory and purchases made during the accounting period from the total cost of the ending inventory.

What category of inventory includes goods in the process of being transformed into a finished product? A. Finished goods B. Merchandise C. Work-in-progress D. Raw materials

C. Work-in-progress Work-in-progress inventory, also known as WIP or goods-in-process, includes goods that are in the process of being transformed or converted into finished products. These goods have undergone some level of processing but are not yet completed.

Compare the receipt to the journal entry. Are the amounts entered correctly? A. No. The amount should be entered as $11.21. B. No. The amount should be entered as $10.57. C. Yes. The amount is recorded correctly.

C. Yes. The amount is recorded correctly. The amount is recorded correctly with sales credited for $10.57 and Tax Payable credited for $.64.

Money a customer owes that a business determines will not be paid back. A. Accounts receivable B. Accounts payable C. Doubtful accounts D. Accounts uncollectible

D. Accounts uncollectible

Select the best answer. Cash sales, or payments for goods or services at the point of sale, affect: A. Income statement B. Balance sheet C. Cash flow statement D. All of the above

D. All of the above Cash sales affect all of the above: the balance sheet, the income statement, the statement of cash flows.

In terms of accounting equations, if each transaction is recorded correctly, a business's accounting equation is referred to as... A. Equal to 1 B. Simple C. Complete D. Balanced

D. Balanced If each transaction is recorded correctly, the accounting equation will be balanced.

Assets have a _________ debit balance, meaning we expect to find the balance of that account on the debit side. Select the best answer to fill in the blank. A. Stable B. Irregular C. Accountability D. Normal

D. Normal Assets have a normal debit balance.

Vehicles and equipment used to produce revenue. These assets decrease in value over time. A. Investments B. Prepaid expenses C. Accounts receivable D. Property, plant, and equipment

D. Property, plant, and equipment Property, plant, and equipment (PP&E) are current (long-term) assets that include vehicles and equipment used to produce revenue. These assets decline in value over time.

What does the gross profit represent? A. The total revenue earned from sales. B. The total assets of a business. C. The difference between net income and expenses. D. The difference between sales revenue and the cost of goods sold.

D. The difference between sales revenue and the cost of goods sold. Gross profit is the difference between sales revenue and the cost of goods sold. It represents the amount of revenue that remains after accounting for the direct costs associated with producing or acquiring the goods sold.

In general, what's a third step for a bookkeeper in the process of recognizing money that will not be paid back? A. When it's determined the customer will not repay the debt, move the money to accounts uncollectible. B. At intervals, run an accounts receivable aging report to check on unpaid invoices. C. When a customer pays for something on credit, that amount is logged under accounts receivable. D. When a significant amount of time passes with no payment, move the money to a doubtful account.

D. When a significant amount of time passes with no payment, move the money to a doubtful account. When a significant amount of time passes with no payment, the money moves to a doubtful account.

Your client, a candle manufacturing business, purchased 100 units of a product at different times in the order that follows with the following costs: 50 units at $10 each 30 units at $12 each 20 units at $15 each If the business sells 60 units of the product, what would be the cost of goods sold (COGS) according to the FIFO method? A. $620 B. $720 C. $780 D. $900

A. $620 To calculate the COGS, we multiply the number of units sold by their respective costs: COGS = (50 units x $10 per unit) + (10 units x $12 per unit) COGS = $500 + $120 COGS = $620 Therefore, the cost of goods sold (COGS) for the business, according to the FIFO method, would be $620.

Which of the following would be classified as an operating lease? Select all that apply. A. A bakery leases a special printer for a large 3-month project. B. A farm wants to test a new beet harvester, so they lease it. C. A printing business leases a top-of-the-line printer that they've wanted for a long time, with plans to eventually own it. D. A candle shop is just getting started and can't afford all the equipment they need until they can afford it and can't qualify for a loan. E. A sports memorabilia shop leases a van for their upcoming nationwide marketing tour.

A. A bakery leases a special printer for a large 3-month project. B. A farm wants to test a new beet harvester, so they lease it. E. A sports memorabilia shop leases a van for their upcoming nationwide marketing tour. With an operating lease, there is no intention for ownership of the asset to transfer hands at the end of the lease.

Money a customer owes that was put on credit. A. Accounts receivable B. Accounts payable C. Doubtful accounts D. Accounts uncollectible

A. Accounts receivable

What is accounts receivable? Select all that apply. A. An asset on a business's financial records B. What a business calls the money owed to them C. An itemized bill of goods sold or services provided

A. An asset on a business's financial records B. What a business calls the money owed to them Accounts receivable is a method for businesses to keep track of the money they're owed. Accounts receivable is important for businesses because it is an asset in their financial records that can quickly be converted to cash.

Which of the following account types have a natural debit balance? Select all that apply. A. Asset B. Liability C. Expense D. Revenue E. Equity

A. Asset C. Expense Asset and expense accounts have a natural debit balance. The others have a natural credit balance.

What is the impact on assets and equity when ending inventory is overstated? A. Assets and equity are overstated B. Assets and equity are understated C. Liabilities are overstated D. Liabilities are understated

A. Assets and equity are overstated If the ending inventory is recorded at a higher value than its actual worth, it is considered an overstatement. This overstatement affects both assets and equity.

How do POS systems impact bookkeeping processes? Select all that apply. A. By automatically recording the date, time, items sold, and payment method. B. By streamlining the sales recording process. C. By reducing the likelihood of errors or omissions. D. By requiring manual input.

A. By automatically recording the date, time, items sold, and payment method. B. By streamlining the sales recording process. C. By reducing the likelihood of errors or omissions. POS automatically records the date, time, items sold, and payment method, streamlining the sales recording process and reducing the likelihood of errors or omissions.

In a periodic inventory system, how is the inventory account updated? A. By conducting a physical count of inventory at the end of the accounting period B. By recording every purchase and sale transaction in real time C. By relying on perpetual inventory software to automatically update the account D. By estimating the value of inventory based on historical sales data

A. By conducting a physical count of inventory at the end of the accounting period In a periodic inventory system, the inventory account is updated by conducting a physical count of inventory at the end of the accounting period.

On Monday, Lola, a caterer, books a small dessert catering job for the following Saturday. After the event on Saturday, Lola gives her client a bill for $225. The client pays the bill on the spot with cash. A. Cash sale B. Credit sale

A. Cash sale This was a cash sale.

Choose the options that are considered inventory. Select all that apply. A. Computers displayed on the sales floor. B. Computers used by salespeople for business operations. C. Motherboards, processors, and hard drives. D. Computers being assembled but not yet ready for sale. E. Packaging materials like boxes and shipping labels.

A. Computers displayed on the sales floor. C. Motherboards, processors, and hard drives. D. Computers being assembled but not yet ready for sale. The computers displayed on the sales floor are considered inventory because they are the finished goods ready for sale and directly contribute to the business's revenue. The raw materials used to build computers are considered inventory until they are used in the production process. They are components for creating the finished goods. Work-in-progress (WIP) inventory includes computers that are being assembled but are not yet ready for sale. These units are in the process of becoming finished goods.

Which of the following describes a promissory note? Select all that apply. A. Contract for the repayment of money B. Note between star-crossed lovers C. Contract between businesses D. Agreement to a payment plan

A. Contract for the repayment of money C. Contract between businesses D. Agreement to a payment plan Promissory notes can be described as contracts for the repayment of money owed, as contracts between two businesses, and as an agreement to a payment plan.

To calculate the average cost, you divide the total _____ of goods by the total _____ of goods over a specific accounting cycle. A. Cost; number B. Number; cost C. Value; quantity D. Expense; units

A. Cost; number The average cost is calculated by dividing the total cost of goods by the total number of goods over a specific accounting cycle.

A bagel shop undergoes a workman's compensation audit which finds they overpaid, resulting in a refund check of $500. Which actions should you take to record the check to the books? Select all that apply. A. Credit the insurance expense account $500 B. Debit the insurance expense account $500 C. Credit the cash account $500 D. Debit the cash account $500

A. Credit the insurance expense account $500 D. Debit the cash account $500 To decrease the expense account balance, you would credit the insurance account, and to increase the cash account balance, debit the cash account account.

When fixing an inventory error, what should be done if there is a decrease in inventory between the balance sheet and the current count? A. Debit cost of good sold, and credit inventory B. Ignore the decrease as it may be due to minor discrepancies C. Adjust the cost of goods sold against the inventory expense D. Make no adjustments and continue with the previous inventory value

A. Debit cost of good sold, and credit inventory When there is a decrease in inventory between the last count and the current count, you need debit cost of good sold, and credit inventory. This adjustment ensures that the inventory value accurately reflects the physical count and properly impacts the cost of goods sold on the financial statements.

Is the cash account debited or credited $250? A. Debited B. Credited

A. Debited The cash account is debited.

What are two ways to write off bad debt? Select all that apply. A. Direct write-off method B. Accounts receivable aging method C. Percentage sales method D. Allowance method

A. Direct write-off method D. Allowance method The direct write-off method is the most common. The allowance method is also valid, but more rare. The percentage sales method and the accounts receivable aging method are ways to estimate the allowance for bad debts.

The owner of a sporting supply store wants to make sure they are tracking all their assets. Which of the following items at the sporting supply store would be an asset? Select all that apply. A. Hockey sticks B. Mini ice rink for testing skates and pucks C. The contract with the hockey equipment bag supplier D. The owner's deposit of $60,000 to get things up and running E. Ice skates in inventory

A. Hockey sticks B. Mini ice rink for testing skates and pucks E. Ice skates in inventory Assets are anything the business owns or offers for sale: hockey sticks, mini ice rink, and ice skates.

What information is included in a promissory note? Select all that apply. A. Maturity date B. Interest rate and how interest is calculated C. Sum borrowed D. Overdue payment interest charged E. Reason for overdue payment

A. Maturity date B. Interest rate and how interest is calculated C. Sum borrowed D. Overdue payment interest charged Promissory notes include maturity date, interest rate, sum borrowed, and overdue payment interest charged.

What is the purpose of the balance sheet? A. Report the financial position of the business B. Monitor incoming and outgoing money C. Report business performance D. Track the value of the business

A. Report the financial position of the business

What financial transactions affect your assets? A. Sales transactions B. Vendor invoices C. Inventory D. Credit card bills E. Depreciation F. Liabilities

A. Sales transactions C. Inventory E. Depreciation

If a client wants to know about the incoming and outgoing money for their business, which financial statement would you refer them to? A. Statement of cash flows B. Balance sheet C. Income statement D. Statement of equity

A. Statement of cash flows The statement cash flows monitors incoming and outgoing money and helps answer the question "How is my cash generated and used?"

When does a business typically create an invoice? A. When a business delivers a product or provides a service to a customer and it is a credit sale. B. When a customer delivers a product or provides a service to the business. C. For all cash sales to customers.

A. When a business delivers a product or provides a service to a customer and it is a credit sale. When a business delivers a product or provides a service to a customer, and it is a credit sale, they create an invoice that says how much the customer owes.

When does a bookkeeper credit accounts receivable and debit the bank account? A. When an invoice is paid B. When an invoice is recorded

A. When an invoice is paid When an invoice is paid, the bookkeeper credits accounts receivable and debits the bank account. When an invoice is recorded, the bookkeeper debits accounts receivable and credits the sales/income account.

Which of these could be categorized as an asset? Select all that apply. A. Cash B. Equipment C. Property D. Marketable securities E. Retirement plans F. Savings accounts G. Mutual funds

All of the above. A, B, C, D, E, F, G All of these things are assets. Assets are anything the business owns that has value or can be turned into cash.

In the current scenario, what is the new accounts receivable balance? A. $1,000 B. $4,000 C. $5,000

B. $4,000 The new net accounts receivable is $4,000.

In June, the wholesale coffee bean roaster purchased Guatemalan beans for $2,000. In July, the wholesale coffee bean roaster sold a coffee shop $4,000 in beans on credit, payable in 30 days. In August, the coffee shop paid the invoice of $4,000 in full. What should you debit accounts receivable? A. $2,000 B. $4,000 C. $6,000

B. $4,000 You should debit accounts receivable the amount of $4,000.

Business A loans business B $25,000, at a 10% compounded annual interest rate, to be paid back in two months. What does the initial journal entry look like for business A? A. A credit to notes receivable for $25,000 and a debit to cash for $25,000 B. A debit to notes receivable for $25,000 and a credit to cash for $25,000 C. A debit to notes payable for $25,000 and a credit to cash for $25,000 D. A credit to notes payable for $25,000 and a debit to cash for $25,000

B. A debit to notes receivable for $25,000 and a credit to cash for $25,000 The initial journal entry includes a debit to notes receivable for $25,000 and a credit to cash for $25,000.

Alan is the owner of a barbecue restaurant. He wants to add a soft-serve ice cream option to his menu, but he doesn't have a soft-serve ice cream machine and can't afford to purchase it outright yet. Which account should the bookkeeper choose when recording the lease? A. Account 101: Checking B. Account 103: Fixed assets C. Account 602: Office expenses D. Account 220: Notes payable

B. Account 103: Fixed assets Because it falls under PP&E as a piece of equipment, meant to be used for a long time, it's a fixed asset.

Which of the following would be classified as current (short-term) assets? Select all that apply. A. Patents and copyrights B. Accounts receivable C. Property, plant, and equipment (PP&E) Inventory D. Inventory E. Domain name and trademark F. Cash and cash equivalents

B. Accounts receivable D. Inventory F. Cash and cash equivalents Current or short-term assets are those that can be quickly converted into cash, typically within a year, and they include cash and other items with high liquidity.

A business issues a promissory note to one of their clients for an overdue invoice. How is it tracked by a bookkeeper? A. Via notes receivable AND notes payable B. As a notes receivable C. As a notes payable D. Via notes receivable OR notes payable

B. As a notes receivable When a promissory note is issued, you'll track it via notes receivable.

Which accounts are affected when purchasing inventory on credit? A. Assets (inventory) and equity (retained earnings). B. Assets (inventory) and liabilities (accounts payable). C. Assets (cash) and liabilities (accounts payable). D. Assets (cash) and equity (retained earnings).

B. Assets (inventory) and liabilities (accounts payable). Assets (inventory) and liabilities (accounts payable). When purchasing inventory on credit, the inventory account (an asset) increases, reflecting the acquisition of inventory. Simultaneously, the accounts payable account (a liability) increases because the business has an obligation to pay the supplier in the future.

What happens to assets and equity when ending inventory is understated? A. Assets and equity are overstated B. Assets and equity are understated C. Liabilities are overstated D. Liabilities are understated

B. Assets and equity are understated If the ending inventory is recorded at a lower value than its actual worth, it is considered an understatement. This understatement affects both assets and equity.

If you want to answer the client's question about an asset, which financial statement would you refer to? A. Income statement B. Balance sheet C. Statement cash flows D. Profit and loss statement

B. Balance sheet The balance sheet contains information about assets, liabilities, and equity.

What is the impact on assets and equity if ending inventory is overstated? A. Both assets and equity will be understated. B. Both assets and equity will be overstated. C. Assets will be overstated, but equity will be understated. D. Assets will be understated, but equity will be overstated.

B. Both assets and equity will be overstated. If ending inventory is overstated, it means that the recorded value of inventory is higher than the actual value. This overstatement affects both assets (as inventory is an asset) and equity since equity is derived from the difference between assets and liabilities.

What type of lease would you select if you eventually wanted to own a piece of equipment? A. Operating lease B. Capital or financing lease

B. Capital or financing lease A capital (or financing) lease is selected when there is an intention to take ownership of the asset from the lessor to the lessee at the end of the lease.

Which of the following is the correct journal entry when raw materials are purchased? A. Credit to raw materials and debit to accounts payable or cash. B. Debit to raw materials and credit to accounts payable or cash. C. Credit to raw materials and credit to accounts payable or cash. D. Debit to raw materials and debit to accounts payable or cash.

B. Debit to raw materials and credit to accounts payable or cash. When raw materials are purchased, the entry is a debit to raw materials and a credit to accounts payable or cash.

Which inventory valuation method considers the first units purchased to be the first units sold? A. Last in, first out (LIFO) B. First-in, first-out (FIFO) C. Average cost method (AVCO) D. Weighted average method

B. First-in, first-out (FIFO) FIFO considers the first units purchased to be the first units sold.

Which inventory valuation method assumes that the first units purchased are the first ones sold? A. Last-in, first-out (LIFO) method. B. First-in, first-out (FIFO) method. C. Weighted average method. D. Specific identification method.

B. First-in, first-out (FIFO) method. First-in, first-out (FIFO) method. The FIFO inventory valuation method assumes that the first units purchased (or produced) are the first ones sold. This means that the cost of the oldest inventory is matched with the revenue from the first sales.

What is the first step in tracking assets? A. Check if there's an existing account for it in the chart of accounts B. Identify the asset type C. Record the asset in the journal

B. Identify the asset type When a client acquires a new asset, follow these steps: Identify the asset type, check if there's an existing account for it in the chart of accounts, and if not, add the account to the chart. Then, use that account to record the asset in the journal.

Cash sales are transactions where the customer pays for goods or services. Which of the following best describes how cash sales are made? A. Immediately with cash. B. Immediately with cash, check, or a credit or debit card. C. Immediately with cash or check.

B. Immediately with cash, check, or a credit or debit card. Cash sales are transactions where the customer pays for the goods or services immediately with cash, check, or a credit or debit card.

Current (short-term) assets such as money market account balances, stocks, and bonds A. Accounts receivable B. Investments C. Intangible assets D. Prepaid expenses

B. Investments Money market account balances, stocks, and bonds are examples of investments, and current (short-term) assets.

If a computer store purchases ready-made computers from a manufacturer, what category of inventory does it fall under? A. Finished goods B. Merchandise C. Work-in-progress D. Raw materials

B. Merchandise Finished goods refer to the final products that are ready for sale and have completed the production process. These goods are in their final form and are available for customers to purchase.

Which of the following describes notes receivable? Select all that apply. A. Money a business owes B. Money owed to a business C. Considered an asset D. Considered a liability

B. Money owed to a business C. Considered an asset Notes receivable is money that is owed to a business, and is considered an asset.

What is a benefit of using a periodic inventory system? A. Real-time visibility into inventory levels B. Simple set up for small businesses C. Accurate tracking of inventory at all times D. Automatic adjustment of inventory balances

B. Simple set up for small businesses One of the benefits of using a periodic inventory system is simple set up, particularly for small businesses.