AC391 Ch3 test 1
operates to sell a product
Merchandising business
purpose to close entries
Close the temporary accounts (to get ready for the next period) Determine net income Transfer net income to a permanent owners' equity account (retained earnings for a corporation)
types of closing entries
temporary account and permanent account
general ledger
the main or primary ledger
tests the equality of debits and credits within the ledger
trial balance
permanent (real) accounts
asset, liability and owners' equity accounts
basic accounting equation
assets= liabilities + sotckhodler's equity
balance sheet
assets= liabilities + stockholders equity
Calculation of cost of goods sold
beginning inventory + net cost of goods purchased = cost of goods available for sale - ending inventory = cost of goods sold
ledger
book of final entry
journal
book of original entry
(Adjusting and Reversing entries) interest of 770 has accrued on notes payable
d interest expense 770 c interest payable 770
(Adjusting and Reversing entries) On November 1, Rent Revenue was credited for 1800, representing revenue form a subrental for a 3 month period beginning on that date
d rental revenue (1800*⅓) 600 c unearned rental revenue 600
Performed services for patients who had dental plan insurance. At January 31, $760 of such services was performed but not yet billed to the insurance companies.
d- Account rec. c- service rev.
(Adjusting and Reversing entries) The prepaid insurance account shows a debit of 5280, representing the cost of a 2-year fire insurance policy dated August 1 of the current year
d- insurance expense (5280*5/24) 1100 c- prepaid insurance 1100
Completed a tax assignment and billed client $1,180 for services rendered
d-account rec. c-service rev.
(Adjusting and Reversing entries) Purchase of advertising materials for 800 during the year was recorded in the Advertising Expense account. On December 31, advertising material
d-avertising materials 290 c advertising expense 290
Received cash of $3,230 for services completed for Ferengi Co.
d-cash c-service rev
Received $3,980 advance on a management consulting engagement.
d-cash c-unearned service rev.
invested 32000 cash and equipment valued 14000 in the business
d-cash d-equipment c-capital
Invested $31,310 cash and equipment valued at $15,720 in the business.
d-cash d-equipment c-owners capital
Purchased dental equipment on January 1 for $84,000, paying $24,700 in cash and signing a $59,300, 3-year note payable. (a) The equipment depreciates $420 per month. (b) Interest is $620 per month.
d-depreciaition ex. c-accumulated ex.
Purchased a new computer for $6,350 with personal funds. (The computer will be used exclusively for business purposes.)
d-equipment c-owner's capital
Paid insurance expense $200
d-insurance ex. c-cash
Purchased a one-year malpractice insurance policy on January 1 for $15,000.
d-insurance ex. c-prepaid insurance
Hired a secretary-receptionist at a salary of $390 per week payable monthly.
d-no entry c-no entry
Paid office rent of $610 for the month
d-rent ex. c-cash
Paid secretary-receptionist $1,560 for the month
d-salaries and wages ex. c-cash
Purchased supplies on account $900. (Debit an asset account.)
d-supplies c-account pay.
A count of supplies indicated that $150 of supplies had been used.
d-supplies ex c-supplies
Purchased $1,650 of dental supplies. On January 31, determined that $420 of supplies were on hand.
d-supplies ex c-supplies
Utility expenses incurred but not paid prior to January 31 totaled $590.
d-utlities ex. c-account pay.
Adjusting Entries
Required at end of accounting period to record any as yet unrecorded changes in accounts caused by the passage of time, usage, and other causes not evidenced by formal transactions
net cost of goods purchased
gross purchases- purchase return and allowances - purchase discounts + transpiration -in
Three different inventory accounts
raw materials, work in process, finished goods inventory
temporary (nominal) accounts
revenue and expense accounts (plus withdrawals or dividends paid)
income statement
revenues - expenses= net income
operates to provide a service
service business
control accounts are in the general ledger
Accounts receivable and accounts payable
