Accounting 101 - Exam 1
Which financial statement is a representation of the accounting equation?
Balance sheet
CLR stands for what?
Capital, Liabilities, Revenue
Which come first, debits or credits?
Debits
Rent Revenue is increases by ______ the account
crediting
In a business transaction, when expenses increase, owner's equity will...
decrease
To correct an entry you must..
enter a correction entry
The Daniel Insurance Agency reported revenues of $29,000 and expenses of $31,000 for the current period. What was the final figure reported on the company's income statement?
$2,000 net loss
At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $21,000; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable $4,000. By the end of the month, Jackson's had earned $32,000 of Revenues, and used $1,800 of Utilities Expenses, $4,000 of Rent Expense and $3,600 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.
$22,600
If assets are $17,000 and owner's equity is $10,000, liabilities are...
$7,000
AWE stands for what?
Assets, Withdrawls, Expenses
What is the correct order of accounts within the general ledger?
Assets, liabilities, owner's equity, revenue, expenses
Funds taken from the business by the owner for personal use are called....
Withdrawls
An entry on the left side of an account is called..
a debit
The classification and normal balance of the accounts payable account is...
a liability with a credit balance
The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties is called -accounting -finacne -economics -computer science
accounting
The classification and normal balance of the accounts receivable account is....
an asset with a debit balance
The rent paid for future months is an
asset
Accounting is often referred to as the language of.. -business -finance -money -data
business
Owners are not personally responsible for the debts of the business if the form of business organization is a.. -sole proprietorship -partnership -corporation -nonprofit organization
corporation
A decrease in a liability is recorded on what side of the T account? (debit or credit)
debit
A business pays a creditor on account. The entry to record this transaction is:
debit accounts payable and credit cash
Which of the following transactions increase owner's equity? -earning revenue -owner withdrawals for personal use -receiving cash from customers on account -paying expenses
earning revenue
Payment of a telephone bill represents an increase in an...
expense
When an electric bill is paid, which of the following increases? -expenses -liabilities -assets -owner's equity
expenses
When a business sells services for cash, assets increase and revenue...
increases
Owners and manager need financial information in order to -grant loans -issue credit -collect taxes -make decisions
make decisions
A business that purchases a product from another business to sell to customers is called a -service business -manufacturing business -merchandising business -nonprofit business
merchandising business
When revenue is greater than expenses, the result is...
net income
The process of transferring the data from the journal to the general ledger is called
posting
The ____ reports the changes that have occurred in the owner's financial interest during the reporting period. -balance sheet -profit and loss statement -income statement -statement of owner's equity
statement of owner's equity
Which of the following is NOT a goal of an accounting system? -to accumulate data about a firm's financial affairs -to classify data about a firm's financial affairs in a meaningful way -to interpret the relative success of a business through the examination of data about its financial affairs -to summarize data about a firm's financial affairs in periodic reports called financial statements
to interpret the relative success of a business through the examination of data about its financial affairs
At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500. The total amount of Liabilities is:
$31,500
If the following are the only accounts of Jones Supply Company, what is the missing Supplies balance? Cash: $8,000 Supplies: ????? Accounts Payable: $4,000 John Smith, Capital: $9,000
$5,000
At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500. The total assets for the SloMo Delivery Service are:
$59,600
If the beginning capital balance for William's Consulting Service is $23,000, net income is $4,000, and the ending capital balance is $20,000, what were the withdrawals for the period?
$7,000
Which of the following groups of accounts all have the same normal balance? -accounts receivable, rent expense, John Smith drawing -accounts reviewable, accounts payable, John Smith capital -cash, supplies expense, accounts payable -accounts payable, fees income, John Smith drawing
Accounts receivable, rent expense, John Smith drawing
What type of account is listed first within the chart of accounts?
Balance sheet accounts
An independent accountant who is licensed by the state and provides accounting services to the public for a fee is a: -CIA -CFE -CMA -CPA
CPA
A business performed $8,300 of services. Their customer paid $2,400 of the amount right away but charged the remaining amount. To record this transaction, the business would:
Debit Cash $2,400 and Debit Accounts Receivable $5,900 and Credit Fees Income $8,300
A business purchases equipment costing $9,200. They pay $1,200 right away and charge the remaining amount. To record this transaction, the business would:
Debit Equipment $9,200; Credit Cash $1,200 and Credit Accounts Payable $8,000
A business receives a bill for utilities but decides to pay it next month. The business would record the receipt of the bill by...
Debiting Utilities Expense and Crediting Accounts Payable
What is the correct order in which to prepare the three financial statements?
Income Statement, Statement of Owner's Equity, Balance Sheet
An example of an economic entity is.. -a town -a business -a politician -a church
a business
The account used to record amounts that will be collected from charge account customers in the future is referred to as...
accounts receivable
What should be listed first when an entry is made in the general journal?
accounts to be debited
The financial statements submitted to the SEC by a corporation must be __________ by an independent accountant to ensure their fairness and adherence to generally accepted accounting principles. -audited -reviewed -created -read
audited
The review of financial statements to assess their fairness and adherence to GAAP is.. -accounting -preparation -compliance -auditing
auditing
The difference between the total debits and credits to an account is called a
balance
If an account is debited by mistake you must...
credit the account and debit the correct account
The people, companies, or government agencies to whom a firm owes money are called -creditors -debtors -purchasing agents -partners
creditors
Identify the entry below that records the payment of an amount owed as a result of the purchase of equipment two months earlier.
debit Accounts Payable and credit Cash
Debits are used to record...
increases in assets
The Securities and Exchange Commission (SEC) regulates the accounting methods and financial reporting of __________ corporations. -all -multimillion dollar -privately held - publicly owned
publicly owned
the normal balance of an account is the
side of the T account on which it increases
Which of the following statements is NOT correct? -The description of a journal entry should include a reference to the source of the information contained in the entry. -If goods are purchased on credit, the supplier's invoice number is used as the source document for the transaction. -The credit portion of a general journal entry is always recorded first. -A firm should be able to trace amounts through the accounting records and back to their source documents.
If goods are purchased on credit, the supplier's invoice number is used as the source document for the transaction.
Which of the following would result in an error when preparing the Trial Balance? -Placing the Withdrawal account balance in the Debit column -Placing a Revenue account balance in the Credit column -Placing the Accounts Payable balance in the Credit column -Placing the balance in Prepaid Rent in the Credit column
Placing the balance in Prepaid Rent in the Credit column
Which of the following accurately defines the audit trail? -a series of steps performed during each accounting period to classify, record, and summarize data for a business -a financial record for entering all types of business transactions -a master reference file for the accounting system -a chain of references that makes it possible to trace information, locate errors, and prevent fraud
a chain of references that makes it possible to trace information, locate errors, and prevent fraud
Identify the form of business that is considered a separate legal entity. -a sole proprietorship -a corporation - a limited liability partnership -a partnership
a corporation
NJW Company provided $5,000 of legal services. The client paid $2,000 up front and agreed to pay the remaining $3,000 in two weeks. Select the correct journal entry from the options below to record the transaction:
a debit to Cash for $2,000, a debit to Accounts Receivable for $3,000, and a credit to Fees Income for $5,000.
The journal entry to record the purchase of equipment for $860 and Furniture for $530 in a single transaction would include
a debit to Equipment for $860, a debit to Furniture for $530, and a credit to Cash for $1,390
The journal entry to record a payment made in January for rent for the months of February and March would include:
a debit to Prepaid Rent and a credit to Cash.
Which of the following is NOT an occupation with similar job duties to accountants and auditors? -buget analyst -cost estimator -actuary -personal financial advisor
actuary
When rent is prepaid, which of the following occurs? -owner's equity decreases -liabilities increase -assets are unchanged -assets increase
assets are unchanged
On July 3, the ABC Company received $865 in cash from customers who had received services from the business in June. The correct journal entry to record this transaction is
debit Cash, $865 and credit Accounts Receivable, $865
Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business? -debit Ty Knott, Drawing and credit cash -debit Ty Knott, Drawing and credit salary expense -debit cash and credit Ty Knott Capital -debit salary expense and credit cash
debit Ty Knott, Drawing and credit cash
The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a:
debit to accounts payable and credit cash
The Financial Accounting Standards Board is responsible for: -auditing financial statements -developing generally accepted accounting principles - establishing accounting systems for businesses - making recommendations to the Securities and Exchange Commission
developing generally accepted accounting principals
The results of the accounting process are summarized in periodic reports called: -cash budgets -bank reconciliations -financial statements -worksheets
financial statements
The __________ (GAAP) must be followed by publicly owned companies and are changed and refined in response to changes in the environment in which businesses operate. -general accounting & auditing principles -generally accepted auditing principles -governmental accounting & auditing principles -generally accepted accounting principles
generally accepted accounting principles
Ginger Yale Ice Company receives money from a customer who previously received services from the business on account. Recording this transaction will: -decrease G. Yale, Capital -decrease accounts payable -increase cash -increase accounts receivable
increase cash
Which of these accounts would appear on a firm's income statement? -liabilities and expenses -assets and liabilities -assets and revenues -revenues and expenses
revenues and expenses
Ownership in a corporation is evidenced by shares of ____? -stock -assets -liabilities -profit
stock
which of the following accounts beings each new period with a zero balance? -supplies expense -equipment -accounts receivable -accounts payable
supplies expense
What would a posting reference of J3 within the general ledger indicate?
that the associated journal entry is on page 3 of the general journal
Every entry in the journal should include all of the following EXCEPT -the amounts -the title of each account affected -the balance of the accounts affected -a brief description
the balance of the accounts affected
If a transaction is properly analyzed and recorded...
the total dollar amount debited will equal the total dollar amount credited
Which of the following is the purpose of financial statements? -to periodically summarize data about a firm's financial affairs -to compare a firm's performance to that of its competitors -to present historical data of a company -to analyze the future financial prospects of a firm
to periodically summarize data about a firm's financial affairs
Which of the following is not a goal of the internal controls implemented by owners and managers? -to safeguard assets -to ensure reliability of accounting data -to promote compliance with management policies and applicable laws -to reduce expenses through the use of efficient processes
to reduce expenses through the use of efficient processes