Accounting Ch. 1-3

The unexpired insurance at the end of the fiscal period represents

A deferred expense

Which of the following errors, each considered individually, would cause the trial balance totals to be unequal?

A payment of $1,311 to a creditor was posted as a debit of $3,111 to Accounts Payable and a debit of $311 to Accounts Receivable

The debt created by a business when it makes a purchase on account is referred to as an

Account Payable

Which of the following is the BEST description of accounting's role in business?

Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company

A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper should

Accounts Receivable, debit; Fees Earned, credit

Which of the following entries records the billing of patients for services performed?

Accounts Receivable, debit; Fees Earned, credit

Which of the following is NOT considered to be a liability?

Accounts Recievable

Data for an adjusting entry described as "accrued wages, $2,020" means to debit

Wages Expense and credit Wages Payable

The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is

Accrual

Generally accepted accounting principles requires that companies use the ____ of accounting.

Accrual basis

Generally accepted accounting principles requires that companies use the _____ of accounting.

Accrual basis

The cost of office supplies to be used in the future periods is ordinarily shown on the balance sheet as a(n)

Asset

The account type and normal balance of Accumulated Depreciation is

Asset, credit

Accrued revenues would appear on the balance sheet as

Assets

How does the owner withdrawing cash from the business affect the accounting equation?

Assets decrease; Owner's Equity decreases

How does the purchase of supplies on account affect the accounting equation?

Assets increase; Liabilities increase

How does the rendering of services on account affect the accounting equation?

Assets increase; Owner's Equity increases

All of the following are financial statement(s) of a proprietorship EXCEPT:

B) The statement of retained earnings

Which of the following financial statements reports information as of a specific date?

Balance sheet

Prior to the adjusting process, accrued revenue has

Been earned and not recorded as revenue

The difference between the balance of a fixed account and the related accumulated depreciation account is termed

Book value

Which of the following is NOT a true statement about the accounting equation and its elements?

C) The accounting equation is Assets = Liabilities - Owner's Equity

Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service.

Cash, debit; Unearned Rent, credit.

Expenses can result from:

Consuming services

Which of the following abbreviations are correct?

Debit "Dr", Credit "Cr"

The payment for the monthly rent will require the following entry

Debit Rent Expense and Credit Cash

When amounts of a transaction are entered on the left side of an account, they are said to be

Debited

If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)

Deferral

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Depreciation

Which of the accounts below would appear on an adjusted trial balance but probably would NOT appear on the trial balance?

Depreciation Expense

Which of the following is NOT true regarding Depreciation?

Depreciation expense reflects the decrease in market value each year

The revenue recognition concept

Determines when revenue is credited to a revenue account

All of the following occur with a double-entry accounting system EXCEPT

Each business transaction will have only two entries

Which of the items below is NOT a business entity?

Entrepreneurship

Which of the following is NOT a business transaction?

Erin pays her monthly personal credit card bill

The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income statements by having

Expenses understated and therefor net income overstated

Assets are

Financed by the owner and/or creditors

The initials GAAP stand for

Generally Accepted Accounting Principles

4 financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

I, OE, B

Which one of the following accounts below would likely be included in a deferral adjusting entry?

Unearned Revenue

All of the following statements regarding vertical analysis are true EXCEPT

In a vertical analysis of an income statement, each item is stated as a percent of total expenses

Accounts are classified in the ledger

In accordance with their appearance in the financial statements

Collins Landscape Company purchased various landscaping supplies on account to be used for landscape designs for their customers. How will this business transaction affect the accounting equation?

Increase Assets (Supplies) and increase Liabilities (Accounts Payable)

Earning revenue

Increases Assets; Increases Owner's Equity

The process of initially recording a business transaction is called

Journalizing

The process of recording a transaction in the journal is called

Journalizing

Accrued expenses are ordinarily reported on the balance sheet as

Liabilities

Which of the following statements is NOT true about liabilities?

Liabilities do not include wages owed to the employees of the company

Which of the following is NOT a business transaction?

Make a sales offer

Adjusting entries are

Needed to bring accounts up to date and match revenue and expense

Deferred revenue is revenue that is

Not earned but the cash has been received

Deferred expenses have

Not yet been recorded as expenses

Which of the following entries records the acquisition of office supplies on account?

Office Supplies, debit; Accounts Payable, credit

Which of the following is NOT an asset?

Owner's Equity

The classification and normal balance of the drawing account is

Owner's Equity with a debit balance

Which of the accounting steps in the accounting process below would be completed last?

Preparing the financial statements

Which of the following entries records the payment of rent for the current month?

Rent Expense, debit; Cash, credit

Which of the following supports the accrual basis of accounting?

Revenue recognition and matching concepts

Net income will result when

Revenues (credits) > expenses (debits)

Which of the following types of accounts have a normal credit balance?

Revenues and Liabilites

Expenses are recorded when

Services are rendered

A trial balance is prepared to

Summarize the account balances to help prepare financial statements

Which of the following is an example of a prepaid expense?

Supplies

Supplies purchased on account were incorrectly recorded as Office Equipment. The correcting entry would be

Supplies, debit; Office Equipment, credit

Which of the following is an example of accrued revenue?

Swimming pool cleaning that has been provided but has not been billed or paid.

A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing

The Income Statement

An account is said to have a debit balance if

The amount of the debits exceeds the amount of the credits

The business entity concept means that

The entity is an individual economic unit for which data are recorded, analyzed, and reported

All of the following are financial statement(s) of a proprietorship EXCEPT

The statement of retained earnings

Which one of the statements below is NOT a purpose for the journal?

To show increases and decreases in accounts

What is the purpose of the adjusted trial balance?

To verify that the debits and credits balance

The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a

Trial balance

Using accrual accounting, revenue is recorded and reported only

When the services are rendered without regard to when cash is received

Using accrual accounting, expenses are recorded and reported only

When they are incurred, whether or not cash is paid

For accounting purposes, the business entity should be considered separate from its owners if the entity is

a proprietorship a partnership a corporation

How does the collection of cash from a customer who was previously put on account affect the accounting equation?

assets increase; assets decrease

Which of the following group of accounts are increased with a debit?

assets, drawing, expenses

Which of the following entries records the investment of cash by Ron York, owner of a proprietorship?

debit Cash; credit Ron York, Captial

Which of the following entries records the withdrawal of cash by Sue Martin, owner of a proprietorship, for personal use?

debit Sue Martin, Drawing; credit Cash

The balance in the supplies account, before adjustment at the end of the year is $725. The proper adjusting entry if the amount of supplies on hand at the end of the year $300 would be

debit Supplies Expense $425, credit Supplies $425

Which of the following entries records the receipt of a utility bill from the water company?

debit Utilities Expense; credit Accounts Payable

Earning revenue

increases Assets, increases Owner's Equity