Bookkeeping Basics Part 11

Credits

Credits decrease assets or expenses, or increase liabilities, owner's equity or revenue.

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.

Current asset

Debits

Debits increase assets or expenses, or decrease liabilities, owner's equity or revenue.

A plumbing and heating business purchases a new pump for their truck. Which type of asset would this be? Select the best answer.

Fixed-PP&E

For Sergio's shoe repair shop, what is important about tracking sales and inventory?

Having enough inventory to provide service to his customers and to project how much he'll need for his ongoing business needs.

Copyrights, patents, intellectual property, domain name, trademarks, and goodwill all fall into this category.

Intangible assets

Current (short-term) assets such as money market account balances, stocks, and bonds.

Investments

Which option should he choose to acquire the machine?

Lease it with a capital/financing lease

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.

Normal

There are two types of equipment leases

Operating lease and capital (financing) lease.

When a client acquires a new asset, follow these steps:

1. Identify the asset type. 2. Check if there's an existing account 3. If needed, add the account 4. Record the asset

The store later had to pay $500 cash to acquire a rare original of choreography notes from Broadway musical. Recording this transaction would include:

A credit to the cash account of $500 because the cash is being reduced

A theatrical memorabilia store received a donation of $1,000 cash. As their bookkeeper, what would the entry to the cash account be?

A debit to assets of $1,000

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 debit to the cash account of $1,500

Which account should the bookkeeper choose when recording the lease?

Account 103: Fixed assets

If you want to answer the client's question about an asset, which financial statement would you refer to?

Balance sheet

Assets such as six months of insurance premiums, or a subscription to a software program.

Prepaid expenses

Vehicles and equipment used to produce revenue. These assets decrease in value over time.

Property, plant, and equipment

Which of the following would be classified as an operating lease? Select all that apply.

• A bakery leases a special printer for a large 3-month project. • A farm wants to test a new beet harvester, so they lease it. • A sports memorabilia shop leases a van for their upcoming nationwide marketing tour.

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 mobile shoe repair van • Leather, rubber, and stitching materials • Shoelaces, shoe polish, and bunion pads

Which of the following would be classified as current (short-term) assets? Select all that apply.

• Accounts receivable • Inventory • Cash and cash equivalents

Which of the following account types have a natural debit balance? Select all that apply.

• Asset • Expense

Which of these could be categorized as an asset? Select all that apply.

• Cash • Equipment • Property • Marketable securities • Retirement plans • Savings accounts • Mutual funds

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.

• Credit the insurance expense account $500 • Debit the cash account $500

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.

• Credit the sales (revenue) account $8,000 • Debit the cash account $8,000

What transactions impact assets? Select all that apply.

• Depreciation • Inventory • Sales transactions

Which of the following would be classified as fixed (long-term) assets? Select all that apply.

• Patents and copyrights • Property, plant, and equipment (PP&E) • Domain name and trademark

Which items that were mentioned qualify as an asset? Select all that apply.

• Shoe-and foot-related inventory for sale. • Bank accounts (checking and savings) • Van with mobile repair shop

If a client wants to know about the incoming and outgoing money for their business, which financial statement would you refer them to?

Statement of cash flows

Capital(financing) lease

The business intends to take ownership of the asset from the lessor to the lessee at the end of the lease.

Operating lease

There is no intention for ownership of the asset to transfer hands at the end of the lease.