RETL 261 Exam 1

Accounts Receivable, Prepaid Accounts, Supplies, and Land are examples of ______ accounts.

Asset

Classify each of the following accounts as an asset (A), liability (L), or equity (EQ) account. Cash

Asset

If a company purchases equipment costing $5,300 on credit, the effect on the accounting equation would be:

Assets increase $5,300 and liabilities increase $5,300.

Accounts payable appear on which of the following statements?

Balance sheet

Why is accounting important?

Businesses, regulatory agencies, and the general public use accounting information.

The ______ is a record containing all accounts used by a company, including account balances.

General Ledger

Which of the following is a proper reflection of the sequence of steps when deciding on the preferred course of action in making an ethical decision?

Identify ethical concerns; Analyze options; Make ethical decision

Entering a list of the sales invoices, including the prices and quantities, for the company's record keeper.

Identifying

The four basic financial statements are:

Income Statement, Statement of owner's equity, Balance sheet, and Statement of cash flows

Marketing Managers are internal or external users?

Internal Information User

Payroll Clerks are internal or external users?

Internal Information User

Net income:

Is the excess of revenues over expenses

Suppliers are internal or external users?

External Information User

During its first year of operations, Mario Lupo personally invested $15,000 in his business, Lupo Company. Mario withdrew $2,000 for personal use. Lupo company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, Lupo Company's equity totaled:

$25,000

Charlie's Chocolates' owner made investments of $74,000 and withdrawals of $32,000. The company has revenues of $107,000 and expenses of $76,000. Calculate its net income.

$31,000

If equity is $30,000 and liabilities are $19,000, then assets must equal:

$49,000

Order the following steps in the accounting process that focus on analyzing and recording transactions.

1. Analyze each transaction from source documents. 2.Record relevant transactions in a journal. 3. Post journal information to ledger accounts. 4.Prepare and analyze the trial balance.

Indicate how to increase each of the accounts listed below. 1. owners capital 2. professional fees earned 3. owner's withdrawals 4. salaries expense

1. credit 2. credit 3. debit 4. debit

Indicate how to increase each of the accounts listed below. 1. Cash 2. Accounts Payable 3. Supplies 4. Accounts Receivable

1. debit 2.credit 3. debit 4.debit

Balance sheet accounts are arranged into ______ general categories.

3

Use the following information as of December 31 to determine equity. Cash$71,000 Buildings 189,000 Equipment 220,000 Liabilities 155,000

=325,000... Cash+Buildings+Equipment-Liabilities

All of the following are classified as liabilities except: Accounts Receivable. Correct Notes Payable. Wages Payable. Accounts Payable. Taxes Payable.

AR

A(n) ______ is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

Account

Increases and decreases in a specific asset, liability, equity, revenue, or expense are recorded in a(n)______.

Account

Accounting

Accounting is an information and measurement system that aims to identify, record, and communicate information about business activities. It helps assess opportunities, products, investments, and social and community responsibilities.

Accounting certifications include:

CPA

Identify which items belong on the balance sheet.

Cash, accounts receivable, and owner capital

Interpreting information from financial reports

Communicating

Preparing financial statements for creditors

Communicating

The Sarbanes-Oxley Act requires the following?

Documentation and verification of internal controls.

Owner Withdrawals

EQ

Owner, Capital

EQ

Owner, Capital and Owner, Withdrawals are examples of ______ accounts.

Equity

Analyze the following transaction and select the best answer. The business pays $2,000 in cash to the landlord for office space rent.

Equity reduces by $2,000

Board of Directors are internal or external users?

External Information User

Customers are internal or external users?

External Information User

Labor Union is internal or external?

External Information User

A(n) ______ has a complete record of every transactions recorded.

Journal

The process of recording transaction in a journal is called:

Journalizing

Accounts Payable, and Note Payable are examples of ______ accounts.

Liability

If a company uses $1,600 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,600 and another asset decreases $1,600, causing no effect.

Preparing and entering a list of checks issued

Recording

Using a cash register to enter sales

Recording

Identify which items belong on the income statement.

Revenue, expenses and net income

Which of the following accounts is not included in the asset section of the balance sheet? Cash. Accounts receivable. Supplies. Land. Services revenue.

Service Revenue

Why are posting references entered in the journal when entries are posted to the ledger accounts?

So we will know that the entry has been posted.

Identify which items belong on the statement of owner's equity.

Withdrawals, beginning owner capital and ending owner capital

Correctly identify steps 3 and 4 of the accounting process:

Step 3: record transactions into the journal; Step 4: post entries into the ledger.

On January 31, Jean Consulting Company receives a bill for that month's utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company's accounting equation as of January 31?

The business must record this event, which would increase liabilities and decrease equity on January 31.

Chart of Accounts

The chart of accounts is a list of all accounts and usually includes an identification number assigned to each account.

Which of the following statements are true about the general ledger?

The general ledger contains all of the accounts that a company uses, along with detail of the balances in those accounts.

What is the general ledger

The ledger (or general ledger) is a record containing all accounts used by a company and their balances. It is referred to as the books.

Recordkeeping

The recording of transactions and events only, either manually or electronically.

A balance sheet lists:

The types and amounts of assets, liabilities, and equity of a business as of a specific date.

Revenue is properly recognized:

When goods or services are provided to customers and at the amount expected to be received from the customer.

A record of the increases and decreases in a specific asset, liability, equity, revenue or expense is a(n):

account

Which of the following accounts is a liability? company truck prepaid advertising capital accounts payable

accounts payable

Prepaid Rent

asset

office equipment

asset

office supplies

asset

prepaid insurance

asset

A ______ of accounts is a list of all accounts a company uses not including account balances.

chart

Upon her promotion to manager at the regional public accounting firm that has employed her for the past five years, Gail Mahaffey moves to the firm's Chicago office. After welcoming her to the office on her first day, the partner managing the Chicago office shares some great news. The firm just learned of its successful bid to audit Morrison's reports. Morrison's business has been expanding and the company is expected to become an important client of the firm. The partner then congratulates Gail; he has decided to assign her to head up the team that will audit Morrison. Thrilled by the exciting news, Gail leaves the office, eager to meet the rest of the team. As she walks to the meeting room, she considers the fact that she inherited a share of Morrison's stock last year under the terms of her grandfather's will. She recalls that the stock is currently trading at $15 per share. Assuming that Gail wants to make an ethical decision in this situation, she will:

decline the assignment; even though she only owns a single share of stock, that direct investment in the stock of Morrison would cast doubt on decisions that she makes during the audit.

Managerial accounting

includes opportunities in general accounting, cost accounting, and internal auditing

Accounts Payable

liability

Unearned Rent Revenue

liability

Which of the following accounts is equity? company truck prepaid advertising owner's capital accounts payable

owner's capital

Which of the following accounts is an asset? owner, capital prepaid advertising supplies expense accounts payable

prepaid advertising

The majority of accounting opportunities are in...

private accounting

A(n) ______ describes transactions entering an accounting system, such as a purchase order.

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