VYC1 Accounting Principles Review

Centrum Services purchased $36,000 worth of equipment. The equipment has an estimated useful life of five years and no salvage value. Using the straight-line method, the depreciation for the first month is

$600.

Which of the following entries records the depreciation on equipment for the fiscal year-end adjustment?

. Debit Depreciation Expense; credit Accumulated Depreciation

FICA taxes are paid by:

. both the employee and employer.

In a firm that uses special journals, the sale of merchandise for cash is recorded in the

. cash receipts journal.

On October 1, 2013, Jay Walker Company purchased a one-year insurance policy for $660. The correct adjusting entry on December 31, 2013, is

. debit Advertising Expense $165; credit Prepaid Advertising $165

On a worksheet, the adjusted balance of the Depreciation Expense account is extended to: A. the Income Statement Debit column.

. the Income Statement Debit column.

If the prepaid expenses are not adjusted, assets on the balance sheet

. will be overstated.

. MacGyver Company bought equipment on January 3, 2013, for $34,000. At the time of purchase, the equipment was estimated to have a useful life of six years and a salvage value of $880. Using the straight-line method, the amount of one year's depreciation is

5520

If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by

9

A cash sale of merchandise would be recorded in the

A cash sale of merchandise would be recorded in the cash receipts journal. Recall that only sales on credit are recorded in the sales journal.

Journal Entry for a Sale of Merchandise Jones Career Consulting sold 2 books to Harry Minor on account for a total of $50. The total cost of the books sold was $25. The journal entries to record this transaction in a perpetual inventory system are as follows.

Accounts Receivable-H. Minor Debit 50 Sales Credit 50 Cost of Merchandise Sold Debit 25 Merchandise Inventory Credit 25

Contra-Asset

Accumulated Depreciation (contra of Fixed Asset Account) Allowance for Doubtful Accounts (contra of Accounts Receivable) Uncollectibles / Bad Debts (contra of Accounts Receivable)

Explain the reasons for preparing adjusting entries.

Adjustments are necessary to achieve a proper matching of revenues and expenses so as to determine net income for the current period and to achieve an accurate statement of end-of-the period balances in assets, liabilities, and owners' equity accounts.

Allowance for doubtful accounts

Allowance for doubtful accounts is a common contra asset listed on a company's balance sheet under accounts receivable. When a company sells its products or services to customers on credit, the company records the amount sold in its accounts receivable account. Typically, a company fails to collect all of the money owed by customers making purchases on credit. The amount a company records as allowance for doubtful accounts is the amount from its accounts receivable the company considers uncollectible.

Merchandise Inventory

Asset Debit To account for the value of merchandise held for sale

merchandise inventory

Asset, Debit, merchandise is referred to as good that a company acquires for the purpose of reselling them to the customers.

current assets

Assets consisting of cash items that normally will be converted into cash wihin one year or items that will be used up within one year

On a worksheet, the adjusted balance of Supplies is extended from the Adjusted Trial Balance Debit column to the ____________________ Debit column.

Balance sheet

The journal entry to record the payment of a monthly utility bill would include

C. a debit to Utilities Expense and a credit to Cash.

An accumulated depreciation account is often referred to as a(n) ____________________ asset account.

Contra

Sales Returns and Allowances

Contra-Revenue Debit To account for returned or damaged merchandise

Steps for Completing Journal Entries Read the transaction to get a feel for what is happening. Do you understand what happened? Try to put it into your own words. Identify the accounts you will put in your journal entry. Identify the type of account for each account used.

For each account, determine if the balance is increasing or decreasing. Then determine if that increase or decrease is a debit or credit. Determine the amount that each account is changing.

On a worksheet, the adjusted balance of Depreciation Expense is extended from the Adjusted Trial Balance Debit column to the ____________________ Debit column

Income statement

. The net income for an accounting period can be determined using the worksheet by comparing the balances and determining the difference between the balances in the two

Income statement or balance sheet column

A journal is referred to as a record of ____________________ entry.

Original

Permanent and Temporary accounts: P

Permanent (real) accounts are asset, liability, and equity accounts; they appear on the balance sheet

If a business issued a check for $1,000 to pay for two months rent in advance, analyze the effect on the firms' assets, liabilities and owner's equity.

Prepaid Rent will increase

Adjustments

R E [ A ssets LIABILIES [ a [ e x v p e e n s u e e s s

If the income statement covered a six-month period ending on November 30, 2013, the third line of the income statement heading would read

Six-month Period Ended November 30, 2013.

The ending capital balance appears on which of the following statement(s)?

Statement of owner's equity and balance sheet

Percentage of Net Credit Sales

The rate used is based on the company pas experience with uncolletible accounts and management assessment of current business conditions. Whiteside estimates that .80% of net credit sales 100,000 x .0080 = 800

If a worksheet is prepared, there is no need to separately prepare a(n)

Trial Balance

Effect of Purchase Returns & Allowances

When a return is made or an allowance is granted for merchandise bought on account, the effect of the transaction is to reduce the amount due to the Vendor (Accounts Payable) and to reduce the value of Merchandise Inventory.

39. The Sales account is classified as

a revenue account

Detailed information about the transactions with credit customers and the balances owed by such customers is provided by

an accounts receivable ledger

. In a firm that uses special journals, the collection of sums on account from credit customers is recorded in the

cash receipts

long term assets

consist of propety that will be used in business for longer than one year

An unearned revenue

is a revenue that has been collected but has not been earned. An adjusting entry for an unearned revenue involves a LIABILITY (unearned revenue) account and a REVENUE account. Ex. Cash collected for a magazine subscription. When the magazine is mailed to the customer, the unearned revenue would be earned.

An accrued expense

is an expense that has been incurred but has not been paid. An adjusting entry for an accrued expense involves an EXPENSE account and a LIABILITY (payable account). Ex. Wages payable, wages expense.

The Allowance method

is the method of charging uncollectible accounts expense in the period when the sales are recorded. estimate losses from uncollectible accounts matches uncollectible accouts expenses to sales uses valuation acounts allowances for doubtful accounts asses which reduces the amount of accounts receivables

aging of accounts receivable

method of estimates your exped uncollectible by aging the accunts. The longer an account is past due, the less lekelyit is to be collected.

When charge customers pay cash to apply against their accounts, the amount is recorded

on the left side of the Cash account and the right side of the Accounts Receivable account.

The balance sheet shows each of the following except the

owner's investment

temporary accounts

revenues, expenses, cost of good sold and expens, and drawing

. On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:

the Balance Sheet Credit column. AACSB: Analytic

The book value of long-term assets is reported on

the balance sheet.

Direct charge off method

the method of recording accounts losses as they occur

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements.

trial balance

The general ledger accounts are usually arranged in the following order:

. first the balance sheet accounts, then the income statement accounts.

Journal Entry for a Sales Return or Allowance Harry Minor returned one book. The book had been sold by JCC for $25. The cost of the book was $12.50. The journal entries to record this transaction in a perpetual inventory system are as follows.

DEBIT CREDIT Sales Returns & Allowances Debit 25.00 Accounts Receivable-Minor Credit 25.00 Merchandise Inventory Debit 12.50 Cost of Merchandise Sold Credit 12.50

The journal entry to record $2,450 of revenue earned and received in cash by Agatha Panthis Landscape Architect Company is:

Debit Cash; Credit Fees Income

A business purchases supplies on account. The journal entry to record this transaction is:

Debit Supplies; Credit Accounts Payable

. When a transaction is entered in the general journal, the account to be _________________ is always recorded first in the Description column

Debited

Cost of Goods Sold

Expense Debit To account for the cost of merchandise sold

Prepare closing entries.

In the closing process, all of the revenue and expense account balances (income statement items) are transferred to a clearing account called Income Summary, which is used only at the end of the fiscal year. Revenues and expenses are matched in the Income Summary account. The net result of this matching, which represents the net income or net loss for the period, is then transferred to an owners' equity account (Retained Earnings for a corporation and capital accounts for proprietorships and partnerships.)

Prepare a 10-column work sheet.

The 10-column work sheet provides columns for the first trial balance, adjustments, adjusted trial balance, income statement, and balance sheet. The work sheet does not replace the financial statements. Instead, it is the accountant's informal device for accumulating and sorting information needed for the financial statements.

The journal entry to record the sale of services on credit should include

a debit to Accounts Receivable and a credit to Fees Income

Trial balance:

a list of all open accounts in the ledger and their balances. A trial balance may be prepared at any time

An Income Statement is all of the following except

a statement of revenues less withdrawals and expenses.

When an entry is made in the general journal,

accounts to be debited should be listed first.

On the financial statements prepared at the end of an accounting period, the merchandise inventory is shown as

an asset on the balance sheet

Assets and liabilities are reported on

balance sheet

Which financial statement is a representation of the accounting equation?

balance sheet

A firm paid cash to apply against a debt. To record this transaction, the accountant would

debit Accounts Payable and credit Cash

When revenue is earned from charge-account sales, the accountant

debits Accounts Receivable and credits a revenue account.

Employees' payments for federal income taxes withheld and social security and Medicare taxes are periodically

deposited in a government-authorized financial institution.

The Financial Accounting Standards Board is responsible for

developing generally accepted accounting principles.

. Federal law requires that the employer withhold _________ from the employee's pay.

federal income tax, social security tax, and Medicare tax

The Balance Sheet heading includes each of the following except

firm's address

Publication 15, Circular E contains withholding information

for federal income taxes only.

A prepaid expense

is an expense that has been paid but has not been incurred. An adjusting entry for a deferred expense involves an EXPENSE account and an ASSET (prepaid expense) account. Ex. Prepaid rent, rent expense.

. The effects of each transaction are recorded in a financial record called a(n) ____________________.

journal

The first place a transaction is recorded is in the:

journal

The balance sheet shows each of the following except the

owners investment

The Posting Reference column of a journal is used to

record the number of the ledger account to which the information is posted.

The "Net Income" or "Net Loss" is transferred from the income statement to the

statement of owner's equity.

Financial statements:

statements that reflect the accounting data's collection, tabulation, and final summarization. Financial statements consist of the balance sheet, the income statement, the statement of cash flows and the statement of retained earnings.

Journal:

the book of original entry where transactions and selected other events are initially recorded.

The balance sheet shows

the financial position of a business at a given time.

Closing entries:

the formal process by which all temporary accounts are reduced to zero, and the net income or net loss is determined and transferred to the appropriate owners' equity account.

The income statement shows

the results of operations for a period of time.

The account used to record increases in owner's equity from the sale of goods or services is

the revenue account

The ending capital balance appears on which of the following statement(s)?

. Statement of owner's equity and balance sheet

The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of

. a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.

If a trial balance is not in balance (the Debit and Credit columns are not equal), a logical first step is

. check the addition of each column.

The ending balance of the capital account appears as a separate line item on what two statements?

The statement of owner's equity and the balance sheet

The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of $400 due in 30 days would include

a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.

The journal entry to record the payment of salaries should include

a debit to Salaries Expense and a credit to Cash.

. Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of

following the separate entity assumption

An adjusting entry for prepaid insurance expense

(expense paid but not incurred) involves an expense account and an asset account. The expense account is often called Insurance Expense or Expired Insurance. Possible titles for the asset account include Prepaid Insurance, Deferred Insurance Expense, Prepaid Insurance Expense, Deferred Insurance, and Unexpired Insurance.

Jill Monroe earns $25 per hour. She worked 48 hours this pay period and receives time-and-a-half for any hours worked over 40 hours per week. Jill's gross earnings are:

. $1,300

Which financial statement is reported as of a specific date?

Balance Sheet