logo image

Accounting 211: Midterm

A ____ is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.
business
The objective of most businesses is to earn a ____.
profit
Profit is the difference between the amounts ____from customers for goods or services and the amounts ____ for the inputs used to provide the goods or services.
received & paid
3 Types of businesses
Service, Merchandising & Manufacturing
_____ can be defined as an information system that provides reports to users about the economic activities and condition of a business.
Accounting
The process by which accounting provides information to users is as follows:
-Identify users.
-Assess users’ information needs.
-Design the accounting information system to meet users’ needs.
-Record economic data about business activities and events.
-Prepare accounting reports for users.
The area of accounting that provides internal users with information is called
managerial accounting or management accounting
Managerial accountants employed by a business are employed in
private accounting
The area of accounting that provides external users with information is called
financial accounting.
The objective of financial accounting is to provide relevant and timely information for the decision-making needs of users ___ of the business.
outside
General-purpose financial statements
are one type of financial accounting report that is distributed to external users.
Ethics are
moral principles that guide the conduct of individuals
2 factors as to why companies went wrong
-Failure of individual character
– Firm culture of greed & ethical indifference
Accountants and their staff who provide services on a fee basis are said to be employed in
public accounting.
Accountants employed by a business firm, government, or a not-for-profit organization are said to be employed in
private accounting
Public accountants who have met a state’s education, experience, and examination requirements may become
Certified Public Accountants (CPAs).
Financial accountants follow ___ ____ ____ ____ in preparing reports.
generally accepted accounting principles (GAAP)
Within the U.S., the ____ ____ ____ _____ ____ has the primary responsibility for developing accounting principles.
Financial Accounting Standards Board (FASB)
The ___ _____ ___ ___ ___, an agency of the U.S. government, has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public.
Securities and Exchange Commission (SEC)
Many countries outside the United States use generally accepted accounting principles adopted by the
International Accounting Standards Board (IASB).
Under the ___ ____ ___, the activities of a business are recorded separately from the activities of its owners, creditors, or other businesses.
business entity concept
A ____ is owned by one individual.
proprietorship
A ___ is similar to a proprietorship except that it is owned by two or more individuals.
partnership
A ____ is organized under state or federal statutes as a separate legal taxable entity
corporation
A ___ ____ ___ ___ combines the attributes of a partnership and a corporation.
limited liability company (LLC)
Under the ___ ____, amounts are initially recorded in the accounting records at their cost or purchase price.
cost concept
The ___ ____ requires that the amounts recorded in the accounting records be based on objective evidence.
objectivity concept
Only the _____ is objective enough to be recorded in the accounting records.
final agreed-upon amount
The ____ requires that economic data be recorded in dollars.
unit of measure concept
The resources owned by a business are its ___
assets
The rights of creditors are the debts of the business and are called ___
liabilities
The rights of the owners are called __ ___.
owner’s equity
The equation ____ is called the ___
Assets = Liabilities + Owner’s Equity

accounting equation

A ___ ___ is an economic event or condition that directly changes an entity’s financial condition or its results of operations
business transaction
The liability created by a purchase on account is called an __ ___
account payable
Items such as supplies that will be used in the business in the future are called ___ ___, which are assets.
prepaid expenses
A business earns money by selling goods or services to its customers. This amount is called
revenue
Revenue from providing services is recorded as
fees earned
Revenue from the sale of merchandise is recorded as
sales.
Other examples of revenue include rent, which is recorded as
rent revenue
interest is recorded as
interest revenue
An account receivable is a ___ ___ ___, which is an asset.
claim against a customer
spent cash or used up other assets in earning revenue is called
expenses
Types of Transactions Affecting Owner’s Equity
-Owner’s investments
-Owner’s withdrawals
-Revenues
– Expenses
After transactions have been recorded and summarized, reports are prepared for users. The accounting reports providing this information are called
financial statements
A summary of the revenue & expenses for a specific period of time (month or a year) is called
income statement
The income statement reports the revenues and expenses for a period of time, based on the
matching concept
The matching concept is applied by “matching” the expenses incurred during a period
with the revenue that those expenses generated
The excess of the revenue over the expenses is called
net income, net profit, or earnings
If expenses exceed revenue, the excess is a
net loss
The ____ reports the changes in the owner’s equity for a period of time.
statement of owner’s equity
Statement of owner’s equity is prepared ___ the income statement because the net income or net loss for the period must be reported in this statement
after
A __ ___ is a list of the assets, liabilities, and owner’s equity as of a specific date.
balance sheet
The __ __ of a balance sheet lists the assets on the left and the liabilities and owner’s equity on the right. It resembles the basic format of the accounting equation
account form
A ______ is a summary of the cash receipts and cash payments for a specific period of time.
statement of cash flows
Statement of cash flows has 3 sections:
operating activities
investing activities
financing activities
The ____ section reports a summary of cash receipts and cash payments from operations
cash flows from operating activities
The ____ section reports the cash transactions for the acquisition and sale of relatively permanent assets.
cash flows from investing activities
The ____ section reports the cash transactions related to cash investments by the owner, borrowings, and withdrawals by the owner.
cash flows from financing activities
Income Statement and Statement of Owner’s Equity are __
interrelated
Net income or net loss reported on the income statement is also reported on ____ and any additional investments by the owner during the year.
the statement of owner’s equity
Statement of Owner’s Equity and Balance Sheet
are ___
interrelated
The ____ at the end of the period is reported on the statement of owner’s equity and is also reported on the balance sheet as owner’s capital.
owner’s capital
Balance Sheet and Statement of Cash Flows
are
interrelated
The cash reported on the balance sheet is also reported as the ___ on the statement of cash flows.
end-of-period cash
Ratio of Liabilities
_____________________
to Owner’s Equity =
Total Liabilities
__________________________
Total Owner’s Equity (or Total Stockholders’ Equity)
Accounting systems are designed to show the increases and decreases in each accounting equation element as a separate record. This record is called an
account
The T account has a __
title
The left side of the account is the ___ side
debit
The right side of the account is the __ side
credit
A group of accounts for a business entity is called a
ledger
A list of the accounts in the ledger is called a
chart of accounts
__ are resources owned by the business.
Assets
Some examples of assets follow:
cash
supplies
accounts receivable
buildings
are debts owed to outsiders (creditors)
Liabilities
Some examples of liabilities follow:
Accounts payable
Notes payable
Wages payable
Interest payable
is the owner’s right to the assets of the business after all liabilities have been paid
Owner’s equity
For a proprietorship, the owner’s equity is represented by the balance of the owner’s .
capital account
A ___ account represents the amount of withdrawals made by the owner.
drawing
___are increases in owner’s equity as a result of selling services or products to customers
Revenues
Some examples of revenue accounts follow:
Fees earned
Commission revenue
Rent revenue
The using up of assets or consuming services in the process of generating revenues results in __
expenses
Some examples of expenses follow:
Wages expense
Rent expense
Miscellaneous expense
All businesses use what is called the
double-entry accounting system
This system is based on the accounting equation and requires:
Every business transaction to be recorded in at least two accounts.

The total debits recorded for each transaction to be equal to the total credits recorded.

Balance Sheet Accounts: The debit and credit rules for balance sheet accounts are as follows:
/Users/alaynaradford/Desktop/Picture clipping.pictClipping
Income Statement Accounts: The debit and credit rules for income statement accounts are based on their relationship with owner’s equity.
/Users/alaynaradford/Desktop/Picture clipping 2.pictClipping
Owner Withdrawals: The debit and credit rules for recording owner withdrawals are based on the effect of owner withdrawals on owner’s equity.
/Users/alaynaradford/Desktop/Picture clipping 3.pictClipping
The sum of the increases in an account is usually equal to or greater than the sum of the decreases in the account, the ____ is either a debit or a credit depending on whether increases in the account are recorded as debits or credits.
normal balance of an account
Rules of Debit and Credit – Normal Balances of Accounts
/Users/alaynaradford/Desktop/Picture clipping 4.pictClipping
Journalizing requires the following steps:
Step 1.
The date of the transaction is entered in the Date column.
Journalizing Step 2
The title of the account to be debited is recorded at the left-hand margin under the Description column, and the amount to be debited is entered in the Debit column.
Journalizing Step 3.
The title of the account to be credited is listed below and to the right of the debited account title, and the amount to be credited is entered in the Credit column.
Journalizing Step 4.
A brief description may be entered below the credited account
Journalizing Step 5.
The Post. Ref. (Posting Reference) column is left blank when the journal entry is initially recorded. This column is used later when the journal entry amounts are transferred to the accounts in the ledger.
A transaction is initially entered in a record called a
journal
The process of recording a transaction in the journal is called
journalizing
The entry in the journal is called a ____ .
journal entry
The process of transferring the debits and credits from the journal entries to the accounts is called ____.
posting
Steps in Posting:
Step 1.
The date of the transaction is entered in the Date column of Prepaid Insurance
Steps in Posting:
Step 2.
The amount is entered in the Debit column of Prepaid Insurance.
Steps in Posting:
Step 3.
The journal page number is entered in the account’s Post. Ref. column
Steps in Posting:
Step 4
The account number is entered in the journal’s Post. Ref. column.
The liability created by receiving the cash in advance of providing the service is called ___ ____
unearned revenue.
The equality of debits and credits in the ledger should be proven at the end of each accounting period by preparing a ___ ____.
trial balance
A ____ occurs when the order of the digits is changed by mistake, such as writing $542 as $452 or $524.
transposition
In a ___ , the entire number is moved one or more spaces to the right or the left by mistake, such as writing $542.00 as $54.20 or $97.50 as $975.00.
slide
If an error has already been journalized and posted to the ledger, a ______ is normally prepared.
correcting journal entry
Another type of error is a
posting error
In ___ ____, the amount of each item on a current financial statement is compared with the same item on an earlier statement
horizontal analysis
When two statements are being compared, the ____ statement is used as the base for computing the amount and the percent of change.
earlier
Which of the following is not a business transaction?
Erin pays her monthly personal credit card bill.
Revenues are reported when
work is completed on the job
If total assets decreased by $88,000 during a period of time and owner’s equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total liabilities is
$159,000 decrease
Which of the following would not normally operate as a service business?
Grocers
Four 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 of the following is not true of accounting principles?
A new accounting principle can be adopted with stockholders approval.
Donner Company is selling a piece of land adjacent to their business premises. An appraisal reported the market value of the land to be $220,000. The Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?
$212,000
Which of the following is not a certification for accountants?
CIA

CMA

CISA

All are certifications.

Cash investments made by the owner to the business are reported on the statement of cash flows in the
financing activities section
Ramon Ramos has withdrawn $750 from Ramos Repair Company’s cash account to deposit in his personal account. How does this transaction affect Ramos Repair Company’s accounting equation?
Decrease Assets (Cash) and decrease Owner’s Equity (Owner’s Withdrawal)
Which of the following is not a correct rule of debits and credits?
the normal balance for revenues and expenses is a credit
Accounts are classified in the ledger
in accordance with their appearance in the financial statements
Which of the following entries records the acquisition of office supplies on account?
Office Supplies, debit; Accounts Payable, credit
Office supplies were sold by Ari’s Alarm Service at cost to another repair shop, with cash received. Which of the following entries for Ari’s Alarm Service records this transaction?
Cash, debit; Office Supplies, credit
What is the post reference that will be found on the journal entry?
11; 41
The owner’s equity will be reduced by all of the following accounts except:
revenues
The payment for the monthly rent will require the following entry
Debit Rent Expense and Credit Cash
The chart of accounts classify the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account. Which of the following indicates the use of this classification?
1-Assets, 2-Liabilities, 3-Owner’s Equity, 4-Revenues, 5-Expenses
Which of the following accounts is an owner’s equity account?
Ross Morris, Capital
Randomly listed below are the steps for preparing a trial balance:

(1) Verify that the total of the Debit column equals the total of the Credit column.
(2) List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance.
(3) List the name of the company, the title of the trial balance, and the date the trial balance is prepared.
(4) Total the Debit and Credit columns of the trial balance.

What is the proper order of these steps?

(3), (2), (4), (1)
The ____ requires that revenues and expenses be reported in the proper period.
accounting period concept
Under the _____, revenues are reported on the income statement in the period in which they are earned.
accrual basis of accounting
The accounting concept supporting the reporting of revenues when they are earned regardless of when cash is received is called the _____
revenue recognition concept.
The accounting concept supporting reporting revenues and related expenses in the same period is called the _____, or _____.
matching concept or matching principle
Under the ____, revenues and expenses are reported on the income statement in the period in which cash is received or paid.
cash basis of accounting
Under the accrual basis, some of the accounts need updating at the end of the accounting period for the following reasons:
Some expenses are not recorded daily.

Some revenues and expenses are incurred as time passes rather than as separate transactions.

Some revenues and expenses may be unrecorded

The analysis and updating of accounts at the end of the period before the financial statements are prepared is called the ___
adjusting process
The journal entries that bring the accounts up to date at the end of the accounting period are called _____.
adjusting entries
_____ are the advance payment of future expenses and are recorded as assets when cash is paid.
Prepaid expenses
_____ are the advance receipt of future revenues and are recorded as liabilities when cash is received.
Unearned revenues
_____ are unrecorded revenues that have been earned and for which cash has yet to be received.
Accrued revenues
___ are unrecorded expenses that have been incurred and for which cash has yet to be paid.
Accrued expenses
Fixed assets, or plant assets, are physical resources that are owned and used by a business and are permanent or have a long life.
As time passes, a fixed asset loses its ability to provide useful services. This decrease in usefulness is called _____.
depreciation
All fixed assets, except land, lose their usefulness and , thus, are said to ____
depreciate
As a fixed asset depreciates, a portion of its cost should be recorded as an expense. This periodic expense is called _____
depreciation expense.
The fixed asset account is not decreased (credited) when making the related adjusting entry. This is because both the original cost of a fixed asset and the depreciation recorded since its purchase are reported on the balance sheet. Instead, an account entitled ______ is increased (credited).
Accumulated Depreciation
Accumulated depreciation accounts are ____
called contra accounts, or contra asset accounts
The difference between the original cost of the office equipment and the balance in the accumulated depreciation—office equipment account is called the _____ of the asset (or net book value). It is computed as shown below.
book value
The purpose of the _____ is to verify the equality of the total debit and credit balances before the financial statements are prepared.
adjusted trial balance
Comparing each item in a financial statement with a total amount from the same statement is referred to as ___.
vertical analysis
The account type and normal balance of Unearned Revenue is
liability & credit
The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)
asset
Which of the following is considered to be an accrued expense?
A computer technician has installed the latest software updates, but you have not received their invoice for payment.
Which of the following is not a characteristic of accrual basis of accounting?
Revenues and expenses are reported in the period in which cash is received or paid
Which account would normally not require an adjusting entry?
Smith; Capital
The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is
deferral
The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry.

Wages Expense
4,500

Wages Payable
4,500
????????????????

Record wages expense incurred and to be paid next month
Accrued expenses are ordinarily reported on the balance sheet as
liabilities
Adjusting entries always include
at least one income statement account and one balance sheet account.
Accrued revenues would appear on the balance sheet as
assets
Account balances are listed in the _____ column using the ending balances found in the general ledger.
Unadjusted Trial Balance
Adjustments are entered here. Two possibilities:
Deferrals – Existing balances are changed
Accruals – New information is entered
Adjustments are combined with the _____. Account balances are now adjusted.
unadjusted trial balance amounts
Revenue and expense balances in the __________
Adjusted Trial Balance column are extended to the Income Statement column.
Asset, liability, owner’s equity, and drawing balances in the _______
Adjusted Trial Balance column are extended to the Balance Sheet column.
The income statement is prepared directly from the ____of the end-of-period spreadsheet (work sheet) beginning with fees earned of $16,840.
Income Statement or Adjusted Trial Balance columns
The first item presented on the statement of owner’s equity is _______ at the beginning of the period
the balance of the owner’s capital account
The balance sheet is prepared directly from the _____ of the end-of-period spreadsheet (or work sheet), beginning with Cash of $2,065.
Balance Sheet or Adjusted Trial Balance columns
A ______ is a balance sheet that was expanded by adding subsections for (1) current assets, (2) property, plant, and equipment, (3) current liabilities, and (4) long-term liabilities.
classified balance sheet
Cash and other assets that are expected to be converted into cash, sold, or used up usually within a year or less, through the normal operations of the business, are called
CURRENT ASSETS
____ are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate
Notes receivable
____ (also called fixed assets or plant assets) include assets that depreciate over a period of time. Land is an exception, since it is not subject to depreciation.
Property, plant, and equipment
Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called
current liabilities
Liabilities not due for a long time (usually more than one year) are called
long-term liabilities.
_____ is the owner’s right to the assets of the business. ____ is added to the total liabilities, and this combined total must be equal to the total assets.
Owner’s equity
Accounts that are relatively permanent from year to year are called ___. These accounts are carried forward from year to year.
permanent accounts or real accounts
Accounts that report amounts for only one period are called _____, _____ are not carried forward because they relate to only one period.
temporary accounts or nominal accounts
To report amounts for only one period, temporary accounts should have ____ at the beginning of the next period.

To achieve this, the revenue and expense account balances are transferred to _____ at the end of the period.

zero balances

Income Summary

The balance of Income Summary (net income or net loss) is then transferred to the ____

The balance of the owner’s drawing account is also transferred to the _____

The entries that transfer these balances are called _____

owner’s capital account.

closing entries.

_____ is a temporary account that is only used during the closing process.

At the end of the _____, the income summary account will have a zero balance.

Income Summary is sometimes called a ____.

Income Summary

closing process

clearing account

After the closing entries are posted, all of the temporary accounts have ____
zero balances.
A ______ is prepared after the closing entries have been posted. The purpose of the____ is to verify that the ledger is in balance at the beginning of the next period
post-closing trial balance
The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the _____.
accounting cycle
There are ____ in the accounting cycle
ten steps
Step 1 of Accounting Cycle
Transactions are analyzed and recorded in the journal.
Step 2 of Accounting Cycle
Transactions are posted to the ledger.
Step 3 of Accounting Cycle
An unadjusted trial balance is prepared.
Step 4 of Accounting Cycle
Adjustment data are assembled and analyzed.
Step 5 of Accounting Cycle
An optional end-of-period spreadsheet (work sheet) is prepared
Step 6 of Accounting Cycle
Adjusting entries are journalized and posted to the ledger.
Step 7 of Accounting Cycle
An adjusted trial balance is prepared.
Step 8 of Accounting Cycle
Financial statements are prepared
Step 9 of Accounting Cycle
Closing entries are journalized and posted to the ledger.
Step 10 of Accounting Cycle
A post-closing trial balance is prepared.
The annual accounting period adopted by a business is known as its
fiscal year
When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the ____
natural business year.
The ability to convert assets into cash is called
liquidity
The ability of a business to pay its debts is called
solvency
_____ is the excess of the current assets of a business over its current liabilities
Working capital
The ____ is another means of expressing the relationship between current assets and current liabilities. The current ratio is computed by dividing current assets by current liabilities.
current ratio
Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $7,200 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Amir’s first month of operations on March 31st?
$600
Which one of the fixed asset accounts listed below will not have a related contra asset account?
land
Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?
unearned rent
The accounting cycle requires three trial balances be done. In what order should they be prepared?
unadjusted, adjusted, post-closing
The income statement columns in the worksheet show that debits are equal to $55,800 and credits are $67,520. What does this information mean to the accountant?
Net Income $11,720
Based on the preceding trial balance, the entry to close C. Finley, Drawing would be:
debit C. Finley, Capital $3,000, credit C. Finley, Drawing $3,000
A fiscal year
ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
The entry required to close the expense accounts at the end of the period includes a:
a debit to Income Summary for $33,520
Which of the accounts below would be closed by posting a debit to the account?
Fees Earned
When preparing the statement of owner’s equity, the beginning capital balance can always be found
in general ledger
An _____ is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information.
accounting system
As a business grows and changes, accounting systems also change in the following ___-step process.
3
The process includes:
Analyze user information needs.

Design the system to meet the user needs.

Implement the system.

______ are the policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.
Internal controls
_____ are the means by which the accounting system collects, summarizes, and reports accounting information. These methods may be either manual or computerized.
Processing methods
Understanding a manual accounting system is useful in identifying relationships between ___ & ____
accounting data and reports.
A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a _____
subsidiary ledger.
The primary ledger, which contains all of the balance sheet and income statement accounts, is called a _____
general ledger.
Each subsidiary ledger is represented in the general ledger by a summarizing account, called a _____
controlling account.
The individual customer accounts are arranged in alphabetical order in a subsidiary ledger called the accounts ______, or customers ledger.
receivable subsidiary ledger
The individual creditor accounts are arranged in alphabetical order in a subsidiary ledger called the _____, or creditors ledger.
accounts payable subsidiary ledger
One method of processing transactions more efficiently in a manual system is to use ____. These are designed to be used for recording a single kind of transaction that occurs frequently.
special journals
The all-purpose two-column journal, called the _____ or simply the journal, can be used for entries that do not fit into any of the special journals.
general journal
The _____ is used for recording fees earned on account.
revenue journal
Cash fees earned would be recorded in the ____
cash receipts journal.
Purchases made on account (on credit) are recorded in the _____
purchases journal
All cash payments are recorded in the ____
cash payments journal
Revenues are normally recorded to the revenue journal when the company sends a bill, referred to as an _____, to the customer.
Each ____ is normally numbered in sequence for future reference.
invoice
All transactions that involve the receipt of cash are recorded in a ______. Every entry recorded in the _____ will involve a debit to the “Cash Dr.” column.
cash receipts journal
After all journalizing and posting to individual accounts for the month is complete, the columns are____ .
totaled
The total of the accounts in the accounts receivable subsidiary ledger should match the balance in the general ledger’s _____ account.
Accounts Receivable
The ____ is designed for recording all purchases on account
purchases journal
All transactions involving a credit to Cash are recorded in the ______
cash payments journal
Computerized accounting systems have the following three main advantages over manual systems:
Computerized systems simplify the record-keeping process by recording transactions in electronic forms and, at the same time, posting them electronically to general and subsidiary ledger accounts.

Computerized systems are generally more accurate than manual systems.

Computerized systems provide
management with current account balance information to support decision making, since account balances are posted as the transactions occur.

Using the Internet to perform business transactions is termed ____
e-commerce.
When transactions are between a company and a consumer, it is termed _____
B2C (business-to-consumer) e-commerce.
Three more advanced areas where the Internet is being used for business purposes are:
Supply chain management (SCM)

Customer relationship management (CRM)

Product life-cycle management (PLM)

One way to report revenue is by different segments. Businesses may be segmented by _____
region, by product or service, or by type of customer.
Which of the following is true about the revenue journal?
only revenues on account are recorded in the revenue journal
Segment data:
is gathered from invoice data.
When using a purchases journal
Accounts Receivable and Accounts Payable subsidiary ledgers.
An “Accounts Receivable Subsidiary Ledger” report shows
cash receipts by customer for a specified date range
Which of the following is not an element of internal controls?
ensure that company policies are in place to maximize profits
The phase of accounting system installation in which the information needs of people in the organization are taken into account is
analysis
When using a revenue journal:
revenues are normally recorded when the company sends customer invoices.
Which of the following transactions is recorded in the purchases journal?
purchase of store supplies on account
Which of the following transactions is recorded in the revenue journal?
rendering services on account
When merchandise is sold, the revenue is reported as sales, and its cost is recognized as an expense called
cost of merchandise sold
The cost of merchandise sold is subtracted from sales to arrive at ____. It is the profit before deducting operating expenses
gross profit
Merchandise on hand (not sold) at the end of an accounting period is called ___.
merchandise inventory
If merchandise inventory at the end of the period is determined by taking a physical count of inventory on hand, a _____ is being used.
periodic inventory system
Under the _____, the amounts of inventory purchased, available for sale, and sold are continuously (perpetually) updated in the inventory records.
perpetual inventory system
A buyer may receive a discount from the seller (sales discount) for early payment of the amount owed. From the buyer’s perspective, such discounts are called ____
purchases discounts
A purchases return involves actually returning merchandise that is damaged or does not meet the specifications of the order. From a buyer’s perspective, such returns are called _____.
purchases returns and allowances
A ____, often called a debit memo, informs the seller of the amount the buyer proposes to debit to the account payable due the seller.
debit memorandum
The terms for when payments for merchandise are to be made are called
credit terms
If payment is required on delivery, the terms are cash or net cash. Otherwise, the buyer is allowed an amount of time, known as the ____, in which to pay.
credit period
A ____, often called a credit memo, authorizes a credit to (decreases) the buyer’s account receivable
credit memorandum
If ownership of the merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier, the terms are said to be ____
FOB (free on board) shipping point.
If ownership of the merchandise passes to the buyer when the buyer receives the merchandise, the terms are said to be
FOB (free on board) destination
When wholesalers offer special discounts to certain classes of buyers who order large quantities, these discounts are called
trade discounts
The ______ contains several sections, subsections, and subtotals.
multiple-step income statement
__ is the total amount charged customers for merchandise sold, including cash sales and sales on account.
Sales
____ are granted by the seller to customers for damaged or defective merchandise.
Sales returns and allowances
____ are granted by the seller to customers for early payment of amounts owed
Sales discounts
____is determined by subtracting sales returns and allowances and sales discounts from sales.
Net sales
The ______ is the cost of the merchandise sold to customers. Merchandise costs consist of all the costs of acquiring the merchandise and readying it for sale, such as purchase and freight costs.
cost of merchandise sold
___ are incurred directly in the selling of merchandise.
Selling expenses
______, sometimes called _____, are incurred in the administration or general operations of the business.
Administrative expenses; general expenses
_____, sometimes called operating income, is determined by subtracting operating expenses from gross profit.
Income from operations
____ is revenue from sources other than the primary operating activity of a business.
Other income
____ is an expense that cannot be traced directly to the normal operations of the business.
Other expense
An alternative form of income statement is the ____
single-step income statement
The form of balance sheet with the assets on the left-hand side and the liabilities and owner’s equity on the right-hand side is called the____
account form
Merchandising businesses may experience some loss of inventory due to shoplifting, employee theft, or errors in
recording or counting inventory
If the balance of the Merchandise Inventory account is larger than the total amount of the merchandise count, the difference is often called
inventory shrinkage or inventory shortage
The ____ measures how effectively a business is using its assets to generate sales.
ratio of net sales to assets
of inventory are recorded in a purchases account rather than in the merchandise inventory account.
Purchases
____ are normally recorded in a separate purchases discounts account. The balance of the purchases discounts account is reported as a deduction from Purchases for the period.
Purchases discounts
_____are recorded in a similar manner as purchase discounts.
Purchases returns and allowances
When merchandise is purchased FOB shipping point, the buyer pays for the freight. Under the periodic inventory system, freight paid when purchasing merchandise FOB shipping point is debited to
Freight In
The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a
single-step statement
Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled
Merchandise inventory
Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total asset balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal points).
2.92
Inventory shortage is recorded when
there is a difference between a physical count of inventory and inventory records.
The arrangements between buyer and seller as to when payments for merchandise are to be made are called
credit terms
Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
credit to merchandise inventory
Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?
7972
Discounts taken by a buyer because of early payment are recorded on the seller’s accounting records as
sales discount
Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?
2940
Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a
credit to merchandise inventory
A minimum cash balance required by a bank is called
compensating balance
Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was
added to the balance per company’s records
Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company’s accounts?
debit Accounts Receivable; credit Cash
An example of a preventive control is
separation of the Purchasing Department and Accounting Department personnel
Cash equivalents include
money market accounts and commercial paper
In management’s internal control report that is now required of all public companies, which of the following does not have a direct effect on a company’s internal control system?
Board of Trustees
A $150 petty cash fund has cash of $44 and receipts of $93. The journal entry to replenish the account would include a
debit to Cash Over and Short for $13.
Which of the following should not be considered cash by an accountant?
postage stamps

Need essay sample on "Accounting 211: Midterm"? We will write a custom essay sample specifically for you for only .90/page

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
×
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register
Signup & Access Essays

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
|
Complete Buyer Protection
|
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy