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STUDY Office Accounting Ch. 4-6

covered completely
Corrections in accounts should NOT be
a description of special entries
The Item column in the general ledger is used for
enter the balance
The steps in the journalizing process include all of the following EXCEPT
False
A list of all the accounts used by a business is called a trial balance.
as the first entry on a page
The month in the journal is recorded
False
An account in the chart of accounts is assigned a number at random.
debiting Drawing and crediting Cash
Cash is used to pay for a car for personal use by the owner. The transaction includes
False
When the trial balance indicates that the ledger is in balance, you can assume there are no errors in the ledger.
False
A two-column journal has only two amount columns?one for the amount of the entry and one for the running balance.
the ruling method
Corrections in accounts should be made by
False
The posting reference, amount, and description are the three items of information about each transaction that should be entered in the ledger accounts.
debiting Rent Expense and crediting Cash
If cash is paid for office rent, the transaction includes
True
Firms are more likely to use a four-column ledger account than T accounts.
False
It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal.
True
Each entry in the journal affects two or more accounts.
numerical order
The accounts in the chart of accounts are arranged in
source documents
Forms and papers that provide information about a business transaction are called
debiting Telephone Expense and crediting Cash
The payment of a telephone bill for the month would include
True
A separate line in the two-column journal should be used for each account title.
False
An account in the chart of accounts is assigned a number at random.
True
Source documents begin the process of entering transactions in the accounting system.
True
Source documents provide objective, verifiable evidence of business transactions.
False
When entering titles of accounts in the two-column journal, the account to be credited is entered first and the account to be debited is entered second.
False
Almost any document that provides information about a business transaction is included in the chart of accounts.
debiting Drawing and crediting Cash
Cash is used to pay for a car for personal use by the owner. The transaction includes
debiting Accounts Payable and crediting Cash
The transaction to record payment for delivery equipment that was purchased on account in the previous month would include
False
A list of all the accounts used by a business is called a trial balance.
True
The journal provides the information needed to transfer the debits and credits to the accounts in the ledger.
False
Entering transactions in a journal is called posting.
erase questionable entries
To find an error, you should do all of the following EXCEPT
debiting Cash and crediting Service Revenue
Service revenue received in cash is entered by
four-column account
Instead of T accounts, businesses are more likely to use a
debiting Rent Expense and crediting Cash
If cash is paid for office rent, the transaction includes
covered completely
Corrections in accounts should NOT be
sales of goods or services
Copies of sales tickets or sales invoices issued to customers or clients provide information about
False
A two-column journal has only two amount columns?one for the amount of the entry and one for the running balance.
cash payments
Check stubs and carbon copies of checks provide information about
True
The general ledger is kept to supply management with desired information in summary form.
True
It is permissible to enter information about a transaction in the ledger accounts first, before entering the information in the journal.
False
The main advantage of a two-column account is that it maintains a running balance.
cash receipts
Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about
enter the balance
The steps in the journalizing process include all of the following EXCEPT
day
For EVERY transaction, the accountant enters the
Enter the description of the entry
Posting from the journal to the ledger does NOT involve which of the following steps?
no entry is required
To record wages earned but not paid under the modified cash accounting method,
False
A contra-asset appears on the income statement.
True
Depreciation matches the cost of an asset against the revenues it will produce.
contra-account
An account used with a related account to bring about a decrease in the net amount of the two account balances is called a(n)
True
If the debits in the Income Statement columns of the work sheet total $50,000 and the credits total $60,000 before net income or net loss has been determined, the business has a net income of $10,000.
revenue earned with the expenses incurred to produce the revenue
The matching principle in accounting requires the matching of
True
The original cost of an asset added to its salvage value represents the depreciable cost of an asset.
depreciation
Matching the cost of an asset with the revenue it is expected to produce is called
False
A contra-asset has a debit balance.
False
The owner’s capital account in the last two columns of the work sheet is an up-to-date account and includes net income and withdrawals of the current period.
True
When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns.
True
“Adjusting” is written in the Item column of the general ledger when posting adjusting entries.
False
Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash.
True
A computer workstation cost $28,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $3,000 per year.
True
The historical cost principle allows for assets to be recorded at actual cost.
True
Depreciation expense is recorded for a specific period of time.
Balance Sheet columns
The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the
True
A computer workstation cost $28,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $3,000 per year.
True
Recording adjustments on the work sheet has no effect on the ledger accounts.
the amount of depreciation taken in past years
What does the credit balance in the Accumulated Depreciation account represent?
True
The matching principle offers the best measure of net income.
True
Under the modified cash basis of accounting, cash payments for assets with lives longer than one accounting period (buildings, equipment, insurance, etc.) are recorded as assets and adjustments are made each period.
True
The cash basis of accounting is used by some small businesses and by most individuals for tax purposes.
True
Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed.
$85,000
Owner’s equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner’s equity at the end of the period is
True
The historical cost principle allows for assets to be recorded at actual cost.
False
Adjusting entries affect only the owner’s equity accounts.
False
The cost of plant assets less the accumulated depreciation is called the salvage value of the asset.
no entry is required
To record wages earned but not paid under the modified cash accounting method,
False
A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.
False
The statement of owner’s equity is prepared from information from the asset and liability accounts.
True
The income summary account is an account used only during the closing process.
False
Obligations that need not be paid for a long time, usually more than one year, are classified as current liabilities.
True
Assets, liabilities, and the owner’s capital account are permanent accounts.
False
A separate explanation of each closing entry is necessary.
Income Summary
The account to which revenue and expenses are closed is called
investments by the owner
Owner’s equity can be increased through
False
The income summary account appears on the income statement at the end of the accounting period.
True
To close the drawing account with a debit balance, credit the account for its balance and debit the owner’s capital account.
revenue accounts, expense accounts, Income Summary, drawing account
What is the correct sequence for closing the temporary accounts?
debiting the owner’s capital account and crediting Income Summary
The journal entry to close the income summary account (showing a net loss) includes
prepare a trial balance, make adjustments, prepare financial statements
Which of the following steps of the accounting cycle are in the correct order?
True
A statement of owner’s equity is a statement summarizing all of the changes in owner’s equity during a specified period of time.
the accounting cycle
The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as
$3,000
The total revenue of the month of June amounted to $6,500; total expenses amounted to $3,500; and withdrawals amounted to $600. The net income for the month amounted to
True
Property, plant, and equipment are assets that are expected to serve the business for many years.
income summary account
The balance in an expense account is closed to a(n)
income statement, statement of owner’s equity, balance sheet
The order in which financial statements should be prepared is
False
The statement of owner’s equity is prepared from information from the asset and liability accounts.
False
A mortgage on an office building is an example of a property, plant, and equipment asset.
False
The heading for a balance sheet includes the name of the business, the title of the statement, and a period of time.
True
Closing entries are made in the journal and posted to the ledger accounts.
debiting the owner’s capital account and crediting the drawing account
The journal entry to close the drawing account includes
report form
A form of balance sheet that lists the liabilities and the owner’s equity sections below the assets section is called the
False
The end-of-period work sheet is completed after adjusting entries have been recorded and posted.
debiting the revenue accounts and crediting Income Summary
The journal entry to close revenue accounts includes
True
Current assets include cash and other assets that will be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer.
False
A separate explanation of each closing entry is necessary.
False
An income statement is an itemized statement that provides information regarding the status of the assets, liabilities, and owner’s equity of a business enterprise as of a specified date.
False
To close an expense account with a debit balance, debit the account for its balance and credit the income summary account.
False
The effect of drawing transactions on the capital account is formalized at any time during the accounting period.
income summary account
The balance in an expense account is closed to a(n)
Owner’s Capital
The account to which the drawing account is closed is called
post-closing trial balance
To prove the equality of the debit and credit balances in the general ledger accounts after the closing entries have been journalized and posted, prepare the
False
The statement of owner’s equity is prepared from information from the asset and liability accounts.
prepare a trial balance, make adjustments, prepare financial statements
Which of the following steps of the accounting cycle are in the correct order?
False
A separate explanation of each closing entry is necessary.
Delivery Fees
After the closing entries are journalized and posted, which of the following accounts would NOT have a balance?
Miscellaneous Expense
After the closing entries have been posted, which of the following accounts would NOT have a balance?
False
The income summary account appears on the income statement at the end of the accounting period.
debiting Income Summary and crediting the expense accounts
The journal entry to close expense accounts includes
report form
A form of balance sheet that lists the liabilities and the owner’s equity sections below the assets section is called the
debiting the owner’s capital account and crediting the drawing account
The journal entry to close the drawing account includes
False
The income statement includes changes in owner’s equity resulting from investments or withdrawals of assets by the owner.
True
An income statement is an itemized statement for the purpose of providing information regarding the results of operations during a specified period of time.

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