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WGU CYC1 Princples of Accounting

True
Accounting is defined as the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties.

True
False

True
The financial statements and the auditor’s report must be made available to stockholders of publicly owned corporations.

True
False

True
Most owners and managers rely heavily on the accountant’s judgment and knowledge when making financial decisions.

True
False

True
In a sole proprietorship, the owner is responsible for the debts of the business if the firm is unable to pay.

True
False

Tax Planning
Tax accounting involves tax compliance and

Tax Evaluation.
Tax Planning.
Tax Configuration.
Tax Obfuscation.

The Securities & Exchange Commission
The government agency that has final authority over the financial reporting of publicly owned corporations is:

The Securities and Exchange Commission
The Federal Trade Commission
The Internal Revenue Service
The Financial Accounting Standards Board

Private Accounting
Managerial accounting is

Public Accounting
Government Accounting
Private Accounting
Tax Accounting

Identifying
Which of the following is NOT part of the process of accounting for financial information?

Recording
Identifying
Communicating
Classifying

True
Laws passed by Congress in 1933 and 1934 gave the Securities and Exchange Commission (SEC) final say on matters of financial reporting by publicly owned corporations.

True
False

Managerial Accounting
The area of accounting that involves the preparation of internal reports for a firm’s executives and the analysis of the data in these reports to aid in decision making is known as

Financial Accounting
Managerial Accounting
Auditing.
Cost Accounting

A Business
An example of an economic entity is

a town
a business
a nonprofit hospital
a church

False, you can only invest in an a public corporation
Anyone can invest in a closely held corporation.

True
False

False, the tax base is determined by the IRS
The SEC uses financial information to determine a company’s tax base.

True
False

The Corporation
Owners are not personally responsible for the debts of the business if the form of business organization is

the sole proprietorship
the partnership
the corporation
the nonprofit organization

False
Public accountants work on the staff of federal, state, or local governmental units.

True
False

Kept totally seperate
The financial affairs of a business and the financial affairs of the owners should be

* Combined in the firm’s accounting records.
* Reported in different parts of the firm’s accounting records.
* Combined only if the owner wants them to be.
* Kept totally separate

False, they are developed by GAAP
Currently, generally accepted accounting principles are developed by the American Institute of Certified Public Accountants (AICPA)

True
False

Developing generally accepted accounting principles
The Financial Accounting Standards Board is responsible for

* Auditing financial statements.
* Developing generally accepted accounting principles.
* Establishing accounting systems for businesses.
* Making recommendations to the Securities and Exchange Commission.

CPA
An independent accountant who provides accounting services to the public for a fee is a:

CIA
CFE
CMA
CPA

Auditing
The review of financial statements to assess their fairness and adherence to GAAP is

Accounting
Preparation
Compliance
Auditing

True
The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit financial statements to it each year.

True
False

Suggesting actions to reduce tax liability
Tax planning includes

* Preparing tax returns
* Auditing tax returns
* Correcting tax returns
* Suggesting actions to reduce tax liability

The types of products and services the business provides
Which of the following is NOT a type of information communicated by the financial statements?

* The equity, or value, of the business
* The amount spent on costs (expenses) of the business
* The types of products and services the business provides
* The amount of revenue earned by the business

True
The death or withdrawal of one partner ends the partnership.

True
False

LLP
A form of the partnerships business entity is

LLP
LLC
INC
DBA

True
Accountants provide financial information to various parties so they can make business decisions.

True
False

True
The purpose of accounting is to provide financial information about an economic or social entity.

True
False

False, the can have as many as they declare in the forming of the entity.
A business partnership can have only two partners.

True
False

Auditor Rotation
The Sarbanes-Oxley Act includes rules on:

Auditor Retention
Auditor Reliability
Auditor Rotation
Auditor Reporting

False
The owners and managers of a business are the only users of the Financial Information.

True
False

True
Public accounting firms provide three major types of services: auditing, tax accounting, and management advisory services.

True
False

False, The records for each entity need to be kept completely separate.
When a business is organized as a sole proprietorship, the owner may combine his/her personal financial information with the business financial information.

True
False

False
An accounting system is designed to accumulate and classify data about a firm’s financial affairs and summarize it in the general journal.

True
False

Publicly Owned Coprorations
The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as

* Privately owned corporations
* Closely held corporations
* Publicly owned corporations
* Sole proprietorship

How long the business has been in operation
Which of the following is NOT a type of information communicated by the financial statements?

* Whether or not the business is profitable
* What types of assets business owns
* How long the business has been in operation
* How much the business owes others

Industrial Accounting
Which of the following is NOT an area in which accountants usually practice?

* Public Accounting
* Industrial Accounting
* Governmental Accounting
* Managerial (Private) Accounting

Sarbanes-Oxley Act
An act passed in response to the wave of corporate accounting scandals is the

Saxon-Ordanly Act
Sarbanes-Oxley Act
Sardonic-Oxone Act
Sorbine-Oxide Act

The AAA
The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is

the FCC.
the AICPA.
the SEC.
the AAA.

$78,040
“At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,170;
Prepaid Insurance, $470;
Equipment, $35,900 and
Cash, $40,500.
On the same date, SloMo owed the following creditors:
Simpson Supply Company, $11,700;
Allen Office Equipment, $9,350.

The total assets for the SloMo Delivery Service are

$78,040
$42,140
$41,670
$76,400”

$21,050
At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,170;
Prepaid Insurance, $470;
Equipment, $35,900 and
Cash, $40,500.
On the same date, SloMo owed the following creditors:
Simpson Supply Company, $11,700;
Allen Office Equipment, $9,350.

The total amount of Liabilities is
$35,900
$21,050
$9,350
$40,500

$78,040
At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $1,170;
Prepaid Insurance, $470;
Equipment, $35,900 and
Cash, $40,500.
On the same date, SloMo owed the following creditors:
Simpson Supply Company, $11,700;
Allen Office Equipment, $9,350.

The total assets for the SloMo Delivery Service are
$76,400
$78,040
$42,140
$41,670

$20,000
Total assets of Douglas Fuhr Furniture Co. are $28,000 and the total liabilities are $8,000. What is the amount of the owner’s equity?

$4,000
$20,000
$28,000
$36,000

$85,000 increase
If during the year total assets increase by $71,000 and total liabilities decrease by $14,000, by how much did owner’s equity increase/decrease?

$85,000 decrease
$85,000 increase
$57,000 decrease
$71,000 increase

$20,200
If liabilities are $4,400 and owner’s equity is $15,800, assets are

$20,200.
$11,400.
$15,800.
$4,400.

Net Income $935
During October, a firm had the following transactions involving revenue and expenses.

Paid $1,000 for rent
Provided services for $2,350 in cash
Paid $170 for telephone service
Provided services for $1,500 on credit
Paid salaries of $1,475 to employees
Paid $270 for office cleaning service

Merchandising Business
A retailer is involved in a?

Merchandising Business
Wholesale Distribution Business
Manufacturing Business
None of the Above

A wholesale merchandising business is typically invovled in:

Product Distribution
Service
Produce Manufacturing
All of the Above

Product Distribution
True
Some business manufacture and distribute products as well as provide services to customers.

True
False

Both a Manufacturing Business & Retail Distribution
A game software development company that sells its products directly to customers through its own advertising and internet website would be considered a:

* Manufacturing Business
* Wholesale Distribution Business
* Retail Distribution Business
* Service Business
* Both a Manufacturing Business & Wholesale Distribution Business
* Both a Manufacturing Business & Retail Distribution
* All of the Above
* None of the Above

All of the Above
Successful businesses typically requre:

Capital
Effective Management
A Product or Service that can be sold to customers at a profit
All of the Above

False
Non-profit businesses typically do not require capital.

True
False

MAP
Management Advisory Services
GAAP
Generally Accepted Accounting Principles
CPA
Certified Public Accountant
Accounting
The process in which financial information is recorded, classified, summarized, interpreted, and communicated to owners, managers and other interested parties.
Accounting System
A process designed to accumulate, classify, and summarize financial data.
Auditing
The review of financial statements to assess their fairness and adherence to generally accepted accounting principles.
Auditor’s Report
An independent accountant’s review of a firm’s financial statements.
Certified Public Accountant (CPA)
An independent accountant who provides accounting services to the public for a fee.
Corporation
A publicly or privately owned business entity that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for the debts or taxes of the business.
Creditor
One to whom money is owed.
Discussion Memorandum
An explanation of a topic under consideration by the Financial Accounting Standards Board.
Economic Entity
A business or organization whose major purpose is to produce a profit for its owners.
Entity
Anything having its own separate identity, such as an individual, a town, a university, or a business.
Exposure Draft
Exposure Draft
Financial Statements
Periodic reports of a firm’s financial position or operating results.
Generally Accepted Accounting Principles (GAAP)
Accounting standards developed and applied by professional accountants.
Governmental Accounting
Accounting work performed for a federal, state, or local governmental unit.
International Accounting
The study of accounting principles used by different countries.
Management Advisory Services
Services designed to help clients improve their information systems or their business performance.
Managerial Accounting
Accounting work carried on by an accountant employed by a single business in industry.
Partnership
A business entity owned by two or more people who are legally responsible for the debts and taxes of the business.
Public Accountants
Members of firms that perform accounting services for other companies.
Separate Entity Assumption
The concept of keeping a firm’s financial records separate from the owner’s personal financial records.
Social Entity
A nonprofit organization, such as a city, public school, or public hospital.
Sole Proprietorship
A business entity owned by one person who is legally responsible for the debts and taxes of the business.
Statements of Financial Accounting Standards
Accounting principles established by the Financial Accounting Standards Board.
Stock
Certificates that represent ownership of a corporation.
Tax Accounting
A service that involves tax compliance and tax planning.
Accounts Payable
Accounts a business must pay in the future.
Accounts Receiveable
Claims for future collection from customers.
P&L
Profit & Loss Statement, also known as an income statement, or statement of income & expense.
Assets
Property owned by a business.
Balance Sheet
A formal report of a business’s financial condition on a certain date; reports the assets, liabilities, and owner’s equity of the business.
Break Even
A point at which revenue equals expenses.
Business Transacation
A financial event that changes the resources of a firm.
Capital
Financial investment in a business; equity.
Equity
An owner’s financial interest in a business.
Expense
An outflow of cash, use of other assets, or incurring of a liability.
Fair Market Value
The current worth of an asset or the price the asset would bring if sold on the open market.
Fundamental Accounting Equation
The relationship between assets and liabilities plus owner’s equity.
Income Statement
A formal report of business operations covering a specific period of time; also called a profit and loss statement (P&L Statement) or a statement of income & expenses.
Liabilities
Debts or obligations of a business.
Net Income
The result of an excess of revenue over expenses.
Net Loss
The result of an excess of expense over revenue.
On Account
An arrangement to allow payment at a later date; also called a charge account or open-account credit.
Owner’s Equity
The financial interest of the owner of a business; also called proprietorship or net worth.
Revenue
An inflow of money or other assets that results from the sales of goods or services or from the use of money or property; also called income.
Statement of Owner’s Equity
A formal report of changes that occurred in the owner’s financial interest during a reporting period.
Withdrawls
Funds taken from the business by the owner for personal use.
True
Assets always equal debts of the business plus the financial interest of the owner.

True or False

False
8,000-2,000=6,000
If assets are $8,000 and liabilities are $2,000, owner’s equity is $10,000.

True or False

“False
56,320-29,500=26,820”
A company has assets of $56,320 and liabilities of $29,500. The owner’s equity is $85,820.

True or False

True
A double line drawn under the figures in a money column shows that the computation is complete.

True or False

Six-month Period Ended November 30, 2010
If the income statement covered a six-month period ending on November 30, 2010, the third line of the income statement heading would read

* Month Ended November 30, 2010.
* November 30, 2010.
* Six-month Period Ended November 30, 2010.
* Month of November, 2010.

False
Business and Personal Expenses must always be kept secret.
A withdrawal of funds by the owner for personal use is considered a business expense.

True or False

beginning capital + net income – withdrawals + additional investments = ending capital
The Statement of Owner’s Equity is calculated as follows:

* beginning capital + net income – withdrawals + additional investments = ending capital
* beginning capital + net loss + withdrawals + additional investments = ending capital
* beginning capital + net loss – withdrawals + additional investments = ending capital
* beginning capital + net income + withdrawals + additional investments = ending capital

assets and owner’s equity increase
assets and owner’s equity increase.
When the owner invests cash in a business,

* assets and revenue increase.
* assets increase and owner’s equity decreases.
* liabilities decrease and owner’s equity increases.
* assets and owner’s equity increase.

one asset increases and another asset decreases
When equipment is purchased for cash,

* assets decrease and expenses increase.
* one asset increases and another asset decreases.
* assets and owner’s equity increase.
* assets increase and liabilities decrease.

a statement of revenues less withdrawals and expenses.
An Income Statement is all of the following EXCEPT:

* a formal report of business operations.
* a profit and loss statement.
* a statement of revenues less withdrawals and expenses.
* a statement of income and expenses.

debt Cash & credit Accounts Payable
A firm paid cash to apply against a debt. To record this transaction, the accountant would

* debit Accounts Receivable and credit Cash.
* debit Accounts Payable and credit Cash.
* debit Cash and credit Accounts Payable.
* credit Cash and credit Accounts Payable.

2
If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by

2
7
9
5

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

the revenue account.
the Cash account.
the capital account.
the drawing account.

Statement of Owner’s Equity
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
Income Statement
Statement of Owner’s Equity
Balance Sheet

Debit Cash; Credit Accounts Payable
A business pays a creditor on account. The journal entry to record this transaction is:

* Debit Accounts Payable; Credit Cash
* Debit Accounts Receivable; Credit Accounts Payable
* Debit Cash; Credit Accounts Payable
* Debit Accounts Receivable; Credit to Cash

Expenses and assets
Which of the following types of accounts normally have debit balances?

Assets and revenue
Assets, liabilities, and owner’s equity
Expenses and assets
Liabilities and owner’s equity

True
Debit entries increase asset, drawing, expense and liability accounts.

True or False

True
Another name for temporary accounts is real accounts.

True or False

True
The modern system of accounting is called the double-entry system because a debit to one account is balanced by a credit to another account.

True or False

Accounting Cycle
A series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information. :
Audit Trail = A chain of references that makes it possible to trace information, locate errors, and prevent fraud. :
Balance Ledger Form = A ledger account form that shows the balance on the account after each entry is posted.
Chronological Order
Organized in the order in which the events occur.
Compound Entry
A journal entry with more than one debit or credit.
Correcting Entry
A journal entry made to correct an erroneous entry.
Equity
An owner’s financial interest in a business.
General Journal
A financial record for entering all types of business transactions; a record of original entry.
General Ledger
A permanent, classified record of all accounts used in a firm’s operation; a record of final entry.
Journal
The record of original entry.
Journalizing
Recording transactions in a journal.
Ledger
The record of final entry.
Posting
Transferring data from a journal to a ledger.
Stockholders
The owners of corporation; also called shareholders.
True
“A ledger account contains a complete record of the individual transaction activity in each account.

True or False”

The total amount debited will equal the total amount credited.
“If a transaction is properly analyzed and recorded;

* only two accounts will be used to record the transaction.
* one account balance will increase and another will decrease.
* one asset account will be debited and one liability account will be credited.
* the total amount debited will equal the total amount credited.”

Debit Cash; Credit Fees Income
“The journal entry to record $2,450 of revenue earned and received in cash by Agatha Panthis Landscape Architect Company is:

* Debit Fees Income; Credit Accounts Receivable
* Debit Cash; Credit Fees Income
* Debit Fees Income; Credit Cash
* Debit Accounts Receivable; Credit Fees Income”

False, it is the final entry.
“A ledger is sometimes referred to as a record of original entry.

True or False”

Source Documents
“Business papers, such as checks, invoices, receipts, letters, and memos, that furnish proof that a transaction has taken place are called:
* ledgers
* source documents
* debit entries
* accounts”
Compound entries affect more than one debit and/or more than one credit.
“Which of the following statements is correct?
* All transactions require compound entries.
* Compound entries include only debits.
* Accounts being debited should always follow the accounts being credited in a compound entry.
* Compound entries affect more than one debit and/or more than one credit.”
A debit to Utilities Expense and a credit to Cash.
“The journal entry to record the payment of a monthly utility bill would include:
* A debit to Utilities Expense and a credit to Capital.
* A debit to Capital and a credit to Cash.
* A debit to Utilities Expense and a credit to Cash.
* A debit to Utilities Expense and a credit to Accounts Payable.”
Posting
“The process of transferring the data from the journal into the ledgers is called:
* footing
* posting
* transponding
* journalizing”
Debit Accounts Receivable $1,350; credit Cash $1,350
“Bertrand Inc. performed services for clients in the amount of $1,350 on credit. If this transaction had been posted in error to the Cash account instead of the Accounts Receivable account, what correcting entry would be necessary?

* Debit Accounts Receivable $1,350; credit Cash $1,350
* Debit Cash $1,350; credit Accounts Receivable $1,350
* Debit Accounts Receivable $1,350; credit Fees Income $1,350
* Debit Fees Income $1,350; credit Cash $1,350”

Debit Office Equipment; Credit Cash
“A purchase of office equipment for $380 cash is journalized as:

* Debit Office Equipment; Credit Accounts Payable
* Debit Office Equipment; Credit Cash
* Debit Equipment Expense; Credit Cash
* Debit Cash; Credit Office Equipment”

Diary
The general journal acts as the “________” of the business.
Compound Entries
_________ _________ contain several debits or credits for a single business transaction, creating efficiencies in journalizing.
General Journal
The __________ __________ is similar to a diary. The general journal details, in chronological order, the economic events of the business.
General Journal Entry Steps
“1 – Record Date; Year, Month, Day
2 – Record the Debit
3 – Indent about 1/2 inch & Record the Credit
4 – Indent again & Write the Description”
Step by Step Method for Analyzing Business Transactions
“1. Analyze the financial event:
• Identify the accounts affected.
• Classify the accounts affected.
• Determine the amount of increase or decrease for each account affected.
2. Apply the rules of debit and credit:
a. Which account is debited? For what amount?
b. Which account is credited? For what amount?
3.Make the entry in T-account form.
4. Record the complete entry in general journal form.”
Debit
In Debit/Credit Rules – Increases to asset accounts are recorded as _________.
Credit
In Debit/Credit Rules – Decreases to asset accounts are recorded as _________.
“The asset account, Equipment, is increased by $6,000.

The liability account, Accounts Payable, is increased by $6,000.”

“Wells’ Consulting Services purchased office equipment on account for $6,000.
How would you record the transaction? “
“The asset account, Supplies, is increased by $1,500.

The asset account, Cash, is decreased by $1,500.”

“Wells’ Consulting Services purchased supplies for $1,500, Check 1002.
How would you record the transaction? “
“The asset account, Cash, is decreased by $2,500.

The liability account, Accounts Payable, is decreased by $2,500.”

“Wells’ Consulting Services purchased supplies for $1,500, Check 1002.
How would you record the transaction? “
Debits
Credits = “__________ = ___________
No matter how many accounts are affected by a transaction, total debits must equal total credits.”
Debit
“The part of the journal entry to be recorded first is the:
a. asset
b. credit
c. debit
d. liability”
Diary
“A general journal is like a(n):
a. address book.
b. appointment calendar.
c. diary.
d. to-do list.”
“Source Documents –
To provide an audit trail to trace information through the accounting system.”
Why are check and invoice numbers included in the journal entry description?
It is the first accounting record where transactions are entered.
Why is the journal referred to as the “record of original entry”?
No. The only requirement is that the total debits must equal the total credits.
In a compound journal entry, if two accounts are debited, must two accounts be credited?
The audit trail will be very difficult to follow.
The accountant for Quality Lawncare never includes descriptions when making journal entries. What effect will this have on the accounting system?
General Ledger
“Post journal entries to general ledger accounts.
The _______ ______ provides a permanent, classified record for a company’s accounts.”
Journal or Ledger
“Correct errors made in the _______ or ______.
Errors must be corrected to ensure a proper audit trail and to provide good information.”
Record
A journal contains a chronological (day-by-day) _______ of a firm’s transactions.
Accounts & the Amounts
Each journal entry shows the _______ and the _______ involved.
Journal
Using the ______ as a guide, you can enter transaction data in the accounts.
T Accounts
________ are used to analyze transactions quickly but are not used to maintain financial records.
Ledger
The account forms are kept in a book or binder called a ________.
Master Reference
Every business has a general ledger. The general ledger is the _______ reference file for the accounting system. It provides a permanent, classified record of all accounts used in a firm’s operations.
Accounting System
Every business has a general ledger. The general ledger is the _______ reference file for the accounting system. It provides a permanent, classified record of all accounts used in a firm’s operations.
Permanent
Every business has a general ledger. The general ledger is the _______ reference file for the accounting system. It provides a permanent, classified record of all accounts used in a firm’s operations.
Account Forms
There are different types of general ledger ______ ______.
Balance Ledger Form
A ______ ______ _____ shows the balance of the account after each entry is posted.
Recording Transactions
Business managers should be sure that their firms have efficient procedures for __________ ________.
Timely & Acccurate
A well-designed accounting system allows ______ and ______ posting of data to the ledger accounts.
Financial Statements
The information that appears in the ______ ______ is taken from the general ledger.
Decision Making
Since management uses financial information for ______ ______, it is essential that the financial statements be prepared quickly at the end of each period and that they contain the correct amounts.
Recording Process
The promptness and accuracy of the statements depend on the efficiency of the ______ ______.
Audit Trail
A well-designed accounting system has a strong ______ ______.
Trace
Every business should be able to ______ amounts through the accounting records and back to the documents where the transactions were first recorded.
Financial Statements
Since management uses financial information for Decision Making, it is essential that the ______ ______ be prepared quickly at the end of each period and that they contain the correct amounts.
Quickly
Since management uses financial information for Decision Making, it is essential that the financial statements be prepared ______ at the end of each period and that they contain the correct amounts.
Each Period
Since management uses financial information for Decision Making, it is essential that the financial statements be prepared quickly at the end of ______ ______ and that they contain the correct amounts.
The Ledger Account Number
What is entered in the Posting Reference Column of the General Journal?
The indicate that the entry has been posted & ensure against posting the same entry twice.
Why are posting references made in ledger accounts and in the journal?
False, if an incorrect journal entry was posted, a correcting entry should be jouralized & posted. To ensure honesty and provide a clear audit trail, erasures are not permitted in the journal
If a journal entry that contains an error has been posted, erase the entry and change the posting in the ledger accounts. True or False?
False, if an incorrect journal entry was posted, a correcting entry should be jouralized & posted. To ensure honesty and provide a clear audit trail, erasures are not permitted in the journal
Once an incorrect journal entry has been posted, the incorrect amounts remain in the general ledger accounts. True or False?
Date Order
The general journal organizes accounting information in:
a. account order.
b. alphabetical order.
c. date order.
Step 1) Analyze Transactions
Step 2) Journalize Transaction
Step 3) Post Transactions
What are the first three steps of the accounting cycle?
First 3 Steps of the Accounting Cycle
Step 1) Analyze Transactions
Step 2) Journalize Transaction
Step 3) Post Transactions”
26,150
Foot and find the balance of the Cash account.
Cash.
——————————————–
+ | –
26,000 | 10,000
18,000 | 3,000
| 2,500
| 2,350

a. 44,000
b. 29,500
c. 26,150
d. 24,100

Recording Transactions
_______ ________ in a journal is called journalizing, the second step in the accounting cycling.
Second Step
Recording transactions in a journal is called journalizing, the _______ _______ in the accounting cycling.
Transactions
A journal is a daily record of _______.
Written Analysis
A _______ _______ of each transaction is contained in a journal.
First
The debit portion is always recorded ______.
Audit Trail
If possible, include source document numbers in descriptions in order to create an ______ ______.
Source Document
If possible, include ______ ______ numbers in descriptions in order to create an audit trail.
Compound Journal Entries
A transaction might require a journal entry that contains several debits or credits.
Third
Posting to the general ledger is the ______ step in the accounting cycle.
Transfer
Posting is the ______ of data from journal entries to ledger accounts.
Accounts
The individual ______ together form a ledger.
Accounting Cycle Steps
“1. Analyze transactions
2. Journalize transactions
3. Post transactions”
Audit Trail
To ensure honesty and to provide a clear ______ ______, erasures are not permitted in a journal.
Correcting Entry
A ______ ______ is journalized and posted to correct a previous mistake.
Cross Reference
Posting references in the journal and the ledger accounts ______ ______ the entries and form another part of the audit trail. They make it possible to trace or recheck any transaction.
Debit Accounts Payable and Credit Cash
“A firm paid cash to apply against a debt. To record this transaction, the accountant would
* Debit Accounts Receivable and Credit Cash
* Debit Accounts Payable and Credit Cash
* Debit Cash and Credit Accounts Payable
* Credit Cash and Credit Accounts Payable”
9
“If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by
* 2
* 7
* 9
* 5”
The Revenue Account
“The account used to record increases in owner’s equity from the sale of goods or services is
* The Revenue Account
* The Cash Account
* The Capital Account
* The Drawing Account”
Statement of Owner’s Equity
“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
* Income Statement
* Statement of Owner’s Equity
* Balance Sheet”
Debit Cash; Credit Accounts Payable
“A business pays a creditor on account. The journal entry to record this transaction is:
* Debit Accounts Payable; Credit Cash
* Debit Accounts Receivable; Credit Accounts Payable
* Debit Cash; Credit Accounts Payable
* Debit Accounts Receivable; Credit to Cash”
Expenses & Assets
“Which of the following types of accounts normally have debit balances?
* Assets And Revenue
* Assets, Liabilities, And Owner’s Equity
* Expenses And Assets
* Liabilities And Owner’s Equity”
False
“Debit entries increase asset, drawing, expense and liability accounts.

True or False”

False
“The modern system of accounting is called the double-entry system because a debit to one account is balanced by a credit to another account.

True or False”

True
“Another name for temporary accounts is real accounts.

True or False”

Account Balance
The difference between the amounts recorded on the two sides of an account.
Accounts
Written records of the assets, liabilities, and owner’s equity of a business.
Chart of Accounts
A list of the accounts used by a business to record its final transactions.
Classification
A means of identifying each account as an asset, liability, or owner’s equity.
Credit
An entry on the right side of an account.
Debit
An entry on the left side of an account.
Double-Entry System
An accounting system that involves recording the effects of each transaction as debits and credits.
Drawing Account
A special type of owner’s equity account set up to record the owner’s withdrawal of cash from the business.
Footing
A small pencil figure written at the base of an amount column showing the sum of the entries in the column.
Normal Balance
The increase side of an account
Permanent Account
An account that is kept open from one accounting period to the next.
Slide
An accounting error involving a misplaced decimal point.
T-Account
A type of account, resembling a T, used to analyze the effects of a business transaction.
Temporary Account
An account whose balance is transferred to another account at the end of an accounting period.
Transposition
An accounging error involving misplaced digits in a number.
Trail Balance
A statement to test the accuracy of total debits and credits after transactions have been recorded.
T-Accounts
Set up T accounts for assets, liabilities, and owner’s equity.
Visual Tool
The T account is an important visual tool used as an alternative to the fundamental accounting equation.
Accounts
Analyze business transactions and enter them in the ______.
Analyze & Classify
Accountants often use T accounts to help ______ and ______ business transactions.
Balances
Accurate account ______ contribute to a reliable accounting system.
Accounting Equation
Assets = Liabilities
Owner’s Equity
Assets
Liabilities
Owner’s Equity
What is the Accounting Equation?
Transactions
Analyze business _______ and enter them in the accounts.
Owes
Liabilities are amounts a business owes its creditors.
Right
Liabilities appear on the _______ side of the accounting equation (Assets = Liabilities
Owner’s Equity).
Right
Increases in liabilities are on the _______ side of liability T accounts.
Left
Decreases in liabilities are on the _______ side of liability T accounts.
Increases
“For liability T accounts
• right side shows ______
• left side shows decreases.”
Decreases
“For liability T accounts
• right side shows increases,
• left side shows _______”
Normal Balance
Usually account balances appear on the increase side of the account. The increase side of the account is the _______ _______ of the account.
Increases in asset accounts are recorded on the left side. Increases in liability and owner’s equity accounts are recorded on the right side.
Increases are recorded on which side of asset, liability, and owner’s equity accounts?
The sum of several entries on either side of an account that is entered in small pencil figures.
What is a footing?
The increase side of an account. The normal balance of an asset account is on the left side. The normal balance of liability and owner’s equity accounts is on the right side.
What is meant by the “normal balance” of an account? What is the normal balance side for asset, liability, and owner’s equity accounts?
Equipment is increased by $10,800. Accounts Payable is increased by $10,800.
“The Wilson Company purchased new computers for $10,800 from Office Supplies, Inc., to be paid in 30 days. Which of the following is correct?
a. Equipment is increased by $10,800. Accounts Payable is decreased by $10,800.
b. Equipment is increased by $10,800. Accounts Payable is increased by $10,800.
c. Equipment is decreased by $10,800. Accounts Payable is increased by $10,800.
d. Equipment is increased by $10,800. Cash is decreased by $10,800.
“Assets
Liabilities
Owner’s Equity
40,000
10,000
30,000″
“From the following accounts, show that the fundamental accounting equation is in balance. All accounts have normal balances.
Cash—$15,400
Accounts Payable—$10,000
David Jenkins, Capital—$30,000
Equipment—$20,000
Supplies—$4,600”
Accounting Cycle
A series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information.
Audit Trail
A chain of references that makes it possible to trace information, locate errors, and prevent fraud.
Balance Ledger Form
A ledger account form that shows the balance of the account after each entry is posted.
Chronological Order
Organized in the order in which the events occur.
Compound Entry
A journal entry with more than one debit or credit.
Correcting Entry
A journal entry made to correct an erroneous entry.
General Journal
A financial record for entering all types of business transactions; a record of original entry.
General Ledger
A permanent, classified record of all accounts used in a firm’s operation; a record of final entry.
Journal
The record of original entry.
Journalizing Recording transactions in a journal.
Ledger
The record of final entry.
Posting
Transferring data from a journal to a ledger.
Account Form Balance Sheet
A balance sheet that lists assets on the left and liabilities and owner’s equity on the right (see Report form balance sheet)
Adjusting Entries
A journal entries made to update accounts for items that were not recorded during the accounting period.
Adjustments
A journal entries made to update accounts for items that were not recorded during the accounting period.
Book Value
That portion of an asset’s original cost that has not yet been depreciated.
Contra Account
An account with a normal balance that is opposite that of a related account.
Contra Asset Account
An asset account with a credit balance, which is contrary to the normal balance of an asset account.
Depreciation
Allocation of the cost of a long-term asset to operations during its expected useful life.
Prepaid Expenses
Expense items acquired, recorded, and paid for in advance of their use.
Report Form Balance Sheet
A balance sheet that lists the asset accounts first, followed by liabilities and owner’s equity.
Salvage Value
An estimate of the amount that could be received by selling or disposing of an asset at the end of its useful life.
Straight-Line Depreciation
Allocation of an asset’s cost in equal amounts to each accounting period of the asset’s useful life.
Worksheet
A form used to gather all data needed at the end of an accounting period to prepare financial statements.
Worksheet
You complete a trial balance on a _______.
Trial Balance
You complete a ______ ______ balance on a worksheet.
Time & Effort
______ and ______ can be saved when the trial balance is prepared directly on the worksheet. Amounts can be easily transferred to other sections of the worksheet.
Business
Not all business transactions occur between separate business entities. Some financial events occur within a business and need to be recorded.
Trial Balance
If total debits do not equal total credits, there is an error in the financial records. The error must be found and corrected.
Steps to Prepare the Trial Balance Section of the Worksheet
“1) Enter the general ledger account names.
2) Transfer the general ledger account balances to the Debit & Credit columns of the Trail Balance section.
3) Total the Debit & Credit columns to prove that the trial balance is in balance.
4) Place a double rule under each Trial Balance column to show that the work in that column is complete. “
Prepaid Expenses
Prepaid rent is recorded as an asset at the time it is paid. As time elapses, the asset is used up. An adjustment is made to reduce the asset and to recognize rent expense
Depreciation
(Cost – Salvage Value)/(Estimated Useful Life)
Accumulated Depreciation
_______ _________ is a contra asset account. The normal balance of an asset account is a debit. The normal balance of a contra asset account is a credit.
Contra Accounts
The normal balance for a contra account is the opposite of the related account.
Entries made to update accounts at the end of an accounting period to include previously unrecorded items that belong to the period.
What are adjustments?
So that the financial statements can be prepared more efficiently.
Why is the worksheet prepared?
Because prepayments they are not yet incurred, they are not recorded as expenses. Rather, they are classified as current assets. Prepaid expenses may need to be adjusted at the end of the accounting period. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded.
Why are prepaid expenses adjusted at the end of an accounting period?
Rent Expense is debited for $3,600. Prepaid Rent is credited for $3,600.
“On January 1, a firm paid $21,600 for six months’ rent, January through June. What is the adjustment for rent expense at the end of January?
a. Rent Expense is debited for $21,600 and Prepaid Rent is credited for $21,600.
b. Rent Expense is debited for $3,600 and Prepaid Rent is credited for $3,600.
c. Prepaid Rent is debited for $3,600 and Rent Expense is credited for $3,600.
d. No adjustment is made until the end of June.”
Supplies Expense is debited for $900. Supplies is credited for $900.
“A firm paid $1,200 for supplies during the accounting period. At the end of the accounting period, the firm had $300 of supplies on hand. What adjustment is entered on the worksheet?
a. Supplies Expense is debited for $900 and Supplies is credited for $900.
b. Supplies is debited for $300 and Supplies Expense is credited for $300.
c. Supplies Expense is debited for $300 and Supplies is credited for $300.
d. Supplies is debited for $900 and Supplies Expense is credited for $900.”
28,000
Three years ago, HB Delivery bought a delivery truck for $70,000. The truck has no salvage value and a five-year useful life. What is the book value of the truck at the end of three years?
Worksheet
The ________ summarizes both internal and external financial events of a period.
Saves Time
Using a worksheet ______ ______ in preparing the financial statements.
Update
Adjusting entries _______ the financial records of the business.
Locating Errors
If total debits do not equal total credits, find the difference between total debits and total credits. If the difference is divisible by 9, there could be a transposition error. If the difference is divisible by 2, an amount could be entered in the wrong (Debit or Credit) column.
Net Income
The difference between the Debit and Credit columns of the Income Statement section represents net income. The difference between the Debit and Credit columns of the Balance Sheet section should equal the net income amount.
$3,120.00
“Equipment costing $13,500 with an estimated salvage value of $1,020 and an estimated life of 4 years was purchased on November 1, 2013. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2013?
$260
$520
$3,120
$1,020”
The Income Statement Credit Column
“On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to:
* The Income Statement Debit Column.
* The Balance Sheet Credit Column.
* The Balance Sheet Debit Column.
* The Income Statement Credit Column”
The Income Statement Credit Column
“On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:
* The Income Statement Debit Column.
* The Income Statement Credit Column.
* The Balance Sheet Debit Column.
* The Balance Sheet Credit Column.”
True
“Land is a long-term asset that is not subject to depreciation.

True or False”

True
“If an adjustment is not recorded for supplies used, the firm’s assets will be overstated.

True or False”

Not Appear On Any Financial Statement.
“The balance in the account Accumulated Depreciation, Equipment will
* Be Reported On The Income Statement.
* Be Reported On The Statement Of Owner’s Equity.
* Will Be Reported On The Balance Sheet.
* Not Appear On Any Financial Statement.”
The cost of supplies used represents an operating expense of the business.
“Which of the following statements is correct?
* The cost of supplies used is reported on the statement of owner’s equity.
* The cost of supplies used represents an operating expense of the business.
* Accumulated Depreciation–Equipment is presented in the Liabilities section of a balance sheet.
* At the time of their acquisition, prepaid expenses are recorded in expense accounts.”
* Recorded In The Balance Sheet Debit Column.
“On a worksheet, a net loss is
* Recorded In The Income Statement Debit Column.
* Recorded In The Balance Sheet Debit Column.
* Recorded In The Balance Sheet Credit Column.
* Not Recorded.”
” • Service Business
• Manufacturing Business
• Merchandising Business”
What are the 3 types of business?
B) $4,968
“On Deck Sports Memorabilia store sells a Babe Ruth rookie card for $4,600 on account. If the sales tax on the sale is 8%, what is the amount debited to Accounts Receivable?
A) $4,232
B) $4,968
C) $4,600
D) $4,592”
c. increases credit sales
” Which of the following is not a reason to use a sales journal?
a. increases efficiency
b. allows division of work
c. increases credit sales
d. improves audit trail”
c. service, merchandising, manufacturing.
” Types of business operations are:
a. service, merchandising, corporation.
b. sole proprietorship, merchandising, manufacturing.
c. service, merchandising, manufacturing.”
“1. Sales Journals
2. Cash Receipts Journals
3. Purchases Journals
4. Cash Payments Journals.”
4 Types of Special Journals
3 Types of Business
” • Service Business
• Manufacturing Business
• Merchandising Business”
A sales journal is used to record only sales of merchandise on credit.
What type of transaction is recorded in the sales journal?
A sales return results when a customer returns goods and the firm takes them back. A sales allowance results when the firm gives a customer a reduction in the price of the good or service.
What is a sales return? What is a sales allowance?
“A special journal is a journal that is used to record only one type of transaction.
1) Sales Journal
2) Expense Journal
3) Cash Receipts
Journal
4) Cash Payments Journal”
What is a special journal? Give four examples of special journals.
A) Balance Sheet
“Which financial statement shows the results of operations for a given period?
A) Balance Sheet
B) Statement of Owner’s Equity
C) Income Statement
D) Statement of Annual profits”
A) Cash
“Which account is used to close revenue and expense accounts?
A) Cash
B) Income Summary
C) Liability
D) Capital”
A) cash receipts journal.
“In a firm that uses special journals, an additional cash investment received from the owner is recorded in the:
A) cash receipts journal.
B) sales journal.
C) cash payments journal.
D) general journal.”
A) Debit Cash $5,000 —- Credit Wages Expense $5,000
“A corporation paid$5,000 for the current month’s payroll. Which entry is needed?
A) Debit Cash $5,000 —- Credit Wages Expense $5,000
B) Debit Wages Expense $5,000 —- Credit Wages Payable $5,000
C) Debit Capital $5,000 —- Credit Cash $5,000
D) Debit Wages Expense $5,000 —- Credit Cash $5,000
“A) Interest Expense
B) Interest Payable”
“Which two accounts will have adjusting Journal Entries to record the interest that has been incurred but not paid on a note payable? (Choose 2 Answers)
A) Interest Expense
B) Interest Payable
C) Notes Payable
D) Cash”
A) Journal entry description
“What information does an accountant enter the general ledger?
A) Journal entry description
B) Computation of debit balance
C) Credit Amount
D) Date of Posting”
A) Owners & Managers
“Which group should make use of accounting information when determining whether to open an additional store location?
A) Owners and Managers
B) Supplies
C) Customers
D) Employees and Unions”
a.Sales Returns and Allowances, Sales Tax Payable, Accounts Receivable
“Which of the following general ledger accounts would appear in a sales returns and allowances journal?
a. Sales Returns and Allowances, Sales Tax Payable, Accounts Receivable
b. Sales Returns and Allowances, Sales, Accounts Receivable
c. Sales Returns, Sales Allowances, Sales”
Account Receivable Ledger
A subsidiarysidiary Ledger that contains credit customer accounts
Accounting Information Systems
_______ _______ _______ collect and process data from transactions and events, organize them in useful reports, and communicate results to decision makers.
Accounting System Components
“Source Documents
Input Devices
Processors
Storage
Output Devices”
Accounting System Principles
“Control
Relevance
Compatibility
Flexibility
Cost-Benefit”
Accounting System Technology
“Computers
Data Processing
Networks
Enterprise Resource Planning (ERP)”
ACCOUNTS PAYABLE Type of Ledger’s Content
Accounts for Creditors
ACCOUNTS RECEIVABLE Type of Ledger’s Content
Accounts for Credit Customers
Adjust, Adapt, Enviornment, Needs, Technnological Advances, Competive Pressures, Consumer Tastes, Regulations, Activiteis, Evolve
Accounting information systems must be able to ______ to changes. The flexibility principle prescribes that an accounting information system be able to ______ to changes in the company, business ______, and ______ of decision makers. ______ ______, ______ ______, ______ ______, ______, and company ______ constantly ______. A system must be designed to adapt to these changes.
ASSET Master Account
ACCOUNTS RECEIVABLE is a subsidiary account for what Master Account?
ASSET Master Account
ACCUMLATED DEPRECTION – STORE EQUIPMENT is a subsidiary account for what Master Account?
ASSET Master Account
ACCUMULATED DEPRECIATION – OFFICE EQUIPMENT is a subsidiary account for what Master Account?
ASSET Master Account
ALLOWANCE FOR DOUBTFUL ACCOUNTS is a subsidiary account for what Master Account?
ASSET Master Account
CASH is a subsidiary account for what Master Account?
ASSET Master Account
INTERTERST RECEIVABLE is a subsidiary account for what Master Account?
ASSET Master Account
MERCHANDISE INVENTORY is a subsidiary account for what Master Account?
ASSET Master Account
NOTES RECEIVABLE is a subsidiary account for what Master Account?
ASSET Master Account
OFFICE EQUIPMENT is a subsidiary account for what Master Account?
ASSET Master Account
PETTY CASH FUND is a subsidiary account for what Master Account?
ASSET Master Account
PREPAID INSURANCE is a subsidiary account for what Master Account?
ASSET Master Account
PREPAID INTEREST is a subsidiary account for what Master Account?
ASSET Master Account
STORE EQUIPMENT is a subsidiary account for what Master Account?
ASSET Master Account
SUPPLIES is a subsidiary account for what Master Account?
B) $540.00
“A wholesale business sells goods with a list price of $900 and a trade discount of 40 percent. The net price is
A) $360.00.
B) $540.00.
C) $900.00.
D) $940.00.”
B) Cash Receipts Journal
“In a firm that uses special journals, the sale of merchandise for cash is recorded in the
A) Cash Payments Journal.
B) Cash Receipts Journal.
C) Sales Journal.
D) Purchases Journal.”
B) Credit to Utilities Payable
“A corporation did not yet receive the September electric bill, so it decides to accrue an estimate of $1,000. What is the appropriate journal entry?
A) Debit to Prepaid Insurance
B) Credit to Utilities Payable
C) Credit to Cash
D) Debit to Entertainment Expense”
B) Fees Income
“From the adjusted trial balance, which account balance is entered in the balance sheet columns?
A) Depreciation Expense
B) Fees Income
C) Rent Expense
D) Owner, Capital”
B) on the income statement as a deduction from Sales.
“The Sales Returns and Allowances account is presented
A) on the balance sheet as a deduction from Accounts Receivable.
B) on the income statement as a deduction from Sales.
C) on the income statement as an addition to Sales.
D) on the balance sheet as a deduction from Capital.”
B) To reduce the risk of illegal or unethical behavior by low level firm employees.
“What is the one reason for honest and ethical accounting practices?
A) To ensure clarity of accounting data for all interested parties
B) To reduce the risk of illegal or unethical behavior by low level firm employees
C) To follow through on an investor mandate of maximizing shareholder value
D) To reduce net income as a result of higher costs
C) Debit Rent Expense $3,000 —- Credit Prepaid Rent $3,000
“On November 30, 2014, Company A paid $6,000 rent for December & January.
What would be the correct adjusting entry at the end of December to show the expiration of one month’s rent?
A) Debit Cash $3,000 —- Credit Prepaid Rent $3,000
B) Debit Rent Expense $3,000 —- Credit Cash $3,000
C) Debit Rent Expense $3,000 —- Credit Prepaid Rent $3,000
D) Debit Cash $3,000 —- Credit Rent Expenses $3,000”
C) Sales Journal.
“In a firm that uses special journals, a sale of merchandise on credit is recorded in the
A) Cash Payments Journal.
B) Cash Receipts Journal.
C) Sales Journal.
D) Purchases Journal.”
C) the net price.
“The amount used by wholesalers to record sales in its sales journal is
A) the retail price.
B) the list price.
C) the net price.
D) the original price.”
c. income statement
“Where would you report net sales?
a. sales general ledger account
b. general journal
c. income statement
d. sales journal”
CASH PAYMENTS Type of Journal’s Purpose
To record all disbursements of cash
CASH RECEIPTS Type of Journal’s Purpose
To record cash received from all sources
Charge-Account Sales
Sales made through the use of open-account credit or one of carious types of credit cards
Compatibility Principle
Accounting information systems must be consistent with the aims of a company. The ______ ______ prescribes that an accounting information system conform with a company’s activities, personnel, and structure. It also must adapt to a company’s unique characteristics. The system must not be intrusive but must work in harmony with and be driven by company goals
“Computers
Data Processing
Networks
Enterprise Resource Planning (ERP)
What is needed for the Accounting System Technology?
Consistent, Actvities, Personnel, Structure, Adapt, Unique Characteristics, Intrusive, Harmony, Driven
Accounting information systems must be ______ with the aims of a company. The Combaility Principle prescribes that an accounting information system conform with a company’s ______, ______, and ______. It also must ______ to a company’s ______ ______. The system must not be ______ but must work in ______ with and be ______ by company goals
Contra Revenue Account
an account with a debit balance, which is contray to the normal balance for a revenue account
Contra, Few, General
“Record sales returns and allowances in the general journal.

Sales returns and allowances are usually debited to a ______ revenue account. A firm with relatively ______ sales returns and allowances could use the ______ journal to record these transactions.”

Control Account
An account that links a subsidiarysidiary ledger and the general ledger since its balance summarizes the balances of the accounts in the subsidiarysidiary ledger
Control Principle
The _______ _______ prescribes that an accounting information system have internal controls.
“Control
Relevance
Compatibility
Flexibility
Cost-Benefit”
What are the Accounting System Principles?
Control, Relevance, Compatibility, Flexibility
Decisions regarding other systems principles (______, ______, ______, and ______) are also affected by the cost-benefit principle.
COST OF GOODS SOLD Master Account
FREIGHT is a subsidiary account for what Master Account?
COST OF GOODS SOLD Master Account
PURCHASES DISCOUNTS is a subsidiary account for what Master Account?
COST OF GOODS SOLD Master Account
PURCHASES is a subsidiary account for what Master Account?
COST OF GOODS SOLD Master Account
PURCHASES RETURNS & ALLOWANCES is a subsidiary account for what Master Account?
Cost-Benefit Principle
The ______-______ ______ prescribes that the benefits from an activity in an accounting information system outweigh the costs of that activity. The costs and benefits of an activity such as producing a specific report will impact the decisions of both external and internal users.
Credit Memorandum
A note verifying that a customer’s account is being reduced by the amount of sales return or sales allowance plus any sales tax that may have been invovlevd.
Credit Sales, Daily Basis, Time of Sale, Reflect, Appropriate, Liability
“Record credit sales in a sales journal.

The sales journal is used to record ______ ______ transactions, usually on a ______ ______. For sales transactions that include sales tax, the sales tax liability is recorded at the ______ of the ______ to ensure that company records ______ the appropriate amount of sales tax ______.”

Credit, Credit, Transactions, Credit, Transaction, Debiting, Accounts Receivable, Crediting, Cash
“Record credit card sales in appropriate journals.

______ sales are common, and different ______ arrangements are used. Businesses that have few ______ with ______ card companies normally record these ______ in the sales journal by ______ the usual ______ ______ account in the general ledger and ______ the same Sales account that is used for ______ sales.”

D) General Journal.
“In a firm that uses special journals, an allowance given for damaged merchandise is recorded in the
A) Cash Payments Journal.
B) Cash Receipts Journal.
C) Purchases Journal.
D) General Journal.”
D) General Journal.
“In a firm that uses special journals, the acceptance of a return of merchandise from a credit customer is recorded in the
A) Cash Receipts Journal.
B) Sales Journal.
C) Cash Payments Journal.
D) General Journal.”
D) sales recorded net of trade discounts.
“The amount of the trade discount taken by the customer is recorded as a(n)
A) asset.
B) liability.
C) expense.
D) sales recorded net of trade discounts.”
Decision Makers, Accounting Information Systems
All _______ _______ need to have a basic knowledge of how _______ _______ _______ work.
Difference, Decisions, Decision Makers, Relevant Information
The relevance principle prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making. The system must be designed to capture data that make a ________ in ________. To ensure this, we must consider all ________ ________ when identifying ________ ________ for disclosure.
EXPENSES Master Account
ADVERTISING EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
BANK FEES EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
CASH SHORT OR OVER EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
DELIVERY EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
DEPRECITION EXPENSE – STORE EQUIPMENT is a subsidiary account for what Master Account?
EXPENSES Master Account
DEPRECITION EXPENSE – STORE EQUIPMENT is a subsidiary account for what Master Account?
EXPENSES Master Account
INSURANCE EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
INTEREST EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
MICELLANEOUS EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
PAYROLL TAXES EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
RENT EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
SALARIES EXPENSE – OFFICE is a subsidiary account for what Master Account?
EXPENSES Master Account
SALARIES EXPENSE – SALES is a subsidiary account for what Master Account?
EXPENSES Master Account
SUPPLIES EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
TELEPHONE EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
UNCOLLECTIBLE ACCOUNTS EXPENSE is a subsidiary account for what Master Account?
EXPENSES Master Account
UTILITIES EXPENSE is a subsidiary account for what Master Account?
False
“When a business makes a sale on a bank credit card, the business is responsible for collecting from the customer.

True or False”

Felxibility Principle
Accounting information systems must be able to adjust to changes. The ______ ______ prescribes that an accounting information system be able to adapt to changes in the company, business environment, and needs of decision makers. Technological advances, competitive pressures, consumer tastes, regulations, and company activities constantly evolve. A system must be designed to adapt to these changes.
GENERAL Type of Journal’s Purpose
To record all transactions that are not recorded in another special journal and all adjusting and closing entries
GENERAL Type of Ledger’s Content
Assets, Liabilities, Owner’s Equity, Revenue, and Extra Expense
Impact
The cost-benefit principle prescribes that the benefits from an activity in an accounting information system Outweigh the costs of that activity. The costs and benefits of an activity such as producing a specific report will ______ the decisions of both external and internal users.
Individual accounts for all credit customers.
Which accounts are kept in the accounts receivable ledger?
Internal Controls
________ ________ are methods and procedures allowing managers to control and monitor business activities.
Invoice
A customer billing for merchandise bought on credit
Left to Right
When posting from the sales journal, post information moving from _______ to _______ across the ledger form.
LIABILTIES Master Account
ACCOUNTS PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
EMPLOYEE INCOME TAX PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
FEDERAL UNEMPLOYMENT TAX PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
INTEREST PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
MEDICARE TAX PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
NOTES PAYABLE – BANK is a subsidiary account for what Master Account?
LIABILTIES Master Account
NOTES PAYABLE – TRADE is a subsidiary account for what Master Account?
LIABILTIES Master Account
SALARIES PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
SALES TAX PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
SOCIAL SECURITY TAX PAYABLE is a subsidiary account for what Master Account?
LIABILTIES Master Account
STATE UNEMPLOYMENT TAX PAYABLE is a subsidiary account for what Master Account?
List Pirce
an estabilished retail price
Manufacturing Business
A business that sells goods that it has produced.
Merchandise Business
A business that sells goods purchased for resale
Merchandise Inventory
The stock of goods a merchandising business keeps on hand.
Net Price
The list price less all trade discounts
Net Sales
The difference between the balance in the sales account and the balance in the sales returns and allowances account
Open Account Credit
a system that allows the sale of services or goods with the understanding that payment will be made at a later date.
Outweigh
The cost-benefit principle prescribes that the benefits from an activity in an accounting information system ______ the costs of that activity. The costs and benefits of an activity such as producing a specific report will impact the decisions of both external and internal users.
OWNER’S EQUITY Master Account
INCOME SUMMARY is a subsidiary account for what Master Account?
OWNER’S EQUITY Master Account
OWNER CAPITAL is a subsidiary account for what Master Account?
OWNER’S EQUITY Master Account
OWNER DRAWING is a subsidiary account for what Master Account?
Policies, Direct Operations, Goals, Reports, Assets, Methods, Regulations
“Internal Controls include ________ to ________ ________ toward
common ________ , procedures to ensure reliable financial ________, safeguards to protect company ________, and ________ to achieve compliance with laws and ________ .”
PURCHASES Type of Journal’s Purpose
To record purchases of merchandise on credit
Retail Business
A business that sells directly to individual consumers
Revelance Principle
The ________ ________ prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making. The system must be designed to capture data that make a difference in decisions. To ensure this, we must consider all decision makers when identifying relevant information for disclosure.
REVENUE Master Account
INTEREST INCOME is a subsidiary account for what Master Account?
REVENUE Master Account
MISCELLANEOUS INCOME is a subsidiary account for what Master Account?
REVENUE Master Account
SALES is a subsidiary account for what Master Account?
REVENUE Master Account
SALES RETURNS & ALLOWANCES is a subsidiary account for what Master Account?
sales allowances
A reduction in the price originally charged to customers for goods or services
Sales Journal
A _______ _______ is used to record only sales of merchandise on credit.
Sales Journal
A special journal used to record sales of merchandise on credit
Sales minus sales returns.
What are net sales?
Sales Return
A firm’s acceptance of a return of goods from a cutomer
SALES Type of Journal’s Purpose
To record sales of merchindise on credit
Saltes Returns & Allowances
A cotnra revenue account where sales returns and sales allowances are recorded; sales returns and allowances are subsidiarytracted from sales to determine net sales.
Schedule of Accounts Receivable
A listing of all balances of the accoutns in the accounts receivable subsidiarysidiary ledger
Schedule, Prepared, Prove, Against, Reports, Due, Credit
“Prepare a schedule of accounts receivable.

Each month a ______ of accounts receivable is ______. It is used to ______ the subsidiary ledger ______ the Accounts Receivable account. It also ______ the amounts ______ from ______ customers.”

Sevice Business
A busienss that sells services
“Source Documents
Input Devices
Processors
Storage
Output Devices”
What are the Accounting System Components?
Special Journal
A _______ _______ is used to record only one type of transaction.
Special Journal
A journal used to record only one type of transaction
Special Journals
_________ _________ are designed as a simple way to record the most frequently occurring transactions. There are four types of Special Journals that are frequently used by merchandising businesses: Sales journals, Cash receipts journals, Purchases journals, and Cash payments journals.
Special Journals
“1. Sales Journals
2. Cash Receipts Journals
3. Purchases Journals
4. Cash Payments Journals.”
States, Cities, Sales Tax, Retailer, Return, Tax Collected, Taxing Authority
“Prepare the state sales tax return.

In ______ and ______ that have a ______ ______, the ______ must prepare a sales tax ______ and send the total tax ______ to the taxing ______.”

“Subsidaiary Ledger is a ledger that contains accounts of a single type.
1) Accounts Receivable Ledger
2) Accounts Payable Ledger”
What is a subsidiarysidiary ledger? Give two examples of subsidiarysidiary ledgers
Subsidiary Ledger
A _______ _______ is a ledger that contains accounts of a single type.
Subsidiary Ledger
A ledger dedicated to accounts of a single type of showing details to support a general ledger account
Subsidiary, Accounts Receivable, Sales, Cash Receipts, General, Allowances, Balance, Each, Known
“Post from the sales journal to the customers’ accounts in the accounts receivable subsidiary ledger.

The accounts of individual credit customers are kept in a ______ ledger called the ______ ______ ledger. Daily postings are made to this ledger from the ______ journal, the ______ ______ journal, and the ______ journal or the sales returns and ______ journal. The current ______ of a customer’s account is computed after ______ posting so that the amount owed is ______ at all times.”

Trade Discount
A reduction from list price
Transactions, General, Accounts, Ledgers, Balance, Subtrracted, Net, Income
“Post sales returns and allowances.

Sales returns and allowances ______ must be posted to the ______ ledger and to the appropriate ______ receivable subsidiary ______. The ______ of the Sales Returns and Allowances account is ______ from the balance of the Sales account to show ______ sales on the ______ statement.”

Transactions, Organize, Reports, results
Accounting Information System collect and process data from _______ and events, _______ them in useful _______ , and communicate _______ to decision makers.
True
“In some states, a firm receives a discount for paying the amount of sales tax due on time.

True or False”

True
“The abbreviation S1 in the Posting Reference column of an account shows that the data was posted from page 1 of the sales journal.

True or False”

True
“The individual amounts in the Accounts Receivable Debit column of a sales journal should be posted to the accounts receivable subsidiarysidiary ledger, and the column total should be posted to the Accounts Receivable account in the general ledger.

True or False”

Useful, Understandable, Timely, Pertinent
The relevance principle prescribes that an accounting information system report ________, ________, ________, and ________ information for effective decision making. The system must be designed to capture data that make a difference in decisions. To ensure this, we must consider all decision makers when identifying relevant information for disclosure.
Wholesale Business
A business that manufactures or distrubutes goods to retail business or large consumers such as hotels and hospitals and costco
Wholesale, Goods, Trade, Percentage Off, List, Mulitply, List, Discount, Compute
“Compute trade discounts.

______ businesses often offer ______ to ______ customers at less than retail prices. Trade discounts are expressed as a ______ ______ the ______ price. ______ the ______ price by the percentage trade ______ offered to ______ the dollar amount.”

C) No entry should be made, since it is not the end of the quarter. At which point, the entry should be: Debit Prepaid Rent Credit Rent Expense. Remember Prepaid expenses are considered assets
“A company has a lease which requires that it pays its annual office space rent in advance on December 31st of each year. On a quarterly basis, this expense totals $10,000.
To account for this transaction, how should the rent expense be recorded on the firm’s books on January 1?
A) Debit Prepaid Rent for $10,000, Credit Cash for $10,000
B) Debit Cash for $10,000, Credit Prepaid Rent for $10,000
C) No entry should be made
D) Debit Unearned Revenue for $10,000, credit Prepaid Rent for $10,000”
C) Debit Depreciation Expense for $2,000 —- Credit Accumulated Depreciation for $2,000
“A company recently purchased a truck for $11,000 with a $1,000 salvage value
What is the proper adjusting entry to recognize $2,000 worth of depreciation on the truck for this year?
A) Debit Truck for $10,000 —- Credit Cash for $10,000
B) Debit Depreciation Expense for $2,000 —- Credit Cash for $2,000
C) Debit Depreciation Expense for $2,000 —- Credit Accumulated Depreciation for $2,000
D) Debit Truck for $10,000 —- Credit Depreciation Expense for $2,000 —- Credit Accumulated Depreciation for $8,000.”
A) Supplies Expense
“A company writes a check to purchase printer cartridges.
Which account would be debited in the journal entry to record this purchase?
A) Supplies Expense
B) Accounts Payable
C) Office Supplies
D) Cash”
D) When payment for the good or service has been received
“According to GAAP, when is the earliest instance that revenue should be recorded?
A) When the good or service has been provided
B) When the good or service has been ordered
C) When a down payment has been received
D) When payment for the good or service has been received”
D) Journalize the Transactions
“After analyzing source documents to determine their effects on the basic accounting equation which step should an accountant perform next?
A) Prepare a trial balance
B) Post the journal entries
C) Prepare T-Accounts
D) Journalize the Transactions
C) Interpret the financial information
“During which accounting cycle step do managers compare revenues, expenses, and profit from one accounting period to another?
A) Analyze the transactions
B) Prepare Financial statements
C) Interpret the financial information
D) Prepare a worksheet”
A) -$5,000
“Examination of Company A’s finances show assets of $50,000 and owner’s equity of $45,000.
What are liabilities for company A?
A) -$5,000
B) $5,000
C) $95,000
D) $55,000”
Objective: Post from the sales journal to the general ledger accounts.
At the end of each month, the sales journal is totaled, proved, and ruled. Column totals are then posted to the general ledger. Using a sales journal rather than a general journal to record sales saves the time and effort of posting individual entries to the general ledger during the month.”
D) The totals do not match
“The accountant for a firm is preparing the post-closing trial balance and has the following figures which represent all debit & credit accounts
• Cash 100,000
• Accounts Receivable 20,000
• Accounts Payable 50,000
• Accumulated Depreciation 20,000
• Prepaid Rent 10,000
• Equipment 40,000
• Firm Capital 100,000
What should the matching totals in the debit & credit columns be when the trial balance is prepared?
A) 100,000
B) 150,000
C) 170,000
D) The totals do not match
I can’t figure it out! Help
“The accounting supervisor is reviewing a junior accountant’s journal entries prior to posting to the general ledger. Which journal entry would cause the trial balance to be imbalanced?
A) $7000 Cash payment for property tax to County of Main —- $700 debit to property tax expense and $700 credit to cash
B) $500 cash collection from billed customers —- $550 debit to cash and $550 credit to accounts receivable
C) $600 insurance bill received & paid in the same month —- $600 debit to insurance expense and $60 credit to cash
D) $800 cash refund received for over-payment to a vendor —- $80 debit to supplies expense and $80 credit to supplies
C) Assets = Liabilities + Owners Equity
“The balance sheet is a reflection of which fundamental accounting equation?
A) Revenue + Expenses = Net Income
B) Assets + Liabilities = Owners Equity
C) Assets = Liabilities + Owners Equity
D) Revenue – Expenses = Net Income “
B) Prepare the balance sheet
C) Prepare the income statement
“The worksheet pulls together certain information. What is this information needed for? (Choose 2 answers)
A) Enter correcting entries
B) Prepare the balance sheet
C) Prepare the income statement
D) Prepare the statement of cashflows”
A) Debit Cash, Credit Supplies
“Using the cash basis method of accounting, which of the following journal entries would be correct when the company is paying for supplies?
A) Debit Cash, Credit Supplies+C112
B) Debit supplies Expense, Credit Cash
C) No entry is made
D) Debit Supplies, Credit Cash “
C) At least one debit entry and at least one credit entry
“What are the key components of every double-entry bookkeeping record?
A) One general journal entry and one general ledger entry
B) At least one asset entry and at least one liability entry
C) At least one debit entry and at least one credit entry
D) One revenue account entry and one expense account entry”
B) A summary of operations from the point of view of the owner
“What information does an income summary account provide?
A) A summary of costs from the point of view of the owner
B) A summary of operations from the point of view of the owner
C) A summary of revenues from the point of view of the owner
D) A summary of liabilities from the point of view of the owner”
“Revenue is documented in the credit account on the income statement while expenses are recorded as debits.

The balance sheet provides a snapshot of the company’s finances. It reports three items: assets, liabilities and owners’ equity.”

A) The balance sheet contains assets, liabilities, and owner’s equity and the income statement contains the general ledger

“What information is contained in the balance sheet and the income statement?
A) The balance sheet contains assets, liabilities, and owner’s equity and the income statement contains the general ledger
B) The balance sheet contains the general journal and the income statement contains revenues, expense, and net profit/loss
C) The balance sheet contains revenues, expenses, and net profit/loss and the income statement contains assets, liabilities, and owner’s equity
D) The balance sheet contains assets, liabilities, and the income statement contains revenues expenses and net profit/loss
B) $520
“Equipment costing $13,500 with an estimated salvage value of $1,020 and an estimated life of 4 years was purchased on November 1, 2013. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2013?
A) $260
B) $520
C) $3,120
D) $1,020”
D) the Income Statement Credit column.
“On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to:
A) the Income Statement Debit column.
B) the Balance Sheet Credit column.
C) the Balance Sheet Debit column.
D) the Income Statement Credit column.”
D) the Balance Sheet Credit column.
“On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:
A) the Income Statement Debit column.
B) the Income Statement Credit column.
C) the Balance Sheet Debit column.
D) the Balance Sheet Credit column.”
TRUE
“Land is a long-term asset that is not subject to depreciation.
True or False “
TRUE
“If an adjustment is not recorded for supplies used, the firm’s assets will be overstated.
True or False”
C) will be reported on the Balance Sheet.
“The balance in the account Accumulated Depreciation, Equipment will
A) be reported on the Income Statement.
B) be reported on the Statement of Owner’s Equity.
C) will be reported on the Balance Sheet.
D) not appear on any financial statement.”
B) The cost of supplies used represents an operating expense of the business.
“Which of the following statements is correct?
A) The cost of supplies used is reported on the statement of owner’s equity.
B) The cost of supplies used represents an operating expense of the business.
C) Accumulated Depreciation–Equipment is presented in the Liabilities section of a balance sheet.
D) At the time of their acquisition, prepaid expenses are recorded in expense accounts.”
Straight-Line Depreciation
Depreciation = (Cost)/(Useful Life Years)/(Months)
B) recorded in the Balance Sheet Debit column.
“On a worksheet, a net loss is
A) recorded in the Income Statement Debit column.
B) recorded in the Balance Sheet Debit column.
C) recorded in the Balance Sheet Credit column.
D) not recorded.”
FALSE
“The normal balance of a contra asset account is a debit.
True or False”
B) Needed For Expenses That Were Paid For Before Or After They
“Adjusting Entries are
A) Corrections Of Errors.
B) Needed For Expenses That Were Paid For Before Or After They Were Used.
C) Not Required.
D) Will Always Affect Cash.”
B) Will Be Understated.
“If long-term assets are not adjusted, expenses on the income statement
A) Will Be Overstated.
B) Will Be Understated.
C) Will Not Be Affected.
D) May Be Either Overstated Or Understated.”
D) the Balance Sheet Credit column.
“On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:
A) the Income Statement Debit column.
B) the Income Statement Credit column.
C) the Balance Sheet Debit column.
D) the Balance Sheet Credit column.”
C) A Contra Asset On The Balance Sheet
“Accumulated Depreciation, Equipment, is shown as:
A) A Liability On The Balance Sheet
B) A Reduction Of Capital On The Statement Of Owner’s Equity
C) A Contra Asset On The Balance Sheet
D) An Expense On The Income Statement”
A) As A Deduction From The Cost Of The Equipment.
“On a balance sheet, Accumulated Depreciation—Equipment is reported
A) As A Deduction From The Cost Of The Equipment.
B) As A Liability.
C) As An Expense.
D) As A Deduction From The Total Of The Assets”
TRUE
“The temporary owner’s equity accounts are closed because they apply to only one accounting period.
True or False “
B) At the end of each accounting period, asset and liability account balances are reduced to zero.
“Which of the following statements is not correct?
A) After closing entries are posted, the revenue, expense, and drawing accounts will have zero balances.
B) At the end of each accounting period, asset and liability account balances are reduced to zero.
C) A postclosing trial balance will not contain revenue and expense account balances.
D) Adjusting entries must be journalized and posted before the closing entries are journalized and posted.”
B) At the end of each accounting period, asset and liability account balances are reduced to zero.
“Which of the following statements is not correct?
A) After closing entries are posted, the revenue, expense, and drawing accounts will have zero balances.
B) At the end of each accounting period, asset and liability account balances are reduced to zero.
C) A postclosing trial balance will not contain revenue and expense account balances.
D) Adjusting entries must be journalized and posted before the closing entries are journalized and posted.”
A) transfer the results of operations to owner’s equity.
“One purpose of closing entries is to
A) transfer the results of operations to owner’s equity.
B) reduce the owner’s capital account balance to zero so that the account is ready for the next period.
C) adjust the ledger account balances to provide complete and accurate figures for use on financial statements.
D) close all accounts so that the ledger is ready for the next accounting period.”
A) Supplies
“Which of the following accounts is a permanent account?
A) Supplies
B) Supplies Expense
C) Owner’s drawing
D) Fees Income”
TRUE
“The heading “”Closing Entries”” is usually written in the Description column of the general journal above the first closing entry.
True or False”
A) the Income Summary account and a credit to the Depreciation Expense account.
“The entry to close the Depreciation Expense account would include a debit to
A) the Income Summary account and a credit to the Depreciation Expense account.
B) the Income Summary and a credit to Cash.
C) Cash and a credit to the Income Summary account.
D) the Depreciation Expense account and a credit to the Income Summary account.”
C) Supplies Expense
“Which of the following accounts would be closed?
A) Accounts Receivable
B) Accumulated Depreciation
C) Supplies Expense
D) Joan Wilson, Capital”
TRUE
“””Closing”” is written in the Description column of the individual revenue and expense accounts in the general ledger.
True or False”
Closing Entries
Journal entries that transfer the results of operations (net income or net loss) to owner’s equity and reduced the revenue, expense, and drawing account balances to zero.
Income Summary Account
A pecial owner’s equity account that is used only in the closing process to summarize the results of operations
Interpret
To understand and explain the meaning and importance of something (such as financial statements)
Postclosing Trial Balance
A statement that is prepared to prove the equality of total debits and credits after the closing process is completed.
The worksheet is only a tool that aids in the preparation of financial statements. Any changes in account balances recorded on the worksheet are not shown in the general journal and the general ledger until the adjusting entries have been journalized and posted
Why is it necessary to journalize and post adjusting entries even though the data are already recorded on the worksheet?
“(a) Beginning owner’s equity.
(b) Net income or net loss for the period.
(c) Additional investments by the owner for the period.
(d) Withdrawals by the owner for the period.
(e) Ending balance of owner’s equity.”
What amounts appear on the statement of owner’s equity?
On a report form balance sheet, the liabilities and owner’s equity are listed under the assets. On the account form, they are listed to the right of the assets.
What is the difference between a report form balance sheet and an account form balance sheet?
B) contra asset account.
“Accumulated Depreciation—Equipment is a(n):
A) asset account.
B) contra asset account.
C) liability account.
D) contra liability account.”
B) Balance Sheet Debit column.
“On a worksheet, the adjusted balance of the Supplies account is extended to the:
A) Income Statement Debit column.
B) Balance Sheet Debit column.
C) Income Statement Credit column.
D) Balance Sheet Credit column.”
$28,000. The adjustment for equipment depreciation is a debit to Depreciation Expense and a credit to Accumulated Depreciation-Equipment. The Equipment account is not changed.
Willis Repair Shop purchased equipment for $28,000. Depreciation Expense for the month is $500. What is the balance of the Equipment account after posting the depreciation entry? Why?
Complete a trial balance on a worksheet
A worksheet is normally used to save time in preparing the financial statements. Preparation of the worksheet is the fourth step in the accounting cycle. The trial balance is the first section of the worksheet to be prepared.
Prepare adjustements for unrecordded business transactions
Some changes arise from the internal operations of the firm itself. Adjusting entries are made to record these changes. Any adjustments to account balances should be entered in the Adjustments section of the worksheet.
Complete the worksheet
An adjusted trial balance is prepared to prove the equality of the debits and credits after adjustments have been entered on the worksheet. Once the Debit and Credit columns have been totaled and ruled, the Income Statement and Balance Sheet columns of the worksheet are completed. The net income or net loss for the period is determined, and the worksheet is completed.

Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet.”
All figures needed to prepare the financial statements are properly reflected on the completed worksheet. The accounts are arranged in the order in which they must appear on the income statement and balance sheet. Preparation of the financial statements is the fifth step of the accounting cycle.
Journalize & post the adjusting entries

Journalize and post the adjusting entries.

After the financial statements have been prepared, the accountant must make permanent entries in the accounting records for the adjustments shown on the worksheet. The adjusting entries are then posted to the general ledger. Journalizing and posting the adjusting entries is the sixth step in the accounting cycle.”

Steps of Accounting Cycle
“1. Analyze transactions.
2. Journalize transactions.
3. Post the journal entries.
4. Prepare a worksheet.
5. Prepare financial statements.
6. Record adjusting entries.”
“1. Analyze transactions.
2. Journalize transactions.
3. Post the journal entries.
4. Prepare a worksheet.
5. Prepare financial statements.
6. Record adjusting entries.”
What are the steps of the Accounting Cycle?
Debit column of the Balance Sheet section.
The Drawing account is extended to which column of the worksheet?
Credit Balance
Is the normal balance for Accumulated Depreciation a debit or credit balance?
Net income causes a net increase in owner’s equity.
Why is the net income for a period recorded in the Balance Sheet section of the worksheet as well as the Income Statement section?
$4,250. Debit column of the Balance Sheet section.
The Supplies account has a debit balance of $6,000 in the Trial Balance column. The Credit column in the Adjustments section is $1,750. What is the new balance? The new balance will be extended to which column of the worksheet?
To allocate the cost of the asset to operations during its expected useful life.
Why are assets depreciated?
Identifying & analyzing transactions & events
What is the first step in the accounting process?
Recording in the Journals
What is the next step in the accounting process after 1st Step Identifying & analyzing transactions & events?
Posting to the Ledger
What is the next step in the accounting process after Step 2-Recording in the Journals?
Unadjusted Trial Blance
What is the next step in the accounting process after Step 3-Posting to the Ledger?
Adjusting Entries
What is the next step in the accounting process after Step 4-Unadjusted Trial Blance?
Adjusted Trial Balance
What is the next step in the accounting process after Step 5-Adjusting Entries?
Financial Statements
What is the next step in the accounting process after Step 6-Adjusted Trial Balance?
Closing Entries
What is the next step in the accounting process after Step 7-Financial Statements?
Post-Closing Trial Balance
What is the next step in the accounting process after Step 8-Closing Entries?
Optional Double Check – Go backwards
What is the next step in the accounting process after Step 9-Post-Closing Trial Balance?

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