question

A ____ is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.

answer

business

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The objective of most businesses is to earn a ____.

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profit

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Profit is the difference between the amounts ____from customers for goods or services and the amounts ____ for the inputs used to provide the goods or services.

answer

received & paid

question

3 Types of businesses

answer

Service, Merchandising & Manufacturing

question

_____ can be defined as an information system that provides reports to users about the economic activities and condition of a business.

answer

Accounting

question

The process by which accounting provides information to users is as follows:

answer

-Identify users. -Assess users' information needs. -Design the accounting information system to meet users' needs. -Record economic data about business activities and events. -Prepare accounting reports for users.

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The area of accounting that provides internal users with information is called

answer

managerial accounting or management accounting

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Managerial accountants employed by a business are employed in

answer

private accounting

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The area of accounting that provides external users with information is called

answer

financial accounting.

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The objective of financial accounting is to provide relevant and timely information for the decision-making needs of users ___ of the business.

answer

outside

question

General-purpose financial statements

answer

are one type of financial accounting report that is distributed to external users.

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Ethics are

answer

moral principles that guide the conduct of individuals

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2 factors as to why companies went wrong

answer

-Failure of individual character - Firm culture of greed & ethical indifference

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Accountants and their staff who provide services on a fee basis are said to be employed in

answer

public accounting.

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Accountants employed by a business firm, government, or a not-for-profit organization are said to be employed in

answer

private accounting

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Public accountants who have met a state's education, experience, and examination requirements may become

answer

Certified Public Accountants (CPAs).

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Financial accountants follow ___ ____ ____ ____ in preparing reports.

answer

generally accepted accounting principles (GAAP)

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Within the U.S., the ____ ____ ____ _____ ____ has the primary responsibility for developing accounting principles.

answer

Financial Accounting Standards Board (FASB)

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The ___ _____ ___ ___ ___, an agency of the U.S. government, has authority over the accounting and financial disclosures for companies whose shares of ownership (stock) are traded and sold to the public.

answer

Securities and Exchange Commission (SEC)

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Many countries outside the United States use generally accepted accounting principles adopted by the

answer

International Accounting Standards Board (IASB).

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Under the ___ ____ ___, the activities of a business are recorded separately from the activities of its owners, creditors, or other businesses.

answer

business entity concept

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A ____ is owned by one individual.

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proprietorship

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A ___ is similar to a proprietorship except that it is owned by two or more individuals.

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partnership

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A ____ is organized under state or federal statutes as a separate legal taxable entity

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corporation

question

A ___ ____ ___ ___ combines the attributes of a partnership and a corporation.

answer

limited liability company (LLC)

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Under the ___ ____, amounts are initially recorded in the accounting records at their cost or purchase price.

answer

cost concept

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The ___ ____ requires that the amounts recorded in the accounting records be based on objective evidence.

answer

objectivity concept

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Only the _____ is objective enough to be recorded in the accounting records.

answer

final agreed-upon amount

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The ____ requires that economic data be recorded in dollars.

answer

unit of measure concept

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The resources owned by a business are its ___

answer

assets

question

The rights of creditors are the debts of the business and are called ___

answer

liabilities

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The rights of the owners are called __ ___.

answer

owner's equity

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The equation ____ is called the ___

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Assets = Liabilities + Owner's Equity accounting equation

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A ___ ___ is an economic event or condition that directly changes an entity's financial condition or its results of operations

answer

business transaction

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The liability created by a purchase on account is called an __ ___

answer

account payable

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Items such as supplies that will be used in the business in the future are called ___ ___, which are assets.

answer

prepaid expenses

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A business earns money by selling goods or services to its customers. This amount is called

answer

revenue

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Revenue from providing services is recorded as

answer

fees earned

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Revenue from the sale of merchandise is recorded as

answer

sales.

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Other examples of revenue include rent, which is recorded as

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rent revenue

question

interest is recorded as

answer

interest revenue

question

An account receivable is a ___ ___ ___, which is an asset.

answer

claim against a customer

question

spent cash or used up other assets in earning revenue is called

answer

expenses

question

Types of Transactions Affecting Owner's Equity

answer

-Owner's investments -Owner's withdrawals -Revenues - Expenses

question

After transactions have been recorded and summarized, reports are prepared for users. The accounting reports providing this information are called

answer

financial statements

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A summary of the revenue & expenses for a specific period of time (month or a year) is called

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income statement

question

The income statement reports the revenues and expenses for a period of time, based on the

answer

matching concept

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The matching concept is applied by "matching" the expenses incurred during a period

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with the revenue that those expenses generated

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The excess of the revenue over the expenses is called

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net income, net profit, or earnings

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If expenses exceed revenue, the excess is a

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net loss

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The ____ reports the changes in the owner's equity for a period of time.

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statement of owner's equity

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Statement of owner's equity is prepared ___ the income statement because the net income or net loss for the period must be reported in this statement

answer

after

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A __ ___ is a list of the assets, liabilities, and owner's equity as of a specific date.

answer

balance sheet

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The __ __ of a balance sheet lists the assets on the left and the liabilities and owner's equity on the right. It resembles the basic format of the accounting equation

answer

account form

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A ______ is a summary of the cash receipts and cash payments for a specific period of time.

answer

statement of cash flows

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Statement of cash flows has 3 sections:

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operating activities investing activities financing activities

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The ____ section reports a summary of cash receipts and cash payments from operations

answer

cash flows from operating activities

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The ____ section reports the cash transactions for the acquisition and sale of relatively permanent assets.

answer

cash flows from investing activities

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The ____ section reports the cash transactions related to cash investments by the owner, borrowings, and withdrawals by the owner.

answer

cash flows from financing activities

question

Income Statement and Statement of Owner's Equity are __

answer

interrelated

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Net income or net loss reported on the income statement is also reported on ____ and any additional investments by the owner during the year.

answer

the statement of owner's equity

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Statement of Owner's Equity and Balance Sheet are ___

answer

interrelated

question

The ____ at the end of the period is reported on the statement of owner's equity and is also reported on the balance sheet as owner's capital.

answer

owner's capital

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Balance Sheet and Statement of Cash Flows are

answer

interrelated

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The cash reported on the balance sheet is also reported as the ___ on the statement of cash flows.

answer

end-of-period cash

question

Ratio of Liabilities _____________________ to Owner's Equity =

answer

Total Liabilities __________________________ Total Owner's Equity (or Total Stockholders' Equity)

question

Accounting systems are designed to show the increases and decreases in each accounting equation element as a separate record. This record is called an

answer

account

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The T account has a __

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title

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The left side of the account is the ___ side

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debit

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The right side of the account is the __ side

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credit

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A group of accounts for a business entity is called a

answer

ledger

question

A list of the accounts in the ledger is called a

answer

chart of accounts

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__ are resources owned by the business.

answer

Assets

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Some examples of assets follow:

answer

cash supplies accounts receivable buildings

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are debts owed to outsiders (creditors)

answer

Liabilities

question

Some examples of liabilities follow:

answer

Accounts payable Notes payable Wages payable Interest payable

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is the owner's right to the assets of the business after all liabilities have been paid

answer

Owner's equity

question

For a proprietorship, the owner's equity is represented by the balance of the owner's .

answer

capital account

question

A ___ account represents the amount of withdrawals made by the owner.

answer

drawing

question

___are increases in owner's equity as a result of selling services or products to customers

answer

Revenues

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Some examples of revenue accounts follow:

answer

Fees earned Commission revenue Rent revenue

question

The using up of assets or consuming services in the process of generating revenues results in __

answer

expenses

question

Some examples of expenses follow:

answer

Wages expense Rent expense Miscellaneous expense

question

All businesses use what is called the

answer

double-entry accounting system

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This system is based on the accounting equation and requires:

answer

Every business transaction to be recorded in at least two accounts. The total debits recorded for each transaction to be equal to the total credits recorded.

question

Balance Sheet Accounts: The debit and credit rules for balance sheet accounts are as follows:

answer

/Users/alaynaradford/Desktop/Picture clipping.pictClipping

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Income Statement Accounts: The debit and credit rules for income statement accounts are based on their relationship with owner's equity.

answer

/Users/alaynaradford/Desktop/Picture clipping 2.pictClipping

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Owner Withdrawals: The debit and credit rules for recording owner withdrawals are based on the effect of owner withdrawals on owner's equity.

answer

/Users/alaynaradford/Desktop/Picture clipping 3.pictClipping

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The sum of the increases in an account is usually equal to or greater than the sum of the decreases in the account, the ____ is either a debit or a credit depending on whether increases in the account are recorded as debits or credits.

answer

normal balance of an account

question

Rules of Debit and Credit - Normal Balances of Accounts

answer

/Users/alaynaradford/Desktop/Picture clipping 4.pictClipping

question

Journalizing requires the following steps: Step 1.

answer

The date of the transaction is entered in the Date column.

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Journalizing Step 2

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The title of the account to be debited is recorded at the left-hand margin under the Description column, and the amount to be debited is entered in the Debit column.

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Journalizing Step 3.

answer

The title of the account to be credited is listed below and to the right of the debited account title, and the amount to be credited is entered in the Credit column.

question

Journalizing Step 4.

answer

A brief description may be entered below the credited account

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Journalizing Step 5.

answer

The Post. Ref. (Posting Reference) column is left blank when the journal entry is initially recorded. This column is used later when the journal entry amounts are transferred to the accounts in the ledger.

question

A transaction is initially entered in a record called a

answer

journal

question

The process of recording a transaction in the journal is called

answer

journalizing

question

The entry in the journal is called a ____ .

answer

journal entry

question

The process of transferring the debits and credits from the journal entries to the accounts is called ____.

answer

posting

question

Steps in Posting: Step 1.

answer

The date of the transaction is entered in the Date column of Prepaid Insurance

question

Steps in Posting: Step 2.

answer

The amount is entered in the Debit column of Prepaid Insurance.

question

Steps in Posting: Step 3.

answer

The journal page number is entered in the account's Post. Ref. column

question

Steps in Posting: Step 4

answer

The account number is entered in the journal's Post. Ref. column.

question

The liability created by receiving the cash in advance of providing the service is called ___ ____

answer

unearned revenue.

question

The equality of debits and credits in the ledger should be proven at the end of each accounting period by preparing a ___ ____.

answer

trial balance

question

A ____ occurs when the order of the digits is changed by mistake, such as writing $542 as $452 or $524.

answer

transposition

question

In a ___ , the entire number is moved one or more spaces to the right or the left by mistake, such as writing $542.00 as $54.20 or $97.50 as $975.00.

answer

slide

question

If an error has already been journalized and posted to the ledger, a ______ is normally prepared.

answer

correcting journal entry

question

Another type of error is a

answer

posting error

question

In ___ ____, the amount of each item on a current financial statement is compared with the same item on an earlier statement

answer

horizontal analysis

question

When two statements are being compared, the ____ statement is used as the base for computing the amount and the percent of change.

answer

earlier

question

Which of the following is not a business transaction?

answer

Erin pays her monthly personal credit card bill.

question

Revenues are reported when

answer

work is completed on the job

question

If total assets decreased by $88,000 during a period of time and owner's equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is

answer

$159,000 decrease

question

Which of the following would not normally operate as a service business?

answer

Grocers

question

Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of owner's equity (OE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared?

answer

I,OE, B

question

Which of the following is not true of accounting principles?

answer

A new accounting principle can be adopted with stockholders approval.

question

Donner Company is selling a piece of land adjacent to their business premises. An appraisal reported the market value of the land to be $220,000. The Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?

answer

$212,000

question

Which of the following is not a certification for accountants?

answer

CIA CMA CISA All are certifications.

question

Cash investments made by the owner to the business are reported on the statement of cash flows in the

answer

financing activities section

question

Ramon Ramos has withdrawn $750 from Ramos Repair Company's cash account to deposit in his personal account. How does this transaction affect Ramos Repair Company's accounting equation?

answer

Decrease Assets (Cash) and decrease Owner's Equity (Owner's Withdrawal)

question

Which of the following is not a correct rule of debits and credits?

answer

the normal balance for revenues and expenses is a credit

question

Accounts are classified in the ledger

answer

in accordance with their appearance in the financial statements

question

Which of the following entries records the acquisition of office supplies on account?

answer

Office Supplies, debit; Accounts Payable, credit

question

Office supplies were sold by Ari's Alarm Service at cost to another repair shop, with cash received. Which of the following entries for Ari's Alarm Service records this transaction?

answer

Cash, debit; Office Supplies, credit

question

What is the post reference that will be found on the journal entry?

answer

11; 41

question

The owner's equity will be reduced by all of the following accounts except:

answer

revenues

question

The payment for the monthly rent will require the following entry

answer

Debit Rent Expense and Credit Cash

question

The chart of accounts classify the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account. Which of the following indicates the use of this classification?

answer

1-Assets, 2-Liabilities, 3-Owner's Equity, 4-Revenues, 5-Expenses

question

Which of the following accounts is an owner's equity account?

answer

Ross Morris, Capital

question

Randomly listed below are the steps for preparing a trial balance: (1) Verify that the total of the Debit column equals the total of the Credit column. (2) List the accounts from the ledger and enter their debit or credit balance in the Debit or Credit column of the trial balance. (3) List the name of the company, the title of the trial balance, and the date the trial balance is prepared. (4) Total the Debit and Credit columns of the trial balance. What is the proper order of these steps?

answer

(3), (2), (4), (1)

question

The ____ requires that revenues and expenses be reported in the proper period.

answer

accounting period concept

question

Under the _____, revenues are reported on the income statement in the period in which they are earned.

answer

accrual basis of accounting

question

The accounting concept supporting the reporting of revenues when they are earned regardless of when cash is received is called the _____

answer

revenue recognition concept.

question

The accounting concept supporting reporting revenues and related expenses in the same period is called the _____, or _____.

answer

matching concept or matching principle

question

Under the ____, revenues and expenses are reported on the income statement in the period in which cash is received or paid.

answer

cash basis of accounting

question

Under the accrual basis, some of the accounts need updating at the end of the accounting period for the following reasons:

answer

Some expenses are not recorded daily. Some revenues and expenses are incurred as time passes rather than as separate transactions. Some revenues and expenses may be unrecorded

question

The analysis and updating of accounts at the end of the period before the financial statements are prepared is called the ___

answer

adjusting process

question

The journal entries that bring the accounts up to date at the end of the accounting period are called _____.

answer

adjusting entries

question

_____ are the advance payment of future expenses and are recorded as assets when cash is paid.

answer

Prepaid expenses

question

_____ are the advance receipt of future revenues and are recorded as liabilities when cash is received.

answer

Unearned revenues

question

_____ are unrecorded revenues that have been earned and for which cash has yet to be received.

answer

Accrued revenues

question

___ are unrecorded expenses that have been incurred and for which cash has yet to be paid.

answer

Accrued expenses

question

Fixed assets, or plant assets, are physical resources that are owned and used by a business and are permanent or have a long life. As time passes, a fixed asset loses its ability to provide useful services. This decrease in usefulness is called _____.

answer

depreciation

question

All fixed assets, except land, lose their usefulness and , thus, are said to ____

answer

depreciate

question

As a fixed asset depreciates, a portion of its cost should be recorded as an expense. This periodic expense is called _____

answer

depreciation expense.

question

The fixed asset account is not decreased (credited) when making the related adjusting entry. This is because both the original cost of a fixed asset and the depreciation recorded since its purchase are reported on the balance sheet. Instead, an account entitled ______ is increased (credited).

answer

Accumulated Depreciation

question

Accumulated depreciation accounts are ____

answer

called contra accounts, or contra asset accounts

question

The difference between the original cost of the office equipment and the balance in the accumulated depreciation—office equipment account is called the _____ of the asset (or net book value). It is computed as shown below.

answer

book value

question

The purpose of the _____ is to verify the equality of the total debit and credit balances before the financial statements are prepared.

answer

adjusted trial balance

question

Comparing each item in a financial statement with a total amount from the same statement is referred to as ___.

answer

vertical analysis

question

The account type and normal balance of Unearned Revenue is

answer

liability & credit

question

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

answer

asset

question

Which of the following is considered to be an accrued expense?

answer

A computer technician has installed the latest software updates, but you have not received their invoice for payment.

question

Which of the following is not a characteristic of accrual basis of accounting?

answer

Revenues and expenses are reported in the period in which cash is received or paid

question

Which account would normally not require an adjusting entry?

answer

Smith; Capital

question

The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is

answer

deferral

question

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry. Wages Expense 4,500 Wages Payable 4,500 ????????????????

answer

Record wages expense incurred and to be paid next month

question

Accrued expenses are ordinarily reported on the balance sheet as

answer

liabilities

question

Adjusting entries always include

answer

at least one income statement account and one balance sheet account.

question

Accrued revenues would appear on the balance sheet as

answer

assets

question

Account balances are listed in the _____ column using the ending balances found in the general ledger.

answer

Unadjusted Trial Balance

question

Adjustments are entered here. Two possibilities:

answer

Deferrals - Existing balances are changed Accruals - New information is entered

question

Adjustments are combined with the _____. Account balances are now adjusted.

answer

unadjusted trial balance amounts

question

Revenue and expense balances in the __________

answer

Adjusted Trial Balance column are extended to the Income Statement column.

question

Asset, liability, owner's equity, and drawing balances in the _______

answer

Adjusted Trial Balance column are extended to the Balance Sheet column.

question

The income statement is prepared directly from the ____of the end-of-period spreadsheet (work sheet) beginning with fees earned of $16,840.

answer

Income Statement or Adjusted Trial Balance columns

question

The first item presented on the statement of owner's equity is _______ at the beginning of the period

answer

the balance of the owner's capital account

question

The balance sheet is prepared directly from the _____ of the end-of-period spreadsheet (or work sheet), beginning with Cash of $2,065.

answer

Balance Sheet or Adjusted Trial Balance columns

question

A ______ is a balance sheet that was expanded by adding subsections for (1) current assets, (2) property, plant, and equipment, (3) current liabilities, and (4) long-term liabilities.

answer

classified balance sheet

question

Cash and other assets that are expected to be converted into cash, sold, or used up usually within a year or less, through the normal operations of the business, are called

answer

CURRENT ASSETS

question

____ are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate

answer

Notes receivable

question

____ (also called fixed assets or plant assets) include assets that depreciate over a period of time. Land is an exception, since it is not subject to depreciation.

answer

Property, plant, and equipment

question

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called

answer

current liabilities

question

Liabilities not due for a long time (usually more than one year) are called

answer

long-term liabilities.

question

_____ is the owner's right to the assets of the business. ____ is added to the total liabilities, and this combined total must be equal to the total assets.

answer

Owner's equity

question

Accounts that are relatively permanent from year to year are called ___. These accounts are carried forward from year to year.

answer

permanent accounts or real accounts

question

Accounts that report amounts for only one period are called _____, _____ are not carried forward because they relate to only one period.

answer

temporary accounts or nominal accounts

question

To report amounts for only one period, temporary accounts should have ____ at the beginning of the next period. To achieve this, the revenue and expense account balances are transferred to _____ at the end of the period.

answer

zero balances Income Summary

question

The balance of Income Summary (net income or net loss) is then transferred to the ____ The balance of the owner's drawing account is also transferred to the _____ The entries that transfer these balances are called _____

answer

owner's capital account. closing entries.

question

_____ is a temporary account that is only used during the closing process. At the end of the _____, the income summary account will have a zero balance. Income Summary is sometimes called a ____.

answer

Income Summary closing process clearing account

question

After the closing entries are posted, all of the temporary accounts have ____

answer

zero balances.

question

A ______ is prepared after the closing entries have been posted. The purpose of the____ is to verify that the ledger is in balance at the beginning of the next period

answer

post-closing trial balance

question

The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period's transactions is called the _____.

answer

accounting cycle

question

There are ____ in the accounting cycle

answer

ten steps

question

Step 1 of Accounting Cycle

answer

Transactions are analyzed and recorded in the journal.

question

Step 2 of Accounting Cycle

answer

Transactions are posted to the ledger.

question

Step 3 of Accounting Cycle

answer

An unadjusted trial balance is prepared.

question

Step 4 of Accounting Cycle

answer

Adjustment data are assembled and analyzed.

question

Step 5 of Accounting Cycle

answer

An optional end-of-period spreadsheet (work sheet) is prepared

question

Step 6 of Accounting Cycle

answer

Adjusting entries are journalized and posted to the ledger.

question

Step 7 of Accounting Cycle

answer

An adjusted trial balance is prepared.

question

Step 8 of Accounting Cycle

answer

Financial statements are prepared

question

Step 9 of Accounting Cycle

answer

Closing entries are journalized and posted to the ledger.

question

Step 10 of Accounting Cycle

answer

A post-closing trial balance is prepared.

question

The annual accounting period adopted by a business is known as its

answer

fiscal year

question

When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the ____

answer

natural business year.

question

The ability to convert assets into cash is called

answer

liquidity

question

The ability of a business to pay its debts is called

answer

solvency

question

_____ is the excess of the current assets of a business over its current liabilities

answer

Working capital

question

The ____ is another means of expressing the relationship between current assets and current liabilities. The current ratio is computed by dividing current assets by current liabilities.

answer

current ratio

question

Amir Designs purchased a one-year liability insurance policy on March 1st of this year for $7,200 and recorded it as a prepaid expense. Which of the following amounts would be recorded for insurance expense during the adjusting process at the end of Amir's first month of operations on March 31st?

answer

$600

question

Which one of the fixed asset accounts listed below will not have a related contra asset account?

answer

land

question

Which of the following accounts will not be closed to Income Summary at the end of the fiscal year?

answer

unearned rent

question

The accounting cycle requires three trial balances be done. In what order should they be prepared?

answer

unadjusted, adjusted, post-closing

question

The income statement columns in the worksheet show that debits are equal to $55,800 and credits are $67,520. What does this information mean to the accountant?

answer

Net Income $11,720

question

Based on the preceding trial balance, the entry to close C. Finley, Drawing would be:

answer

debit C. Finley, Capital $3,000, credit C. Finley, Drawing $3,000

question

A fiscal year

answer

ordinarily begins on the first day of a month and ends on the last day of the following twelfth month

question

The entry required to close the expense accounts at the end of the period includes a:

answer

a debit to Income Summary for $33,520

question

Which of the accounts below would be closed by posting a debit to the account?

answer

Fees Earned

question

When preparing the statement of owner's equity, the beginning capital balance can always be found

answer

in general ledger

question

An _____ is the methods and procedures for collecting, classifying, summarizing, and reporting a business's financial and operating information.

answer

accounting system

question

As a business grows and changes, accounting systems also change in the following ___-step process.

answer

3

question

The process includes:

answer

Analyze user information needs. Design the system to meet the user needs. Implement the system.

question

______ are the policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.

answer

Internal controls

question

_____ are the means by which the accounting system collects, summarizes, and reports accounting information. These methods may be either manual or computerized.

answer

Processing methods

question

Understanding a manual accounting system is useful in identifying relationships between ___ & ____

answer

accounting data and reports.

question

A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a _____

answer

subsidiary ledger.

question

The primary ledger, which contains all of the balance sheet and income statement accounts, is called a _____

answer

general ledger.

question

Each subsidiary ledger is represented in the general ledger by a summarizing account, called a _____

answer

controlling account.

question

The individual customer accounts are arranged in alphabetical order in a subsidiary ledger called the accounts ______, or customers ledger.

answer

receivable subsidiary ledger

question

The individual creditor accounts are arranged in alphabetical order in a subsidiary ledger called the _____, or creditors ledger.

answer

accounts payable subsidiary ledger

question

One method of processing transactions more efficiently in a manual system is to use ____. These are designed to be used for recording a single kind of transaction that occurs frequently.

answer

special journals

question

The all-purpose two-column journal, called the _____ or simply the journal, can be used for entries that do not fit into any of the special journals.

answer

general journal

question

The _____ is used for recording fees earned on account.

answer

revenue journal

question

Cash fees earned would be recorded in the ____

answer

cash receipts journal.

question

Purchases made on account (on credit) are recorded in the _____

answer

purchases journal

question

All cash payments are recorded in the ____

answer

cash payments journal

question

Revenues are normally recorded to the revenue journal when the company sends a bill, referred to as an _____, to the customer. Each ____ is normally numbered in sequence for future reference.

answer

invoice

question

All transactions that involve the receipt of cash are recorded in a ______. Every entry recorded in the _____ will involve a debit to the "Cash Dr." column.

answer

cash receipts journal

question

After all journalizing and posting to individual accounts for the month is complete, the columns are____ .

answer

totaled

question

The total of the accounts in the accounts receivable subsidiary ledger should match the balance in the general ledger's _____ account.

answer

Accounts Receivable

question

The ____ is designed for recording all purchases on account

answer

purchases journal

question

All transactions involving a credit to Cash are recorded in the ______

answer

cash payments journal

question

Computerized accounting systems have the following three main advantages over manual systems:

answer

Computerized systems simplify the record-keeping process by recording transactions in electronic forms and, at the same time, posting them electronically to general and subsidiary ledger accounts. Computerized systems are generally more accurate than manual systems. Computerized systems provide management with current account balance information to support decision making, since account balances are posted as the transactions occur.

question

Using the Internet to perform business transactions is termed ____

answer

e-commerce.

question

When transactions are between a company and a consumer, it is termed _____

answer

B2C (business-to-consumer) e-commerce.

question

Three more advanced areas where the Internet is being used for business purposes are:

answer

Supply chain management (SCM) Customer relationship management (CRM) Product life-cycle management (PLM)

question

One way to report revenue is by different segments. Businesses may be segmented by _____

answer

region, by product or service, or by type of customer.

question

Which of the following is true about the revenue journal?

answer

only revenues on account are recorded in the revenue journal

question

Segment data:

answer

is gathered from invoice data.

question

When using a purchases journal

answer

Accounts Receivable and Accounts Payable subsidiary ledgers.

question

An "Accounts Receivable Subsidiary Ledger" report shows

answer

cash receipts by customer for a specified date range

question

Which of the following is not an element of internal controls?

answer

ensure that company policies are in place to maximize profits

question

The phase of accounting system installation in which the information needs of people in the organization are taken into account is

answer

analysis

question

When using a revenue journal:

answer

revenues are normally recorded when the company sends customer invoices.

question

Which of the following transactions is recorded in the purchases journal?

answer

purchase of store supplies on account

question

Which of the following transactions is recorded in the revenue journal?

answer

rendering services on account

question

When merchandise is sold, the revenue is reported as sales, and its cost is recognized as an expense called

answer

cost of merchandise sold

question

The cost of merchandise sold is subtracted from sales to arrive at ____. It is the profit before deducting operating expenses

answer

gross profit

question

Merchandise on hand (not sold) at the end of an accounting period is called ___.

answer

merchandise inventory

question

If merchandise inventory at the end of the period is determined by taking a physical count of inventory on hand, a _____ is being used.

answer

periodic inventory system

question

Under the _____, the amounts of inventory purchased, available for sale, and sold are continuously (perpetually) updated in the inventory records.

answer

perpetual inventory system

question

A buyer may receive a discount from the seller (sales discount) for early payment of the amount owed. From the buyer's perspective, such discounts are called ____

answer

purchases discounts

question

A purchases return involves actually returning merchandise that is damaged or does not meet the specifications of the order. From a buyer's perspective, such returns are called _____.

answer

purchases returns and allowances

question

A ____, often called a debit memo, informs the seller of the amount the buyer proposes to debit to the account payable due the seller.

answer

debit memorandum

question

The terms for when payments for merchandise are to be made are called

answer

credit terms

question

If payment is required on delivery, the terms are cash or net cash. Otherwise, the buyer is allowed an amount of time, known as the ____, in which to pay.

answer

credit period

question

A ____, often called a credit memo, authorizes a credit to (decreases) the buyer's account receivable

answer

credit memorandum

question

If ownership of the merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier, the terms are said to be ____

answer

FOB (free on board) shipping point.

question

If ownership of the merchandise passes to the buyer when the buyer receives the merchandise, the terms are said to be

answer

FOB (free on board) destination

question

When wholesalers offer special discounts to certain classes of buyers who order large quantities, these discounts are called

answer

trade discounts

question

The ______ contains several sections, subsections, and subtotals.

answer

multiple-step income statement

question

__ is the total amount charged customers for merchandise sold, including cash sales and sales on account.

answer

Sales

question

____ are granted by the seller to customers for damaged or defective merchandise.

answer

Sales returns and allowances

question

____ are granted by the seller to customers for early payment of amounts owed

answer

Sales discounts

question

____is determined by subtracting sales returns and allowances and sales discounts from sales.

answer

Net sales

question

The ______ is the cost of the merchandise sold to customers. Merchandise costs consist of all the costs of acquiring the merchandise and readying it for sale, such as purchase and freight costs.

answer

cost of merchandise sold

question

___ are incurred directly in the selling of merchandise.

answer

Selling expenses

question

______, sometimes called _____, are incurred in the administration or general operations of the business.

answer

Administrative expenses; general expenses

question

_____, sometimes called operating income, is determined by subtracting operating expenses from gross profit.

answer

Income from operations

question

____ is revenue from sources other than the primary operating activity of a business.

answer

Other income

question

____ is an expense that cannot be traced directly to the normal operations of the business.

answer

Other expense

question

An alternative form of income statement is the ____

answer

single-step income statement

question

The form of balance sheet with the assets on the left-hand side and the liabilities and owner's equity on the right-hand side is called the____

answer

account form

question

Merchandising businesses may experience some loss of inventory due to shoplifting, employee theft, or errors in

answer

recording or counting inventory

question

If the balance of the Merchandise Inventory account is larger than the total amount of the merchandise count, the difference is often called

answer

inventory shrinkage or inventory shortage

question

The ____ measures how effectively a business is using its assets to generate sales.

answer

ratio of net sales to assets

question

of inventory are recorded in a purchases account rather than in the merchandise inventory account.

answer

Purchases

question

____ are normally recorded in a separate purchases discounts account. The balance of the purchases discounts account is reported as a deduction from Purchases for the period.

answer

Purchases discounts

question

_____are recorded in a similar manner as purchase discounts.

answer

Purchases returns and allowances

question

When merchandise is purchased FOB shipping point, the buyer pays for the freight. Under the periodic inventory system, freight paid when purchasing merchandise FOB shipping point is debited to

answer

Freight In

question

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

answer

single-step statement

question

Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled

answer

Merchandise inventory

question

Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total asset balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal points).

answer

2.92

question

Inventory shortage is recorded when

answer

there is a difference between a physical count of inventory and inventory records.

question

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

answer

credit terms

question

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a

answer

credit to merchandise inventory

question

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

answer

7972

question

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

answer

sales discount

question

Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

answer

2940

question

Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a

answer

credit to merchandise inventory

question

A minimum cash balance required by a bank is called

answer

compensating balance

question

Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was

answer

added to the balance per company's records

question

Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?

answer

debit Accounts Receivable; credit Cash

question

An example of a preventive control is

answer

separation of the Purchasing Department and Accounting Department personnel

question

Cash equivalents include

answer

money market accounts and commercial paper

question

In management's internal control report that is now required of all public companies, which of the following does not have a direct effect on a company's internal control system?

answer

Board of Trustees

question

A $150 petty cash fund has cash of $44 and receipts of $93. The journal entry to replenish the account would include a

answer

debit to Cash Over and Short for $13.

question

Which of the following should not be considered cash by an accountant?

answer

postage stamps

Accounting 211: Midterm – Flashcards

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