Principles of Accounting Ch 8

Flashcard maker : Lily Taylor
Which of the following steps of the accounting cycle are in the correct order
prepare a trial balance, make adjustments, prepare financial statements
What is the purpose of the post-closing trial balance
to prove the equality of the debit and credit balances in the general ledger accounts
The Item column in the general ledger is used for
a description of special entries
The journal entry to close revenue accounts includes
debiting the revenue accounts and crediting Income Summary
A chart of accounts does NOT include
names of customers
Copies of sales tickets or sales invoices issued to customers or clients provide information about
sales of goods or services.
When posting an adjusting entry to the general ledger, write
“adjusting” in the Item column.
To record wages earned but not paid under the modified cash accounting method,
no entry is required.
Cash is used to pay for a car for personal use by the owner. The transaction includes
debiting Drawing and crediting Cash.
In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column
Owner’s equity is not up-to-date
A net loss is shown on the work sheet as a(n)
debit in the Balance Sheet columns.
If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n)
modified cash basis of accounting.
The time an asset is expected to last is called its
useful life.
If the owner of a company invested cash in a business enterprise, the transaction would include
debiting Cash and crediting Capital.
If cash is paid for office rent, the transaction includes
debiting Rent Expense and crediting Cash
The steps in the journalizing process include all of the following EXCEPT
enter the balance.
Changes in owner’s equity that result from investments or withdrawals of assets by the owner are included in the
statement of owner’s equity
The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the
Income Statement columns.
Supplies originally cost $500, but only $150 worth of supplies were used this period. The adjusting entry would be
debit Supplies Expense, $150; credit Supplies, $150
An account used with a related account to bring about a decrease in the net amount of the two account balances is called a(n)
contra-account
An asset cost $33,000. It has an expected useful life of 5 years and an expected salvage value of $3,000. Depreciation expense for the first year of the asset’s life using the straight-line method is
$6000
The simplest form of journal is one with
2 columns
After the closing entries have been posted, which of the following accounts would NOT have a balance
Miscellaneous Expense
The transaction to record payment for delivery equipment that was purchased on account in the previous month would include
debiting Accounts Payable and crediting Cash.
The depreciation system used by many businesses for tax purposes is the
Modified Accelerated Cost Recovery System
The third pair of columns on a 10-column work sheet prepared at the end of the period would be the
Adjusted Trial Balance columns.
Matching the cost of an asset with the revenue it is expected to produce is called
depreciation.
Purchase invoices received from suppliers provide information about
purchases of goods or services.
Because the first formal accounting record of a transaction is made in a journal from source document information, a journal is commonly referred to as a(n)
book of original entry.
Every entry in the journal should include all of the following EXCEPT
the balance of the accounts affected.
Net income is shown on the work sheet as a
debit in the Income Statement column
Owner’s equity can be increased through
investments by the owner.
The journal entry to close expense accounts includes
debiting Income Summary and crediting the expense accounts.
The body of the income statement consists of an itemized list of
revenues and expenses.
The account to which revenue and expenses are closed is called
Income Summary
Cash and other assets that will be converted into cash within one year or the normal operating cycle of the business, whichever is longer, are called
current assets
Posting from the journal to the ledger does NOT involve which of the following steps
Enter the description of the entry
The journal entry to close the income summary account (showing a profit) includes
debiting Income Summary and crediting the owner’s capital account
Receipt stubs, carbon copies of receipts, cash register tapes, or memos of cash register totals provide information about
cash receipts
To record the purchase of assets on account under the modified cash basis of accounting method
debit the asset and credit Accounts Payable
Instead of T accounts, businesses are more likely to use a
four-column account.
To prove the equality of the debit and credit balances in the general ledger accounts after the closing entries have been journalized and posted, prepare the
post-closing trial balance.
When assets are recorded at original value, they are recorded under the
historical cost principle.
The journal entry to close the income summary account (showing a net loss) includes
debiting the owner’s capital account and crediting Income Summary
The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as
the accounting cycle.
Check stubs and carbon copies of checks provide information about
cash payments
A typical account number for a contra-account would be
185.1
A balance sheet that groups similar items is called a(n)
classified balance sheet.
Journalizing does NOT include
posting the debits and credits to the accounts.
Service revenue received in cash is entered by
debiting Cash and crediting Service Revenue

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