cooley 2012-13. an equation showing the relationship among assets, liabilities, and owner’s equity

AccountingUnit 1Review

Cooley2012-13

An equation showing the relationship among assets, liabilities, and owner’s equity.

Accounting Equation

An increase in owner’s equity resulting from the operation of a business

Revenue

A business paper from which information is obtained for a journal entry

Source Document

Accounts used to accumulate information until it is transferred to the owner’s capital account

Temporary Account

A business that performs an activity for a fee.

Service Business

Journal entries recorded to update general ledger accounts at the end of the fiscal period

Adjusting Entries

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

Work Sheet

A list of accounts used by a business

Chart of Accounts

Journal entries used to prepare temporary accounts for a new fiscal period.

Closing Entries

A financial statement that reports assets, liabilities, and owner’s equity on a specific date.

Balance Sheet

Transferring information from a journal entry to a ledger account.

Posting

An accounting device used to analyze transactions.

T Account

A proof of the equality of debits and credits in a general ledger.

Trial Balance

A business owned by one person

Proprietorship

A trial balance prepared after the closing entries are posted

Post-Closing Trial Balance

TRUE or FALSE?TRUE or FALSE?

Making adjustments to general ledger accounts is an application of the Matching Expenses with Revenue accounting concept.

TRUE or FALSE?TRUE or FALSE?The posting reference should always be recorded in the journal’s Post. Ref. column before amounts are recorded in the ledger

TRUE or FALSE?TRUE or FALSE?The current capital to be reported on a balance sheet is calculated as the capital account balance plus net income equals current capital.

TRUE or FALSE?TRUE or FALSE?

Blank endorsements should be used when sending checks through the mail.

TRUE or FALSE?TRUE or FALSE?

Temporary accounts must start each fiscal period with a zero balance.

TRUE or FALSE?TRUE or FALSE?The balances of the expense accounts must be reduced to zero to prepare the accounts for the next fiscal period.

TRUE or FALSE?TRUE or FALSE?Net income on a work sheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total.

TRUE or FALSE?TRUE or FALSE?The formula for calculating the total expenses component percentage is total expenses divided by total sales equals total expenses component percentage

TRUE or FALSE?TRUE or FALSE?

The value of the prepaid insurance coverage used during a fiscal period is an expense.

TRUE or FALSE?TRUE or FALSE?

When the petty cash fund is replenished, the balance of the petty cash account increases.

TRUE or FALSE?TRUE or FALSE?The only reason for the Post. Ref. Columns of the journal and general ledger is to indicate which entries in the journal still need to be posted if posting is interrupted.

TRUE or FALSE?TRUE or FALSE?The current capital to be reported on a balance sheet is calculated as the capital account balance plus net income equals current capital.

TRUE or FALSE?TRUE or FALSE?The account number is placed in the Post. Ref. column of the journal as the last step in the posting procedure.

TRUE or FALSE?TRUE or FALSE?A double line ruled across both Trial Balance columns shows that the two columns are to be totaled.

TRUE or FALSE?TRUE or FALSE?The balance of the supplies account plus the value of the supplies on hand equals the up-to-date balance of the supplies account.

A.

B.

C.

D.

A petty cash fund is always replenished

None of these

daily

weekly

At the end of the month

A.

B.

C.

D.

An account number in the journal’s Post.Ref. column shows

None of these

The work on that journal page is completed

The date of the entry

The account to which an amount is posted.

A.

B.

C.

D.

A net loss is entered in the work sheet’s

Income Statement Debit and Trial Balance Credit columns

Balance Sheet Debit and Trial Balance Credit columns

Income Statement Debit and Balance Sheet Credit columns

Income Statement Credit and Balance Sheet Debit columns

A.

B.

C.

D.

Preparing financial statements at the end of each monthly fiscal period is an application of the accounting concept

Going Concern

Objective Evidence

Adequate Disclosure

Accounting Period Cycle

A.

B.

C.

D.

On a work sheet, the balance of the Sales account is extended to

Balance Sheet Credit column

Income Statement Debit column

Balance Sheet Debit column

Income Statement Credit column

A.

B.

C.

D.

The journal entry to adjust Supplies is

Debit Supplies Expense; credit Income Summary

Debit Income Summary; credit Supplies

Debit Supplies; credit Supplies Expense

Debit Supplies Expense; credit Supplies

A.

B.

C.

D.

Posting references in a journal are

Always placed in an account’s Post. Ref. column

The first item recorded when posting

Not necessary

None of these

A.

B.

C.

D.

The bank statement shows an account balance of $5,500.00. There are outstanding checks totaling $600.00 and an outstanding deposit of $400.00. The adjusted bank balance should be

None of these

$5,285.00

$5,700.00

$5,300.00

A.

B.

C.

D.

An endorsement on the back of a check indicating that the check is to be accepted for deposit only is a

Deposit Endorsement

Special Endorsement

Blank Endorsement

Restrictive Endorsement

A.

B.

C.

D.

The formula for calculating the net income component percentage is

None of these

Total sales minus total expenses divided by net income equals total net income percentage

Total sales divided by total expenses equals net income component percentage

Net income divided by total sales equals net income component percentage

A.

B.

C.

D.

After the adjusting entry for Supplies has been posted, Supplies Expense has an up-to-date balance that is the

Value of supplies bought during the fiscal period

Same as the ending balance for Supplies

Same as the beginning balance for Supplies

Value of supplies used during the fiscal period

A.

B.

C.

D.

The journal entry to close the expense accounts is

None of these

Debit each expense account; credit Income Summary

Debit Income Summary; credit owner’s capital

Debit Income Summary for the total expense; credit each expense account

A.

B.

C.

D.

The last step in the posting procedure is writing

The entry amount in the debit or Credit column of the account

The journal page number in the Post.Ref. column of the account

The entry date in the Date column of the account

None of these

A.

B.

C.

D.

Following the same accounting procedures in the same way in each accounting period is an application of the account concept

Going Concern

Accounting Period Cycle

Matching Expenses with Revenue

Consistent Reporting

A.

B.

C.

D.

A lost check with a blank endorsement on it can be cashed by

No one

Only the person who endorsed the check.

Only the person whose name follows the words “Pay to the order of.”

Anyone who has the check

A.

B.

C.

D.

After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has an up-to-date balance that is the

Value of insurance premiums bought during the fiscal period

Same as the ending balance for Prepaid Insurance

Same as the beginning balance for Prepaid Insurance

Value of insurance premiums used during the fiscal period

A.

B.

C.

D.

The journal entry to close Sales is

None of these

Debit Income Summary; Credit Sales

Debit Income Summary; credit Owner’s Capital

Debit Sales; credit Income Summary

A.

B.

C.

D.

The entry to establish a $200.00 petty cash fund is

Debit Petty Cash, $200.00; credit Miscellaneous Expense $200.00

Debit Miscellaneous Expense, $200.00; credit Cash, $200.00

Debit Cash, $200.00; credit Petty Cash, $200.00

Debit petty Cash, $200.00; credit Cash, $200.00

You will be journalizing and totaling one journal page as your problem.