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Exam 2: Accounting System and Financial Statements

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Question 1

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Eon Movers purchases supplies for $1,200 cash.How would Eon record this transaction?

A) Debit Supplies for $1,200 and credit Accounts Payable for $1,200.
B) Credit Cash for $1,200 and credit Accounts Payable for $1,200.
C) Debit Supplies for $1,200 and credit Cash for $1,200.
D) Debit Accounts Payable for $1,200 and credit Cash for $1,200.
E) Debit Equipment for $1,200 and credit Cash for $1,200.

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Question 2

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Josephine's Bakery had the following assets and liabilities at the beginning and end of the current year: If the owners made no investments in the business and no dividends were paid during the year,what was the amount of net income earned by Josephine's Bakery during the current year?

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Beginning owner's equity = $114,000 - $6...

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Question 3

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The posting process is the link between the _______________ and the _____________.

Explain the difference between a general ledger and a chart of accounts.

Unearned revenues are classified as liabilities.

Vicki Lake is a computer consultant.Shown below are (a) several accounts in her ledger with each account preceded by an identification number and (b) several transactions completed by Lake.Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction.

The record in which business transactions are first recorded is the:

Prepaid expenses are:

Which of the following is a TRUE statement concerning a company's financial statements?

The journal is known as a book of original entry.

FastForward purchased $25,000 of equipment for cash.The Equipment asset account is _______________ for $25,000 and the cash account is _______________ for $25,000.

At year-end, Harris Cleaning Service noted the following errors in its trial balance: 1.It understated the total debits to the Cash account by $500 when computing the account balance. 2.A credit sale for $311 was recorded as a credit to the revenue account,but the offsetting debit was not posted. 3.A cash payment to a creditor for $2,600 was never recorded. 4.The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial balance. 5.A $24,900 truck purchase for cash was recorded as a $24,090 debit to Vehicles and a $24,090 credit to Notes Payable. 6.A purchase of office supplies for $150 was recorded as a debit to Office Equipment.The offsetting credit entry was correct. 7.An additional investment of $4,000 by Del Harris was recorded as a debit to Common Stock and as a credit to Cash. 8.The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9.A revenue account balance of $79,817 was listed on the trial balance as $97,817. 10.A $1,000 cash dividend was recorded as a $100 debit to Dividends and $100 credit to cash. Using the form below,indicate whether each error would cause the trial balance to be out of balance,the amount of any imbalance and whether a correcting journal entry is required.

A credit entry:

A transaction that increases an asset and decreases a liability must also affect one or more other accounts.

The four categories of equity accounts are _____________________,__________________,______________________ and ______________________.

Debits increase both asset and expense accounts.

A company had the following account balances at year-end: Cash……………………………………… $30,000 Accounts receivable……………………… 32,000 Accounts payable………………………… 20,000 Fees earned…………………………………..65,000 Rent expense…………………………………15,000 Insurance expense……………………………..4,800 Supplies………………………………………..5,000 Common stock……………………………….5,000 Retained earnings………………………….....14,800 Dividends………………………………… 18,000 If all of the accounts have normal balances,what are the total debits on the trial balance?

Asset accounts normally have credit balances and expense accounts normally have debit balances.

The following accounts appear on either the income statement (IS) or balance sheet (BS).In the space provided next to each account write the letters IS or BS that identify the statement on which the account appears.

IFRS requires that companies report four financial statements with explanatory notes: balance sheet; income statement; statement of changes in equity,and statement of cash flows.