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101
The company paid cash of $500 for utilities for the month of March.
The company received $3,100 cash in advance from a customer for repair services to be provided
in April.
Wiley withdrew $5,000 for his personal use from the company.
Based on this information, the balance in Wiley Hill, Capital reported on the Statement of Owner's
Equity at the end of March would be:
A) $13,500. B) $8,400. C) $133,400. D) $130,300. E) $125,300.
SHORT ANSWER QUESTIONS
182)
Match the following definitions and terms by placing the letter that identifies the best
definition in the blank space next to the term.
_____ 1. Source documents
_____ 2. Debit
_____ 3. Posting
4. Double-entry accounting
_____ 5. Ledger
6. Journal
_____ 7. Account
8. Credit
_____ 9. T-account
_____ 10. Trial balance
A. Decrease in an asset, owner withdrawal and expense account, and increase in a liability,
owner's capital and revenue account; recorded on the right side of a T-account.
A.
An increase in an asset, owner withdrawal, and expense account, and a decrease in a
liability, owner's capital, and revenue account; recorded on the left side of a T-
account.
B.
A decrease in an asset, owner withdrawal, and expense account, and an increase in a
liability, owner's capital, and revenue account; recorded on the right side of a T-
account.
C.
A written promise to pay a definite sum of money on a specified future date.
D.
The difference between total debits and total credits for an account including the
beginning balance.
E.
A list of accounts and their balances at a point in time; the total debit balances shoul
equal the total credit balances.
F.
A list of all accounts used by a company and the identification number assigned to
B. A record containing all the accounts of a company and their balances.
C. An accounting system where each transaction affects and is recorded in at least two
accounts; the sum of the debits for each entry must equal the sum of its credits.
D. A company's chronological record of each transaction in one place that shows debits and credits
for each transaction.
E. An increase in an asset and expense account, and decrease in a liability, owner's capital,
and revenue account; recorded on the left side of a T-account.
F. A record of the increases and decreases in a specific asset, liability, equity, revenue, or
expense item.
G. A representation of a ledger account used to understand the effects of transactions.
H. A list of accounts and their balances at a point in time.
I. The process of transferring journal entry information to the ledger accounts.
J. Verifiable evidence that transactions have occurred used to record accounting information.
183)
Provided below is a list of definitions and terms. Match them by placing the letter that identifies
the best definition in the blank space next to each term.
_____ 1. Debit _____ 6. Chart of accounts
_____ 2. Note payable
_____ 3. Ledger
7. Trial balance
8. Credit
4. Journal _____ 9. Account balance
_____ 5. Debt ratio _____ 10. Balance column account
d
102
103
F.
A list of all accounts used by a company and the identification number assigned to
each account.
G.
The ratio of total liabilities to total assets; used to reflect the risk associated with the
company's debts.
H.
An account with debit and credit columns for recording entries and another column
for showing the balance of the account after each entry.
I.
A chronological record of each transaction in one place that shows debits and credits
for each transaction.
J.
A record containing all accounts of a company and their balances.
184)
Provided below is a list of definitions and terms. Match them by placing the letter that identifies the
best definition in the blank space next to each term.
_____ 1. General journal
_____ 2. Chart of accounts
_____ 3. Note receivable
_____ 4. T-account
_____ 5. Unearned revenues
_____ 6. Compound journal entry
_____ 7. Posting reference column
_____ 8. Posting
_____ 9. Account
_____ 10. Trial Balance
A. A simple form used as a helpful tool in understanding the effect of transactions and events on
specific accounts.
B. The most flexible type of journal, it can be used to record any kind of transaction.
C. A journal entry that affects at least three accounts.
D. A written promise from a customer to pay a definite sum of money on a specified future date.
E. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense
item.
F. A list of all accounts used by a company and the identification number assigned to each account.
G. The process of transferring journal entry information to the ledger.
H. A list of accounts and their balances at a point in time; the total debit balances should equal the
total credit balances.
I. A column in journals where individual account numbers are entered when entries are posted to
ledger accounts.
J. Liabilities created when customers pay in advance for products or services; satisfied by delivering
the products or services in the future.
185)
Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or
equity (OE) by placing initials (R,E,A,L or OE) in the blanks.
_____ 1. Salary Expense
2. Cash
_____ 3. Equipment
_____ 4. Owner, Capital
5. Fees Revenue
6. Accounts Receivable
_____ 7. Accounts Payable
_____ 8. Owner, Withdrawals
9. Supplies
_____ 10. Unearned Revenue
_____ 11. Prepaid Insurance
12. Office Furniture
186)
Review the transactions below and identify with an "X" those that would be posted as a credit in
the ledger (The first one has been done for you):
__X__ 1. Salary Payable was increased.
2. Cash was decreased
_____ 3. Equipment was increased
4. Owner, Capital was increased
_____ 5. Salaries Expense was increased
_____ 6. Accounts Receivable was decreased
_____ 7. Unearned Revenue was increased
_____ 8. Owner, Withdrawals was increased
9. Supplies was increased
_____ 10. Building was increased
_____ 11. Utilities Expense was increased
_____ 12. Service Revenue was increased
105
187)
The following accounts appear on either the Income Statement (IS) or Balance Sheet (BS). In
the space to the left of each account, write the letters, IS or BS to identify the statement on which
the account appears.
_____ 1. Office Equipment
_____ 2. Rent Expense
3. Unearned Fees Revenues
_____ 4. Rent Expense
_____ 5. Accounts Payable
_____ 6. Owner, Capital
7. Fees Revenue
8. Cash
_____ 9. Notes Receivable
_____ 10. Wages Payable
ESSAY QUESTIONS
188)
Miley Block is a building consultant. Shown below are (a) several accounts in her ledger with each
account preceded by an identification number, and (b) several transactions completed by Block.
Indicate the accounts debited and credited when recording each transaction by placing the proper
account identification numbers to the right of each transaction.
1.
Accounts Payable
7.
Telephone Expense
2.
Accounts Receivable
8.
Unearned Revenue
3.
Cash
9.
Miley Block, Capital
4.
Consulting Fees Earned
10.
Miley Block, Withdrawals
5.
Office Supplies
11.
Insurance Expense
6.
Office Supplies Expense
12.
Prepaid Insurance
Debit
Credit
Example:
2
4
Completed consulting work for a client
who will pay at a later date.
A.
Received cash in advance from a
customer for designing a building
B.
Purchased office supplies on credit.
C.
Paid for the supplies purchased in B.
D.
Received the telephone bill of the 1
06
Debit
Credit
Example:
Completed an appraisal for a client who
promised to pay at a later date.
2
3
A.
Received cash in advance for appraising a
hail damage claim………………………….
B.
Purchased office supplies on credit………
C.
Drew Castle used cash from the business to
pay his home telephone bill. There were no
business calls on the bill………………….
D.
Received the telephone bill of the business
and immediately paid it…………………….
E.
Paid the salary of the office assistant….
D.
Received the telephone bill of the
business and immediately paid it.
E.
Paid for a 3-year insurance policy
189)
Drew Castle is an insurance appraiser. Shown below are (a) several accounts in his ledger with
each account preceded by an identification number, and (b) several transactions completed by
Castle. Indicate the accounts debited and credited when recording each transaction by placing the
proper account identification numbers to the right of each transaction.
1.
Accounts Payable 8. Office Supplies Expense
2.
Accounts Receivable 9. Prepaid Insurance
3.
Appraisal Fees Earned 10. Salaries Expense
4.
Cash 11. Telephone Expense
5.
Insurance Expense 12. Unearned Appraisal Fees
6.
Office Equipment 13. Drew Castle, Capital
7.
Office Supplies 14. Drew Castle, Withdrawals
107
108
E.
Paid the salary of the office assistant….
F.
Paid for the supplies purchased
in transaction B…………………………..
G.
Completed an appraisal for a client and
immediately collected cash for the work
done…
SHORT ANSWER QUESTIONS
190)
List the steps in processing transactions.
109
191)
Describe what source documents are and the purpose they serve in a business.
192)
Explain how accounts are used in recording information about a business's transactions.
193)
Explain the difference between a general ledger and a chart of accounts.
110
194)
Explain debits and credits and their role in the accounting system of a business.
195)
Explain the debt ratio and its use in analyzing a company's financial condition.
196)
Explain the recording and posting processes.
111
197)
What is a trial balance? What is its purpose?
198)
Describe the link between a business's income statement, the statement of owner's equity, and the
balance sheet.
112
ESSAY QUESTIONS
199)
Identify by marking an X in the appropriate column, whether each of the following items would
likely serve as a source document. The first one is done as an example.
Yes
No
Ex.
Credit card
X
a.
Credit card receipt
b.
Purchase order
c.
Invoice
d.
Balance sheet
e.
Bank statement
f.
Journal entry
g.
Telephone bill
h.
Employee earnings record
113
200)
Indicate whether a debit or credit entry would be required to record the following changes in each
account.
a. To decrease Cash
b. To increase Owner, Capital
c. To decrease Accounts Payable.
d. To increase Salaries Expense.
e. To decrease Supplies.
f. To increase Revenue.
g. To decrease Accounts Receivable.
h. To increase Owner, Withdrawals.
201)
Using the following list of accounts and identification letters A through J for Homer's Management
Co., enter the type of account and its normal balance into the table below. The first item is filled in
as an example:
A. Homer, Capital F. Prepaid Rent
B. Interest Payable G. Advertising Expense
C. Land H. Unearned Rent Revenue
D. Homer, Withdrawals I. Commissions Earned
E. Fees Earned J. Notes Receivable
Type of Account
Normal Balance
Asset
Liability
Equity
Debit
Credit
A
X
X
B
C
D
E
F
G
H
I
J
115
202)
Rowdy Bolton began Bolton Office Services in October and during that month completed these
transactions:
a. Invested $10,000 cash, and $15,000 of computer equipment.
b. Paid $500 cash for an insurance premium covering the next 12 months.
c. Completed a word processing assignment for a customer and collected $1,000 cash.
d. Paid $200 cash for office supplies.
e. Paid $2,000 for October's rent.
Prepare journal entries to record the above transactions. Explanations are unnecessary.
116
203)
BBB Company sends a $2,500 invoice to a customer for catering services it provided during the
month. Set up the necessary T-accounts below and show how this transaction would be recorded
directly in those accounts.
204)
ABC Company made a $2,500 payment on account, to satisfy a previously recorded account
payable. Set up the necessary T-accounts below and show how this transaction would be
recorded directly in those accounts.
117
205)
A business paid $100 cash to Charles Nice (the owner of the business) for his personal use. Set
up the necessary T-accounts below and show how this transaction would be recorded directly in
those accounts.
206)
On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the
general journal entry to record this transaction.
207)
On February 5, Teddy's Catering purchased an oven that cost $35,000. The firm made a down
payment of $5,000 cash and signed a long-term note payable for the balance. Show the general
journal entry to record this transaction.
208)
Jarrod Automotive, owned and operated by Jarrod Johnson, began business in September of the
current year. Jarrod, a mechanic, had no experience with recording business transactions. As a
result, Jarrod entered all of September's transactions directly into the ledger accounts. When he
tried to locate a particular entry he found it confusing and time consuming. He has hired you to
improve his accounting procedures. The accounts in his General Ledger follow:
Prepare the general journal entries, in chronological order (a) through (e), from the T-account
entries shown. Include a brief description of the probable nature of each transaction.
118
209)
Pippa's Paralegal Services completed these transactions in February:
a. Purchased office supplies on account, $300.
b. Completed work for a client on credit, $500.
c. Paid cash for the office supplies purchased in (a).
d. Completed work for a client and received $800 cash.
e. Received $500 cash for the work described in (b).
f. Received $1,000 from a client for paralegal services to be performed in March.
Prepare journal entries to record the above transactions. Explanations are not necessary.
210)
Larry Matt completed these transactions during December of the current year:
Dec. 1
Began a financial services practice by investing $15,000 cash and office
equipment having a $5,000 value.
2
Purchased $1,200 of office equipment on credit.
3
Purchased $300 of office supplies on credit.
4
Completed work for a client and i
1
m
19
mediately received a payment of $900
120
4
Completed work for a client and immediately received a payment of $900
cash.
8
Completed work for Precept Paper Co. on credit, $1,700.
10
Paid for the supplies purchased on credit on December 3.
14
Paid for the annual $960 premium on an insurance policy.
18
Received payment in full from Precept Paper Co. for the work completed on
December 8.
27
Larry withdrew $650 cash from the practice to pay personal expenses.
30
Paid $175 cash for the December utility bills.
30
Received $2,000 from a client for financial services to be rendered next year.
Prepare general journal entries to record these transactions.
