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)
a. accrual basis of accounting.
b. cash basis of accounting.
c. modified cash basis of accounting.
d. revenue basis of accounting.
The balance sheet reports
a. assets.
b. revenue.
c. expenses.
d. net income.
The second pair of columns on a 10-column work sheet prepared at the end of the
period would be the
a. Income Statement columns.
b. Trial Balance columns.
c. Adjustments columns.
d. Adjusted Trial Balance columns.
A credit represents a decrease in
a. an asset.
b. a liability.
c. owner’s equity.
d. revenues.
Accounts that affect owner’s equity are
a. assets, capital, and revenue.
b. capital, liabilities, and expenses.
c. expenses, capital, and drawing.
d. drawing, assets, and liabilities.
Any accounting period of twelve months’ duration is usually referred to as a(n)
a. fiscal year.
b. calendar year.
c. physical year.
d. operational year.
A type of business in which the principal source of revenue is compensation for
services rendered to a business firm or to a person is a
a. mercantile enterprise.
b. manufacturing enterprise.
c. professional service enterprise.
d. retail enterprise.
The account that is debited for the total amount of the gross earnings of all employees
for each pay period is
a. Wages and Salaries Expense.
b. Payroll Taxes Expense.
c. Miscellaneous Expense.
d. Withdrawal Expense.
An investment of cash in a business by the owner
a. increases cash.
b. decreases owner’s equity.
c. appears in a liability account.
d. represents an obligation of the business.
To record wages earned but not paid under the modified cash accounting method,
a. debit Wages Payable and credit Wages Expense.
b. debit Cash and credit Wages Expense.
c. debit Wages Expense and credit Wages Payable.
d. no entry is required.
To complete transactions with the bank, electronic funds transfer (EFT) systems use
a. a computer.
b. checks.
c. currency.
d. drafts or money orders.
Cash Sales from the cash register tapes totaled $882. There is a change fund of $100.
The cash count indicates that $984 is in the cash drawer. What journal entry would be
required?
a. debit Miscellaneous Expense for $2; credit Cash Short and Over for $2
b. debit Cash for $982, Cash Short and Over for $2; credit Revenues for $984
c. debit Cash Short and Over for $2; credit Miscellaneous Expense $2
d. debit Cash for $884; credit Revenues for $882, and Cash Short and Over for $2
A special multi-column record that supplements the regular accounting records and
from which no posting is done is called a
a. bank reconciliation form.
b. petty cash payment record.
c. journal.
d. ledger.
For this text, it is assumed that the maximum amount of earnings subject to FICA taxes
is
a. $100,000.
b. $110,500.
c. $105,900.
d. $110,100
Match the terms with the definitions.
a. Adjusted Trial Balance columns
b. Adjusting entries
c. Balance Sheet columns
d. book value
e. contra-asset
f. depreciable cost
g. depreciation
h. fiscal year
i. historical cost principle
j. Income Statement columns
k. market value
l. matching principle
m. plant assets
n. salvage value
o. straight-line method
p. undepreciated cost
q. useful life
r. work sheet
1>The work sheet columns that show the amounts that will be reported in the statement
of owner’s equity and balance sheet.
2>A principle that requires the matching of revenues earned during an accounting
period with the expenses incurred to produce the revenues.
3>A principle that requires assets to be recorded at their actual cost.
4>A method of matching an asset’s original cost against the revenues produced over its
useful life.
5>The period of time that an asset is expected to help produce revenues.
6>The expected market value of an asset at the end of its useful life.
7>A twelve-month period for which financial reports are prepared.
8>A form used to pull together all of the information needed to enter adjusting entries
and prepare the financial statements.
9>The cost of an asset that is subject to depreciation.
10>The amount an item can be sold for under normal economic conditions.
11>An account with a credit balance that is deducted from the related asset account on
the balance sheet.
12>A depreciation method in which the depreciable cost is divided by the estimated
useful life.
13>Journal entries made at the end of the accounting period to reflect changes in
account balances that are not the direct result of an exchange with an outside party.
14>Assets of a durable nature that will be used for operations over several years.
15>The third pair of amount columns on the work sheet. Used to prove the equality of
the debits and credits in the general ledger accounts after making all end-of-period
adjustments.
ANSWER:
1>
Match the terms with the definitions.
a. outstanding checks
b. cash
c. petty cash voucher
d. automated teller machines
e. change fund
f. internal control
g. credit memos
h. debit memos
1>Checks issued during the bank statement period that have not been presented to the
bank for payment before the statement is prepared.
2>Items that the bank deducts from the account.
3>Machines used by depositors to make withdrawals or deposits at any time.
4>To a business, this includes currency, coins, checks received from customers, money
orders, and bank cashier’s checks.
5>A set of procedures designed to ensure proper accounting for transactions.
(Appendix)
6>A receipt that is prepared for every payment from the petty cash fund.
7>A supply of currency and coins kept in a cash drawer for use in handling sales
transactions.
8>Items that the bank adds to a customer’s checking account.
To reconcile the bank statement, which of the following amounts would be subtracted
from the checkbook balance?
a. service charge
b. outstanding checks
c. deposits in transit
d. amounts collected by the bank for the depositor’s account
Footings in T accounts
a. appear to the left of the amount columns.
b. are used for accounts with more than one debit or credit.
c. are only used in asset accounts.
d. are used for accounts with only one entry.
The time an asset is expected to last is called its
a. depreciation.
b. fiscal period.
c. net loss value.
d. useful life.
If the depositor’s book balance is not the same as the bank’s book balance, an error has
occurred.
(Appendix) The accuracy of the statement of cash flows can be proved by comparing
the cash provided by operating activities with the change in the cash balance.
Both manual and electronic payroll systems require the same payroll input and output.
Cash receipts of $719 and a cash count of $724 would indicate a cash overage.
A blank endorsement makes a check payable to any bearer.
The debits and credits to Cash are not posted until the end of the accounting period.