Accounting I
Final Exam Review
1. What other account is used when making an adjustment to Merchandise Inventory?
Income Summary
2. Goods that a business purchases in order to sell are called what?
Merchandise
3. What wording is used when a journal page is filled and must be moved to the next page?
Carried Forward and Brought Forward
4. What account is used to close out Income Summary for a corporation?
Retained Earnings
5. What is the source document for a sales return?
Credit Memorandum
6. What is the annual depreciation for an asset that originally cost $2000, can be salvaged for $200, and has an
expected lifetime of 6 years?
$300
7. In the Cash Payments journal, the Accounts Payable amount must equal what other two amounts?
Cash and Purchases Discount
8. When posting totals from a special journal, where does the Post. Ref. go?
Under the total in parenthesis
9. Adjusting and closing entries are recorded where?
General Journal
10. What is the correct order of posting from special journals?
Sales, purchases, general, cash receipts, cash payments
11. Why do businesses have an Allowance for Uncollectible Accounts?
Risk that customers will not pay
12. What two accounts are affected by transactions in the Purchases Journal?
Purchases and Accounts Payable
13. What accounting concept is used when revenue is recorded at the time goods services are sold?
Realization of Revenue
14. Which two accounts are affected by the following transaction and how?
Paid cash to owner for personal use.
Drawing – debit, cash – credit
15. What is the next step after adjusting and closing entries have been created?
Post to the General Ledger
16. Accounts Receivable is what type of ledger?
Subsidiary
17. Is the balance of the Cash Short and Over account a debit or credit?
Both
18. What is listed in the Post. Ref. column of the General Journal after an entry has been posted to the General
Ledger?
Account number
19. If you discover a mistake in the General Journal, but there are no blank lines immediately after the incorrect entry,
how do you fix it?
Draw a line thru the incorrect part and record the correct information directly above on the same line
20. How do you prove the total of the Schedule of Accounts Receivable?
Must match the balance of Accounts Receivable in the General Ledger
21. What two accounts are adjusted for Federal Income Tax?
Federal Income Tax Payable and Expense
22. What does it mean if the Owner’s Equity is reported in detail on a balance sheet?
Owner’s equity reflects how it is calculated (net income/net loss, owner’s drawing)
23. What goes in the Post. Ref. column for a balance entry in a journal? Why?
Checkmark – doesn’t get posted
24. What does G13 in the Post. Ref. column of the General Ledger represent?
Entry came from page 13 of the General Journal
25. Credit card sales are recorded in which journal?
Cash Receipts
26. Assets that are expected to be consumed within a year are called what?
Current Assets
27. How is the book value of Accounts Receivable calculated?
Accounts Receivable – Balance of Allowance for Uncollectible Accounts
28. What are the four accounts/sets of accounts that are closed at the end of a fiscal period?
Revenue, expenses, income summary, and owner’s drawing
29. How much Federal Income Tax needs to be paid on Net Income of $136,589?
$36,519.71
30. Where do the amounts for the closing entries come from?
Worksheet – Income statement columns
31. What occurs to the value of plant assets over time?
Depreciates
32. The Post. Ref. in a journal will always be what piece of information?
Account number from ledger
33. What is the purpose of a worksheet?
To summarize general ledger information needed to create financial statements
34. What is done in the General Ledger to show that an account has been closed out.
Draw line thru both debit and credit balance columns
35. What are the two pieces of information that need to be written at the top of each account in a General Ledger?
Account title and account number
36. Comparing the cash balance in the checkbook with the cash balance in the cash account of the General Ledger is
known as what?
Proving cash
37. The length of time in which a business summarizes and reports financial information is known as what?
Fiscal period
38. What is the normal balance side of the owner’s drawing account?
Debit
39. Anything of value that is owned is called what?
Asset
40. What are the 3 major types of plant assets?
Equipment, buildings, and land
41. Which two accounts are affected by the following transaction and how?
Bought supplies on account from Supply Depot.
Supplies – debit, Accounts Payable – credit
42. How often should a business enter transactions in their General Journal?
Daily
43. Which 3 journals have entries posted to the Accounts Payable Ledger?
Purchases, Cash Payments, General
44. Why is it necessary to create adjusting entries for Supplies and Prepaid Insurance?
To reflect what is used during the fiscal period.
45. Which section in a chart of accounts should be in alphabetical order?
Expenses
46. What type of source document would be used when goods or services are sold on account?
Sales invoice
47. What are the 5 components of workplace skills?
Resources, information, systems, interpersonal skills, and technology
48. What enables a business to pay cash for small expenses without writing a check?
Petty cash fund
49. Which accounts are listed on the Post-Closing Trial Balance?
Assets, liabilities, and owner’s equity
50. A debit to an expense does what to the account balance?
Increase
51. If there is only one blank line remaining on journal page, what should you do with the next transaction?
Start on the next page
52. What is the accounting concept demonstrated by the use of source documents?
Objective Evidence
53. What do you have when expenses are greater than revenue?
Net loss
54. A business activity that changes assets, liabilities, or owner’s equity is called what?
Transaction
55. What does the first digit of an account number represent?
General ledger division
56. What is the last step in the accounting cycle?
Post-closing trial balance
57. What are the three components of a financial statement heading?
Company name, document name, and date
58. How should the date be written on an Income Statement?
For month ended
59. In what order are accounts listed on a worksheet?
Assets, liabilities, owner’s equity, revenue, and expenses
60. Using the same procedures each accounting period is an example of which accounting concept?
Consistent reporting
61. What does a double rule line represent?
Total that is finalized and accurate
62. How do you calculate % of sales on an income statement?
Divide by sales
63. Revenue and expenses are reported in the same fiscal period in which they occurred. What accounting concept
does this follow?
Matching Expenses with Revenue
64. What is the purpose of the Income Summary account?
Temporary account used for closing revenue and expense accounts
65. Revenue, expenses, Income Summary, and Owner’s Drawing are what type of accounts (Not Owner’s Equity)?
Temporary
66. What information is used to create an income statement?
Revenue and expense
67. Expenses fall under which part of the accounting equation?
Owner’s equity
68. When entering a transaction in a general journal, which part of the transaction is entered on the first line?
Debit
69. A form for recording transactions in chronological order is called what?
Journal
70. The Purchases Journal is used only to record what type of transactions?
Purchase of merchandise on account
71. What are the four sets of columns on a worksheet?
Trial balance, adjustments, income statement, and balance sheet
72. What is the accounting equation?
Assets = Liabilities + Owner’s Equity
73. What are the 3 aspects of objectivity that accountants must display?
Impartial, honest, free from personal conflicts
74. A debit to Accounts Payable does what to the account balance?
Decrease
75. A business paper from which information is obtained for a journal entry.
Source Document
76. Planning, recording, analyzing, and interpreting financial information is called what?
Accounting
77. What two accounts need to have adjusting entries?
Supplies and Prepaid Insurance
78. What is the purpose of a T account?
To analyze transactions
79. What does T22 represent?
Calculator tape for the 22nd day of the month
80. Accounts Payable is what type of account?
Liability