Name:
Date:
Period:
Accounting I
State Test Review
Standard 2: Students will list and identify characteristics of the three basic accounting equation
elements. (Chapter 1)
1. Write the accounting equation.
Assets = Liabilities + Owner’s Equity
2. List and define each part of the accounting equation.
Assets – anything of value that is owned
Liabilities – an amount owed by a business
Owner’s Equity – Amount remaining after the value of all liabilities is subtracted from the value of
all assets
3. Classify each item listed below as an asset, liability, or owner’s equity by placing a check mark in
the Asset, Liability, or Owner’s Equity column.
Account
Asset
Liability
Owner’s
Equity

Cash

Alice Jones, Capital

Prepaid Insurance

Accounts Payable – Steward Supply Company

Supplies

Any amount owed

Owner’s capital account

Anything owned
4. Balance the accounting equation.
Assets
19,000
=
Liabilities
9,000
+
Owner’s Equity
10,000
27,500
6,500
21,000
51,570
11,820
39,750
28,000
6,000
22,000
27,000
10,000
17,000
24,985
5,000
19,985
10,000
0
10,000
71,000
25,000
46,000
34,879
18,450
16,429
125,540
36,000
89,540
5. Explain why the accounting equation must be in balance.
So the equation is equal on both sides.
Standard 3: Students will apply the theory of debit and credit to the accounting equation, define a
business transaction, and show how and why accounts are increased and decreased.
(Chapter 2)
1. What is a business transaction?
A business activity that changes assets, liabilities, or owner’s equity
2. For each account listed, assign an account number in the chart of accounts.
Account Title
Cash in Bank
George Smith, Capital
Accounts Payable – Allen Systems
Accounts Receivable – Abe Dunn
Revenue/Sales
George Smith, Drawing
Advertising Expense
Supplies
Rent Expense
Prepaid Insurance
Account Number
110
310
210
120
410
320
510
130
520
140
3. Decide which accounts in the accounting equation are changed by each of the following transactions.
Place a plus (+) in the appropriate column if the account is increased. Place a minus (-) in the
appropriate column if the account is decreased.
Transactions
1.
Received cash from owner as an investment.
2.
Received cash from sales.
3.
Paid cash for telephone bill.
4.
Paid cash for advertising.
5.
Paid cash to owner for personal use.
6.
Paid cash for rent.
7.
Paid cash for equipment repairs.
8.
Bought supplies on account from Maxwell Company.
9.
Paid cash for insurance.
10.
Paid cash on account to Maxwell Company.
Assets
Trans.
No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Cash
+
Supplies
+
Prepaid
Insurance
=
Liabilities
+
Owner’s Equity
=
Accts. Payable
Maxwell
Company
+
Susan
Sanders,
Capital
+
+
+
+
–
–
–
–
–
–
–
–
–
–
+
–
–
+
+
–
4. Determine how each transaction affects the accounting equation; analyze transactions into debit and
credit parts.
Cash
Supplies
Prepaid Insurance
Accounts Payable—Miller Supplies
Jeff Dixon, Capital
Jeff Dixon, Drawing
Sales
Advertising Expense
Miscellaneous Expense
Rent Expense
Repair Expense
Utilities Expense
1.
2.
3.
4.
Using the account titles shown above, write the accounts affected in Column 2.
For each account title, write the account classification in Column 3.
For each account title, place a check mark in either Column 4 or 5 to indicate the normal balance.
For each account title, place a check mark in either Column 6 or 7 to indicate if the account is
increased (+) or decreased (-) by this transaction.
5. For each account title, place a check mark in either Column 8 or 9 to indicate if the account is
changed by a debit or a credit.
Transactions
1. Received cash from owner as an investment.
2. Paid cash for supplies.
3. Paid cash for insurance.
4. Bought supplies on account from Miller Supplies.
5. Paid cash on account to Miller Supplies.
6. Paid cash for rent.
7. Received cash from sales.
8. Paid cash to owner for personal use.
9. Paid cash for telephone bill (utilities expense).
1
2
3
Trans.
No.
Accounts
Affected
Account
Classification
1.
2.
3.
4.
5.
6.
7.
8.
9.
Cash
Jeff Dixon, Capital
Supplies
Cash
Prepaid Insurance
Cash
Supplies
A/P—Miller Supplies
A/P—Miller Supplies
Cash
Rent Expense
Cash
Cash
Sales
Jeff Dixon, Drawing
Cash
Utilities Expense
Cash
Asset
Owner’s Eq.
Asset
Asset
Asset
Asset
Asset
Liability
Liability
Asset
OE-Expense
Asset
Asset
OE-Revenue
OE-Drawing
Asset
OE-Expense
Asset
4
5
Account’s
Normal Balance
Debit
Credit










8
9
Entered in
Account as
Debit
Credit































6
7
How is Account
Affected?
+
-













Standard 4: Students will identify and use source documents for journalizing transactions; students
will post journal entries to a ledger. (Chapter 3 & 4)
1. List five different source documents and identify what type of transaction each source document
would be used for.
Check – pay cash; Sales Invoice – sales on account; Receipt – receives cash; Calculator Tape –
cash sales; Memorandum – any other transaction
2. What is the purpose of the General Journal?
To record transactions in chronological order
3. What are the steps in journalizing? (in order)
1. Date
2. Debit
3. Credit
4. Source Document
4. What is the purpose of the General Ledger?
To organize transaction into accounts
5. What the steps in posting? (in order)
1. Date
2. Journal Page Number in Ledger Post. Ref.
3. Debit/Credit amount
4. New Balance
5. Account Number in Journal Post. Ref.
6. Explain the purpose of the posting references?
Cross-reference between journal page number and account
Let you know you are finished posting
7. What is recorded in the Post. Ref. column of the General Ledger account?
Journal Page Number
8. What is recorded in the Post. Ref. column of the General Journal?
Account Number
9. Analyze each transaction listed below.
1. Write the source document for each transaction in Column 2.
2. Using the following account titles, write the accounts affected by each transaction in Column 3.
Cash
Accounts Receivable—Darnell Lee
Supplies
Prepaid Insurance
Accounts Payable—Gable Supplies
Mary Jacobs, Capital
Mary Jacobs, Drawing
Sales
Advertising Expense
Miscellaneous Expense
Rent Expense
Repair Expense
Utilities Expense
3. For each account title, write the account classification in Column 4.
4. For each account title, place a check mark in either Column 5 or 6 to indicate the normal balance.
5. For each account title, place a check mark in either Column 7 or 8 to indicate if the account is
increased (+) or decreased (-) by this transaction.
6. For each account title, place a check mark in either Column 9 or 10 to indicate if the account is
changed by a debit or a credit.
Transactions
1. Paid cash for advertising.
2. Paid cash for repairs.
3. Received cash from owner as an investment.
4. Paid cash for miscellaneous expense.
5. Bought supplies on account from Gable Supplies.
6. Paid cash on account to Gable Supplies.
7. Paid cash for water bill.
8. Paid cash for supplies.
9. Paid cash for rent.
10. Sold services on account to Darnell Lee
11. Received cash from sales.
12. Paid cash for insurance.
1
Trans.
No.
2
Source
Document
1.
Check
2.
Check
3.
Receipt
4.
Check
5.
Memo
6.
Check
7.
Check
8.
Check
9.
Check
10.
Sales
Invoice
11.
Tape
12.
Check
3
4
Accounts
Affected
Account
Classification
Advertising Expense
Cash
Repairs Expense
Cash
OE-Expense
Asset
OE-Expense
Asset
Cash
Mary Jacobs, Capital
Miscellaneous Expense
Cash
Supplies
A/P—Gable Supplies
Asset
OE
OE-Expense
Asset
Assets
Liability
A/P—Gable Supplies
Cash
Utilities Expense
Cash
Supplies
Cash
Liability
Asset
OE-Expense
Asset
Asset
Asset
Rent Expense
Cash
A/R—Darnell Lee
Sales
Cash
Sales
OE-Expense
Asset
Asset
OE-Revenue
Asset
OE-Revenue
Prepaid Insurance
Cash
Asset
Asset
5
6
Account’s Normal
Balance
Debit
Credit






9
10
Entered in Account
as a
Debit
Credit





















































7
8
How Is Account
Affected?
+
-













Standard 5: Students will prepare, analyze and interpret financial statements. (Chapter 6)
1. Determine the General Ledger account balance.
1.
Beg. Balance
Debit
Credit
Debit
800
500
2.
3.
1,300
650
250
575
900
360
4.
5.
New Balance
Debit
Credit
Credit
435
150
6.
0
215
100
335
775
300
400
690
625
290
7.
290
850
40
1,100
8.
0
239
100
139
2. What is the purpose of the trial balance? To prove debits and credits are equal
3. What are the steps for preparing a Work Sheet?
Heading
Trial Balance
Adjustments
Extend Balances
Calculate Net Income
4. Extending account balances on a work sheet
1. Place a check mark in either Column 1 or 2 to indicate the Trial Balance column in which each
account’s balance will appear.
2. Place a check mark in Columns 5, 6, 7, or 8 to indicate the column to which each up-to-date
account balance will be extended.
Account Title
1. Advertising Expense
1
2
Trial Balance
Debit
Credit

4. Miscellaneous Expense
7. Prepaid Insurance
8. Rent Expense
9. Repair Expense
12. Utilities Expense














10. Sales
11. Supplies



5. Maria Dorn, Capital
6. Maria Dorn, Drawing
7
8
Balance Sheet
Debit
Credit

2. Accts. Pay.--Bell Supply
3. Cash
5
6
Income Statement
Debit
Credit





5.
Calculating net income or net loss on a work sheet
The column totals from five different work sheets are given on the form below.
Complete the following for each company.
1. Calculate the amount of net income or net loss. Write the amount on line 2 in the correct
columns. Label the amount as Net Income or Net Loss.
2. Add the amounts in each column. Write the totals on line 3.
3. Verify the accuracy of your proving totals.
Income Statement
Debit
Credit
1. Column totals
2. Net Income
$9,000
$9,500
Balance Sheet
Debit
Credit
$35,500
$35,000
500
500
3. Proving totals
$9,500
$9,500
$35,500
$35,500
1. Column totals
$1,500
$2,000
$7,500
$7,000
2. Net Income
500
500
3. Proving totals
$2,000
$2,000
1. Column totals
$5,200
$4,800
$26,500
400
400
2. Net Loss
$7, 500
$7,500
$26,900
3. Proving totals
$5,200
$5,200
$26,900
$26,900
1. Column totals
$5,300
$8,150
$34,950
$32,100
2. Net Income
2,850
2,850
3. Proving totals
$8,150
$8,150
$34,950
$34,950
1. Column totals
$5,300
$4,130
$33,400
$34,570
1,170
1,170
$5,300
$34,570
2. Net Loss
3. Proving totals
$5,300
$34,570
Standard 5: Students will prepare, analyze and interpret financial statements. (Chapter 7)
1. What document is used to prepare the financial statements? Work Sheet
2. What is the purpose of the Income Statement? To show financial progress over a period of time
3. What information is reported on the Income Statement?
Revenue, Expenses, Net Income/Loss
4. What is the purpose of the Balance Sheet? To show financial condition on a specific date
5. What information is reported on the Balance Sheet?
Assets, Liabilities, and Owner’s Equity
6. Preparing an Income Statement and Balance Sheet
From the work sheet below, prepare an income statement and balance sheet for The Sound of Stone.
Complete the following.
1. Total all columns of the work sheet
2. Calculate and record the amount of net income or net loss.
3. Using the form on the next page, prepare an income statement for the month ended September
30, 20--.
4. Calculate and record the component percentages for total expenses and net income. Round
percentages to the nearest 0.1%
5. Prepare the September 30, 20-- balance sheet for The Sound of Stone.
Account Title
1. Cash
2. Petty Cash
3. Accts. Rec.—HartCo
4. Accts. Rec.—Starlite Club
5. Supplies
6. Prepaid Insurance
7. Accts. Pay.—First Audio
8. Accts. Pay.—Office Supply Co.
9. Shannon Stone, Capital
10. Shannon Stone, Drawing
11. Income Summary
12. Sales
13. Advertising Expense
14. Insurance Expense
15. Miscellaneous Expense
16. Rent Expense
17. Supplies Expense
18. Utilities Expense
1
2
Trial Balance
Debit
Credit
8,272
200
100
720
4,051
1,200
5
6
Income Statement
Debit
Credit
7
8
Balance Sheet
Debit
Credit
8,272
200
100
720
1,487
1,100
2,564
100
1,360
20
10,000
1,360
20
10,000
600
600
4,411
4,411
273
273
100
10
250
2,564
115
100
10
250
2,564
115
15,791
20. Net Income
3
4
Adjustments
Debit
Credit
15,791
2,664
2,664
3,312
4,411
12,479
11,380
4,411
12,479
12,479
1,099
4,411
1,099
Income Statement
The Sound of Stone
Income Statement
For month ended September 30, 2008
% of
Sales
Revenue:
Sales
Expenses:
Advertising Expense
Insurance Expense
Miscellaneous Expense
Rent Expense
Supplies Expense
Utilities Expense
Total Expenses
Net Income
4,411 100.0
273
100
10
250
2,564
115
3,312
1,099
75.1
24.9
Balance Sheet
The Sound of Stone
Balance Sheet
September 30, 2008
Assets
Liabilities
8,272 Accts. Pay.—First Audio
200 Accts. Pay.—Office Supply Co.
Cash
Petty Cash
Accts. Rec.—HartCo
Accts. Rec.—Starlite Club
Supplies
Prepaid Insurance
Total Assets
100 Total Liabilities
720
Owner’s Equity
1,487 Shannon Stone, Capital
1,100
11,879 Total Liab. and Owner’s Eq.
1,360
20
1,380
10,499
11,879
7. Determine the ending capital balances.
1.
2.
3.
4.
Beginning
Capital
Investments +
Revenue +
Expenses -
Withdrawals -
Ending
Capital
10,000
0
25,000
45,785
5,000
25,000
10,000
0
20,000
30,000
50,000
66,350
5,000
50,000
10,000
15,900
3,000
5,000
6,000
5,000
27,000
0
69,000
91,235
Standard 6: Students will prepare adjusting and closing entries and a post-closing trial balance.
(Chapter 8)
1. What is the difference between permanent and temporary accounts?
Permanent accounts carry-over a balance from fiscal period to fiscal period.
Temporary accounts are closed at the end of each fiscal period and start each new fiscal period
with a zero balance
2. Determining accounts affected by adjusting and closing entries
1. For each account title on the chart, place a check mark in either Column 2 or 3 to indicate
whether the account is affected by an adjusting entry.
2. For each account title on the chart, place a check mark in either Column 4 or 5 to indicate
whether the account is affected by a closing entry.
3. For each account title on the chart, place a check mark in either Column 6 or 7 to indicate
whether the account has a balance after closing entries are posted.
1
Account Title
2
Account Is Affected
by an Adjusting Entry
Yes
1. Advertising Expense
2. Accts. Pay.--Baer Supplies
3. Cash
4. Accts. Pay.--Gates Office Supplies
5. Alisha Downs, Capital
6. Alisha Downs, Drawing
7. Income Summary
8. Insurance Expense
14. Supplies Expense
15. Utilities Expense








No

























6
7
After Closing Entries
Are Posted, Account
Has a Balance
Yes
No





12. Sales
5
Account Is Affected
by a Closing Entry
Yes

11. Rent Expense
13. Supplies
4
No

9. Miscellaneous Expense
10. Prepaid Insurance
3





3. Why is the post-closing trial balance prepared? To prove debits and credits are still equal
4. Why do only the balances of permanent accounts appear on the post-closing trial balance?
Because those accounts are the only ones that still have a balance.
5. Journalize adjusting and closing entries using the information from the worksheet on the previous
page.
General Journal
Date
Account Title
2008
Adjusting Entries
Sep 30
Supplies Expense
Doc.
No.
Post.
Ref.
Debit
Credit
2,564
Supplies
30
2,564
Insurance Expense
100
Prepaid Insurance
100
Closing Entries
30
Sales
4,411
Income Summary
30
Income Summary
4,411
3,312
Advertising Expense
273
Insurance Expense
100
Miscellaneous Expense
10
Rent Expense
250
Supplies Expense
2,564
Utilities Expense
30
Income Summary
115
1,099
Shannon Stone, Capital
30
Shannon Stone, Capital
Shannon Stone, Drawing
1,099
600
600
Standard 7: Students will demonstrate proper cash management. (Chapter 5)
1. Define and show an example of a blank endorsement.
Endorsement consisting of a signature only.
2. Define and show an example of a restrictive endorsement.
Endorsement that restricts further transfer of ownership.
3. What are the steps for preparing a bank reconciliation?
1. Write date
6. Add outstanding deposits
2. Balance on check stub
7. Calculate subtotal
3. Deduct bank charges
8. Deduct outstanding checks
4. Calculate adjusted check stub balance
9. Calculate adjusted bank statement balance
5. Balance on bank statement
10. Compare adjusted balances (should be equal)
4. Using the information below, calculate the adjusted checkbook balance:
Balance on last unused check stub is $3,000; outstanding deposits of $400, bank service charge of
$25, outstanding checks totaling $450, and a dishonored check for $75. What is the adjusted
checkbook balance after the bank reconciliation is prepared?
Balance on check stub
3,000
Deduct bank charges
–25
Deduct dishonored check
–75
Adjusted checkbook balance 2,900
5. Using the information below, calculate the adjusted bank balance:
Bank statement balance is $5,000; outstanding deposits of $150, bank service charge of $30, and
outstanding checks totaling $600. What is the adjusted bank balance after the bank reconciliation is
prepared?
Balance on bank statement
5,000
Add outstanding deposits
+150
Deduct outstanding checks
–600
Adjusted bank balance
4,550
6. Which accounts are affected when journalizing a bank service charge?
Debit:
Miscellaneous Expense
Credit:
Cash
7. Which accounts are affected when journalizing a dishonored/NSF check?
Debit:
Accounts Receivable
Credit:
Cash
8. What does it mean to “prove cash”?
To compare the balance on the last unused check stub with the balance in the cash account. These
two numbers should be the same.
9. Why is it important for a company to establish a petty cash fund?
To be more cost effective and efficient when paying out small cash payments.
10. What accounts are affected when establishing a petty cash fund?
Debit:
Petty Cash
Credit:
Cash
11. What accounts are affected when replenishing a petty cash fund?
Debit:
Accounts affected by petty cash payments
(Generally Supplies and Expenses)
Credit:
Cash
12. Journalize entries to replenishing a petty cash fund
KeepClean replenished petty cash on the dates shown in Column 2 of the following table. The
information in Columns 3 to 5 is obtained from the petty cash reports.
Record the journal entry for each petty cash replenishment.
1
2
Trans./Doc. No.
Replenished on
A / C43
B / C54
C / C67
D / C79
3
Supplies
July 31
August 31
September 30
October 31
4
Summary of Petty Cash Slips
Advertising
32.00
21.00
40.00
10.00
5
Miscellaneous
25.00
20.00
20.00
5.00
15.00
20.00
General Journal
Date
Jul 31
Account Title
Supplies
Doc.
No.
C43
Advertising Expense
Post.
Ref.
Debit
32.00
25.00
Cash
Aug 31
Supplies
57.00
C54
Advertising Expense
21.00
20.00
Miscellaneous Expense
5.00
Cash
Sep 30
Supplies
46.00
C67
40.00
Advertising Expense
20.00
Miscellaneous Expense
15.00
Cash
Oct 31
Supplies
Miscellaneous Expense
Cash
Credit
75.00
C79
10.00
20.00
30.00