ACC 100 Study Guide - Trial Balance, Retained Earnings, Income Statement

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emeraldtrout668

18 May 2013

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Understand this and you will never go wrong . Canadian accounting standards follows the accrual basis of accounting. Basically, you need to understand and know how to apply two principles: Matching principle expenses have to be recorded in the period in which they helped earned revenue. Revenue recognition principle revenue can only be recognized when it is: earned, 2) measurable, 3) collectable. This leads to adjusting entries relating to accruals and deferrals. The recognition of revenue or expense is postponed even though the actual transaction has taken place. Deferral examples: prepaid insurance or rent, supplies, depreciation / amortization, unearned revenue. Recognition of expenses or revenue that have occurred without the actual transactions taking place. Accrual examples: salaries yet to be paid, past-due expenses, unbilled revenue. Other principles you may want to be familiar with. Historical cost principle most assets and liabilities are recorded at their historical cost, in most cases this is the purchase price.

Related Questions

1- The requirement that only transaction data capable of beingexpressed in terms of money be included in the accounting recordsrelates to the
Answer

A. cost principle.

B. monetary unit assumption.

C. economic entity assumption.

D. both a and b above.

2- Transactions are initially recorded in the
Answer

A. general ledger.

B. trial balance.

C. general journal.

D. balance sheet.

3- The proper sequence for the accounting cycle is
Answer

A. analyze, journalize, post, adjust, prepare statements,close.

B. post, journalize, analyze, prepare statements, close,adjust.

C. prepare statements, journalize, post, adjust, close,analyze.

D. journalize, post, close, prepare statements, adjust,analyze.

4- In preparing closing entries, which of the following columns ofthe worksheet are the most helpful?
Answer

A. The Adjusted Trial Balance columns

B. The Income Statement columns

C. The Balance Sheet columns

D. The Adjustments column

periwinklesardine538

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

Record (journalize) transactions in the books) Doherty Tree Cellular, Inc.,
completed the following transactions during April 2012, its first month of operations:

Apr 1	Received $19,800 and issued common stock.
2	Purchased $200 of office supplies on account.
4	Paid $14,300 cash for land to use as a building site.
6	Performed service for customers and received cash of $2,600.
9	Paid $100 on accounts payable.
17	Performed service for UFax on account totaling $1,900.
23	Collected $100 from UFax on account.
30	Paid the following expenses: salary, $1,900; rent, $1,300.

1.Record the transactions in the journal of Doherty Tree Cellular, Inc. Key transactions by date and include an explanation for each entry.

CLASS, LETS TAKE RECORDING STEP 1 STEP FURTHER - THE TRIAL BALANCE

Now that we know what the accounting equation is and we have some experience with Journal Entries.

Letâs review the process and take the recording process one step further.

STEP 1) Analyze transaction: As an actual accountant, we determine if a transaction should be recorded by analyzing source documents.

For example: If the Company makes a sale; they will complete a sales document (or sales
tape is generated). If the Company purchases something a purchase invoice is forwarded to Accounting. There is a different type of source documents for different types of transactions.

Note: as an accountant a large part of the battle is making sure there is a source document for all transactions and that all departments capture and forward these documents to Accounting!

STEP 2) Accounting prepares journal entry: for each transaction based on GAAP. (Mostly using the constraints, assumptions, principles we've discussed: materiality, conservatism, matching, revenue recognition, etc).

The entry is entered into a Journal for those types of Transactions (There is a Sales Journal, A/P Journal for purchases, Payroll journal for payroll related entries, General Journal for misc. entries., etc.

Journal entries are made in the proper form, and include: date, description, indent of credit side of each entry.

STEP 3) The Journal entry is posted to General ledger; which includes all activity for all accounts.

However, the recording process is not over. Letâs talk about the trial balance. Please answer ALL however only post ONE question at a time to allow more to participate.

1) Why do we prepare it?

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ACC 100 Study Guide - Trial Balance, Retained Earnings, Income Statement

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