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ACCT 1100 > Chapter 4 > Flashcards

Chapter 4 Flashcards

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1
Q

What is a debit?

A

A debit is always recorded on the left-hand side of an account.

Represented by DR

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2
Q

What is a credit?

A

A credit is always recorded on the right-hand side of an account.

Represented by CR

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3
Q

Does a debit always mean decrease?

A

No, a debit does not always mean decrease; it can increase or decrease an account depending on its type.

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4
Q

Does a credit always mean increase?

A

No, a credit does not always mean increase; it can increase or decrease an account depending on its type.

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5
Q

What is the accounting equation?

A

Assets = Liabilities + Owner’s Equity

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6
Q

What is a double entry?

A

Every transaction must have at least one debit and one credit.

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7
Q

What must be true for the accounting equation to stay in balance?

A

The total value of the debits must always equal the total value of the credits.

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8
Q

What is the normal balance for assets, withdrawals, and expenses?

A

Debit = AWE (Assets, Withdrawals, Expenses)

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9
Q

What is the normal balance for liabilities, capital, and revenue?

A

Credit = LCR (Liabilities, Capital, Revenue)

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10
Q

Which side of the account is an increase to an asset recorded?

A

Debit

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11
Q

Which side of the account is an increase to a liability recorded?

A

Credit

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12
Q

True or false? Depending on the type of transaction, you can have either only two debits or only two credits.

A

False

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13
Q

What is the accounting cycle?

A

The steps required to generate a formal set of financial statements for a given period.

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14
Q

When do businesses prepare financial statements?

A

At the end of each accounting period, whether it is a month, quarter, or year.

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15
Q

What are source documents?

A

Evidence that transactions actually happened, such as sales receipts, bills, cheques, and bank statements.

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16
Q

What is the first step of the accounting cycle?

A

Gather and analyze what must be recorded as transactions.

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17
Q

What is journalizing?

A

The act of recording a transaction in the journal.

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18
Q

What is a general journal?

A

A journal that lists all the transactions of the business in one place and in chronological order.

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19
Q

What does a complete journal entry consist of?

A
  • The date of the transaction
  • The accounts and amounts to be debited and credited
  • A brief explanation of the transaction
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20
Q

What are compound journal entries?

A

Journal entries that affect more than two accounts, having multiple debits or multiple credits.

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21
Q

True or false? Every journal entry will have at least one account debited and one account credited.

A

True

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22
Q

What does the general ledger do?

A

Records and organizes the accounts used by the business.

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23
Q

What is a chart of accounts?

A

The list of all the accounts in the general ledger.

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24
Q

What is the numbering range for asset accounts in a chart of accounts?

A

100–199

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25
What is the numbering range for liability accounts in a chart of accounts?
200–299
26
What is the numbering range for equity accounts in a chart of accounts?
300–399
27
What is the numbering range for revenue accounts in a chart of accounts?
400–499
28
What is the numbering range for expense accounts in a chart of accounts?
500–599
29
What must be done after each journal entry?
Each entry in the journal must be posted to the appropriate ledger account.
30
What is the definition of Professional Fees Expense?
An expense incurred for professional services received.
31
What does Rent Expense refer to?
The cost incurred for renting property or equipment.
32
What is included under Salaries Expense?
Costs associated with employee salaries.
33
What does Telephone Expense cover?
Costs related to telephone services.
34
What is Travel Expense?
Costs incurred for business-related travel.
35
What are Ledger Accounts?
Accounts that record all transactions for a specific account.
36
What is the purpose of posting to ledger accounts?
To maintain up-to-date records.
37
Fill in the blank: Each entry in the journal must be posted to the appropriate _______.
[ledger account].
38
What is the first step in posting to ledger accounts?
Transfer the date of the transaction.
39
Is it necessary to complete the description for every transaction in the ledger?
No, if a description is already recorded in the journal.
40
What should be entered into the PR column of the ledger?
The page number of the journal.
41
What is the next step after entering the transaction amount into the debit or credit column?
Calculate the new (ending) account balance.
42
True or false? All journal entries should be posted to the general ledger.
True.
43
What is a trial balance?
A list of all accounts in the general ledger and their balances at a specific date.
44
How should accounts be listed in a trial balance?
In the order they appear in the ledger.
45
What indicates that the trial balance is balanced?
If total debits equal total credits.
46
What should be checked when preparing a trial balance?
Normal balance of accounts, correctness of copied balances, and accuracy of journal entries.
47
Fill in the blank: Errors may occur in a trial balance such as the wrong account being used or an entire journal entry being _______.
[omitted].
48
What should be done if an error in journal entries is discovered?
A correcting journal entry should be made to reverse the error.
49
What is the main purpose of the trial balance?
To ensure that total debits equals total credits.
50
True or false? A general ledger can be prepared after the trial balance has been prepared.
False.
51
What do debits and credits represent in accounting?
Debits are recorded on the left side and credits on the right side.
52
What increases with debits and decreases with credits?
Assets, expenses, and owner’s withdrawals.
53
What increases with credits and decreases with debits?
Liabilities, revenues, and owner’s capital.
54
Define the accounting cycle.
The steps required to complete the financial statements.
55
What initiates the analysis of a transaction?
Source documents indicating a transaction has occurred.
56
What is a journal in accounting?
A record where transactions are recorded before they are posted.
57
What is a key characteristic of journal entries?
They are double-entry transactions requiring at least one debit and one credit.
58
What does the general ledger represent?
All accounts and balances of the business.
59
What is a chart of accounts?
The listing of all accounts being used by a business.
60
What must be done if the trial balance is not balanced?
An error must be fixed before continuing with the accounting cycle.
61
What should accountants ensure while recording transactions?
They should record and post transactions truthfully.
62
What are internal controls?
Procedures to detect and avoid errors in recording and posting transactions.
63
What is the purpose of posting transactions from the journal to the ledger?
To update account balances and maintain accurate financial records.
64
What is the purpose of a trial balance?
To ensure that total debits equal total credits in the ledger.
65
What are the two main types of account entries in accounting?
Debit and Credit.
66
What is the GL number for Cash?
101.
67
What is the GL number for Equipment?
120.
68
True or False: Rent Expense is classified as a liability.
False.
69
What is the account title for GL No. 200?
Accounts Payable.
70
List the accounts that are debited in the trial balance.
* Cash * Equipment * Rent Expense * Salaries Expense.
71
List the accounts that are credited in the trial balance.
* Accounts Payable * Service Revenue.
72
Which of the following is the first step of accounting cycle? Question 6 Select one: a. Prepare the trial balance. b. Post to ledger accounts. c. Journalize the transaction. d. Analyze the transaction.
D
73
Which of the following is not a source document? Question 7 Select one: a. A bank statement b. A bill c. The verbal confirmation for a sales order d. A sales receipt
C
74
The purchase of photocopy paper for $30 (to be paid next month) would be recorded as a: Question 8 Select one: a. Debit to Assets and credit to Accounts Payable b. Debit to Office Supplies expense and credit to Cash c. Debit to Inventory and credit to Cash d. Debit to Office Supplies Expense and credit to Accounts Payable
D
75
Sara Fenn is going through the bookkeeping of her small catering business. During the past month, they provided services to a customer who paid cash. How should this transaction be recorded in the books? Question 9 Select one: a. Increase (Debit) Service Revenue; Increase (Credit) Accounts Receivable b. Increase (Debit) Cash; Increase (Credit) Service Revenue c. Increase (Credit) Cash; Increase (Debit) Service Revenue d. Increase (Debit) Accounts Receivable; Decrease (Credit) Cash
B
76
What is the correct entry to record a sale of services performed? Question 10 Select one: a. Debit Service Revenue; credit Cash b. Debit Cash; credit Service Revenue c. Debit Service Revenue; credit Cash d. Debit Cash; debit Service Revenue
B
77
For each account listed, identify whether a debit or credit will cause an increase to that account. Unearned Revenue _______________ Accounts Receivable ______________ Service Revenue ________________ Rent Expense _______________
Credit Debit Credit Debit
78
For each account listed, identify whether a debit will cause the account to increase or decrease. Accounts Payable ____________ Owner’s Withdrawals __________ Owner’s Capital __________ Cash ____________
Decrease Increase Decrease Increase
79
For each account listed, identify whether the normal balance is a debit or a credit. Owner’s Capital ___________ Utilities Expense __________ Bank Loan __________ Prepaid Rent _________
Credit Debit Credit Debit
80
Put the following actions in the proper order according to the accounting cycle by identifying the appropriate step (steps 1–4). Analyze transactions Post to ledger accounts Prepare the trial balance Journalize the transactions
Step 1 Step 3 Step 4 Step 2

ACCT 1100 (7 decks)

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