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Acounting EXAM

What is the accounting equation

Assets = Liabilities + Owner's Equity

GAAP

Generally Accepted Accounting Practices

Cost Concept

Amounts are initially recorded as their cost or purchase price

The asset created by a business when it makes a sale on account is termed

accounts receivable

Clifford Moore is starting his computer programming business and has deposited in initial investment of $15,000 into the business cash account. Identify how the accounting equation will be affected.

Increase Assets (Cash) and increase Owner's Equity (Clifford Moore, Capital)

A debit may signify a(n)

decrease in liability accounts

Which of the following groups of accounts have a normal debit balance?

assets, expenses

A debit balance in which of the following accounts would indicate a likely error?

Notes Payable

Which of the following entries records the receipt of a utility bill from the water company?

debit Utilities Expense; credit Accounts Payable

Which of the following entries records the collection of cash from cash customers?

Debit Cash; Credit Fees Earned

Using accrual accounting, revenue is recorded and reported only

when the services are rendered without regard to when cash is received

Which of the following is considered to be unearned revenue?

A magazine publisher receiving a year's subscription in advance

The balance in the prepaid rent account before adjustment at the end of the year is $24,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is

debit Rent Expense, $6,000; credit Prepaid Rent, $6,000

The adjusting entry to record the depreciation of equipment for the fiscal period is

debit Depreciation Expense; credit Accumulated Depreciation

A company purchases a one-year insurance policy on June 1 for $1,260. The adjusting entry on December 31 is

debit Insurance Expense, $525 and credit Prepaid Insurance, $525.

(1260/12 = 105 105*7 = 735 )

Cash is reported on the balance sheet as a

current asset

Accumulated Depreciation appears on the

balance sheet in the property, plant and equipment section

There are four closing entries. The first one is to close ____, the second one is to close ____, the third one is to close ____, and the last one is to close ____.

Revenues, expenses, income summary, drawing account

The Statement of Owner's Equity begins with the beginning balance followed by

plus investments plus Net Income (loss) less withdrawals

Which of the accounts below would be closed by posting a debit to the account?

Fees Earned

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