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Accounting Test 2
Terms in this set (30)
Diff between unadjusted and adjusted trial balances
Unadjusted Trial Balance
- list of accounts and balances prepared before accounting adjustments and recordings are posted
Adjusted Trial Balance
- List of accounts and balances prepared after period - end adjustments are recored and posted
When to prepare retained earnings statement
End of the accounting period
Name the Liabilities from the Unadjusted Trial Balance
Goal of Closing Process
only closing temporary acct
- Debit all Expenses
- Debit all Revenue
- Debit all Dividends
Which acts are considered temporary accounts?
- Report for only one period
- Not carried forward from year to year
because they relate to only one period
- Includes all accounts reported on the income statement as well as the dividends account, which is reported on the statement equity
- Revenue, Expense
Journalize Two Closing Entries
1. Fees Earned
Sal Exp. 250k
R Exp. 45k
Dep Exp 20k
Sup Exp. 8500
Misc Exp. 3k
Retained Earnings. 173,500
2. RE 36k
Steps in the Accounting Cycle
1. Transactions are analyzed & recorded in the journal
2. Transactions are posted to the ledger
3. An unadjusted trial balance is prepared
4. Adjustment data are assembled & analyzed
5. An optional end - of - period spreadsheet is prepared
6. Adjusting entries are journalized & posted to the ledger
7. An adjusting trial balance is prepared
8. Financial statements are prepared
9. Closing entries are journalized & posted to the ledger
10. A post - closing trial balance is prepared
Difference between retail & service store
Retail - buy products from other company to sell at higher prices
Service - provides service for income
Sold Merch on Account: $30, 700
Terms 2/15, net 45
30,700 x .02 = $614
= $30, 086 sales
FIFO Journal Entry
Beginning Inventory 25 units @ $15
Sales 18 units
Purchases 11 units @ $20
Sales 8 units
A) Determine Cost Of Goods Sold?
B) Determine End income?
A) Determine cost of goods sold
18 @ $15=$270
7 @ $15=$105
1 @ $20=$20
B) Determine End income
10 @ $20=$200
LIFO Journal Entry
10/2 Purchase 600 units @ $90
10/5 Sold 200 units
10/12 Purchase 350 units @ $92
10/13 Sold 275 units
10/23 Purchase 175 units @ $94
1024 Sold 155 units
A) Determine End Income?
B) Determine Cost Of Goods Sold?
A) Determine End Income?
B) Determine Cost Of Goods Sold:
Commodity: Inventory: Cost per unit: Market value per unit:
Size 4 7 $15 $20
Size 5 9 $15 $13
Size 6 15 $20 $21
Size 7 13 $7 $16
ex: Size 4: 7($15)=
do it for all rows, add up the totals
Retained Earnings Debit & Credit
- debit to retained earnings is a net loss
- credit to retained earnings is a net gain
Difference between post closing trial balance & the adjustment trial balance
The main difference between post-closing trial balance and adjusted trial balance is that the post-closing trial balance statement contains the income statement accounts like revenues, expenses, and other gain or lost accounts.
Sell merchandise on credit: $8,600
Invoice dated: 7/1
Terms: 1/15, n/45
T Accounts Equation **
know how to use
Sales - Gross Profits = Cost of Goods Sold - Operating Expense = Net Income
Purchase $2,400 on account
Payment was made in discount period
Terms: 2/10, n/30
A) Purchase Journal Entry?
B) Payment Journal Entry?
A) Purchase Journal Entry:
Accounts Payable $2,352
B) Payment Journal Entry:
Accounts Payable $2,352
What happens to LIFO and FIFO during times of rising prices?
-When prices are rising, you prefer LIFO because it gives you the highest cost of goods sold and the lowest taxable income.
-In rising markets, FIFO yields the lowest cost of goods sold and the highest taxable income.
What documents are used for inventory control?
Definition of perpetual inventory system
information on inventory quantity and availability is updated on a continuous basis
What is inventory shrinking?
Employee theft, shoplifting, administrative error. To find inventory shrinking it is the difference between recorded inventory on the balance sheet, and actual inventory on hand.
You are going to have to identify which answer choice would not be on the end of year inventory sheet.
6/2- Purchase merch from Co. B, $8k terms FOB Shipping point, 2/10, N/30
6/14- Issued a debit memo to Co. B for $3,500 of merch returned from 6/2 purchase
6/16- Paid Co. B for invoice of 6/2 less debit memo of 6/14
6/2- Inventory 7840
8k x .02= 160 8k-160= $7840
6/14- AP 3430
3500 x .02= $70 3500-70= $3430
6/16- AP 4410
What is the definition of a purchase order?
official offer issued by a buyer to a seller indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers.
What are the primary objectives of control over inventory?
Safeguarding the inventory from damage or theft and reporting inventory in the financial statements.
What does LIFO & FIFO mean
LIFO- Last in first out
FIFO- First in last out
11/4- Purchase 1 unit @ $6
11/11- Purchase 1 unit @ $12
11/26- Purchase 1 unit @ $15
Totals 3 units at $33 Average Cost= $11
1 Unit sold on 11/30
11/30 Sales $25
EI $22 <---- $33-$11= $22
4/21 Sold merch on account: $15k
applicable tax rate: 7.5%
Sales Tax 1,125
15k x .075= $1,125
Difference between FOB Destination & FOB Shipping Point
FOB Destination- Seller pays freight charge from shipping point to buyer's final destination
FOB Shipping Point- Buyer pays freight charge from shipping point to final destination (Freight cost is included in inventory price)
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