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Exam 2: Accounting for Transactions

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Question 21

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Explain debits and credits and their role in the accounting system.

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Debit refers to the left side of an acco...

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Question 22

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Accountants at Amalgamated Corporation incorrectly journalized a $50,000 equipment purchase as a debit to Buildings. This error was not discovered before the journal entry was posted. What is the correcting entry?

A) Debit Buildings and credit Equipment for $50,000 each.
B) Debit Equipment and credit Buildings for $50,000 each.
C) Debit Buildings and credit Equipment for $100,000 each.
D) Debit Equipment and credit Buildings for $100,000 each.
E) Debit Equipment for $100,000 and credit Buildings for $50,000.

F) A) and D)
G) C) and D)

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Question 23

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The journal is known as a book of original entry.

Which of the following is the appropriate journal entry if a company hires a new employee?

An asset created by prepayment of an expense is:

Double-entry accounting is an accounting system:

Explain the recording and posting processes.

According to IFRS, comparative information on financial statements is:

Identify which of the following items would likely serve as a source document by marking an X in the appropriate column. The first one is done as an example.

Unearned revenue is classified as _______________ that is satisfied by delivering products or services in the future.

If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.

An account used to record the owners' investments in the business is called:

Vicki Lake is a computer consultant. Shown below are (a) several accounts in her ledger with each account preceded by an identification number and (b) several transactions completed by Lake. Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. $\begin{array}{|l|l|l|l|}\hline \text { 1. } & \text { Accounts Payable } & 7 . & \text { Telephone Expense } \\\hline \text { 2. } & \text { Accounts Receivable } & 8 . & \text { Unearned Consulting Fees } \\\hline \text { 3. } & \text { Cash } & 9 . & \text { Common Stock } \\\hline 4 . & \text { Consulting Fees Earned } & 10 . & \text { Dividends } \\\hline \text { 5. } & \text { Office Supplies } & 11 . & \text { Insurance Expense } \\\hline 6 . & \text { Office Supplies Expense } & 12 . & \text { Prepaid Insurance } \\\hline\end{array}$

Match the following terms and definitions

On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October?

Which of the following formulas can be used to calculate the debt ratio?

Maria Sanchez began business as Sanchez Law Firm on November 1. Record the following November transactions by making entries directly to the T-accounts provided. Then, prepare a trial balance, as of November 30. a. Sanchez invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b. Purchased $7,500 of office equipment from Johnson Bros. on credit. c. Completed legal work for a client and received $1,500 cash in full payment. d. Paid Johnson Bros. $3,500 cash in partial settlement of the amount owed. e. Completed $4,000 of legal work for a client on credit. f. Paid a $2,000 cash dividend. g. Received $2,500 cash as partial payment for the legal work completed for the client in (e). h. Paid $2,500 cash for the legal secretary's salary.

Posting is the transfer of the information from each journal entry to the ledger.

Accounts are normally decreased by debits.

Preparation of a trial balance is the first step in the analyzing and recording process.