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Exam 2: Analyzing and Recording Transactions

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Question 21

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An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

A) True
B) False

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Question 22

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The numbering system used in a company's chart of accounts:

A) Typically begins with balance sheet accounts.
B) Is the same for all companies.
C) Is determined by generally accepted accounting principles.
D) Typically begins with income statement accounts.
E) Depends on the source documents used in the accounting process.

F) C) and D)
G) D) and E)

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Question 23

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Unearned revenues are classified as liabilities.

On January 1 of the current year, Jimmy's Sandwich Company reported owner's capital totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year Jimmy withdrew $20,000 from the company. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in owner's capital during the year was:

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

Unearned revenues refer to a(n) :

A revenue account normally has a debit balance.

If a company purchases equipment paying cash, the journal entry to record this transaction will include a debit to Cash.

Identify the account below that is classified as a liability account:

Indicate whether a debit or credit entry would be required to record the following changes in each account.

A company provided $12,000 of consulting services, and was immediately paid in cash by the customer.Identify the journal entry below that properly records this transaction. $\begin{array}{l}\text { A) }\\\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 12,000 & \\\hline \text { Consulting services revenue } & & 12,000 \\\hline\end{array}\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 12,000 & \\\hline \text { Cash } & & 12,000 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Consulting services revenue } & 12,000 & \\\hline \text { Cash } & & 12,000 \\\hline\end{array}$ D) $\begin{array}{|l|r|l|}\hline \text { Cash } & 12,000 & \\\hline \text { Consulting services revenue } & & 12,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|l|}\hline \text { Accounts payable } & 12,000 & \\\hline \text { Consulting services revenue } & & 12,000 \\\hline\end{array}$

The first step in the processing of a transaction is to analyze the transaction and source documents.

Explain the recording and posting processes.

Larry Bar opened a frame shop and completed these transactions: 1. Larry started the shop by investing $40,000 cash and equipment valued at $18,000. 2. Purchased $70 of office supplies on credit. 3. Paid $1,200 cash for the receptionist's salary. 4. Sold a custom frame service and collected $1,500 cash on the sale. 5. Completed framing services and billed the client $200. What was the balance of the cash account after these transactions were posted?

A double-entry accounting system is an accounting system:

An asset created by prepayment of an insurance premium is:

Trimble Graphic Design receives $1,500 from a client billed in a previous month for services provided. Which of the following general journal entries will Trimble Graphic Design make to record this transaction? A) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable } & 1,500 & \\\hline \text { Unearned Design Revenue } & & 1,500 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 1,500 & \\\hline \text { Unearned Design Revenue } & & 1,500 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 1,500 & \\\hline \text { Design Revenue } & & 1,500 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts Receivable } & 1,500 & \\\hline \text { Cash } & & 1,500 \\\hline\end{array}$ $\begin{array}{l}\text { E) }\\\begin{array} { | l | r | r | } \hline \text { Cash } & 1,500 & \\\hline \text { Accounts Receivable } & & 1,500 \\\hline\end{array}\end{array}$

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

A credit entry:

Identify the account used by businesses to record the transfer of assets from a business to its owner for personal use: