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Exam 2: Analyzing and Recording Transactions

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Question 61

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The debt ratio is calculated by dividing total assets by total liabilities.

A) True
B) False

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Question 62

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When a company provides services for which cash will not be received until some future date, the company should record the amount billed as accounts receivable.

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B) False

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Question 63

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The heading on every financial statement lists the three W's-Who (the name of the business); What (the name of the statement); and Where (the organization's address).

What is a trial balance? What is its purpose?

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?

The third step in the analyzing and recording process is to post the information to the ________.

Credits always increase account balances.

Describe what source documents are and the purpose they serve in a business.

Golddigger Services Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $60,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a:

Match the following definitions and terms by placing the letter that identifies the best definition in the blank space next to the term. _____ 1. Source documents _____ 2. Debit _____ 3. Posting 4. Double-entry accounting _____ 5. Ledger 6. Journal _____ 7. Account 8. Credit _____ 9. T-account _____ 10. Trial balance A. Decrease in an asset, owner withdrawal and expense account, and increase in a liability, owner's capital and revenue account; recorded on the right side of a T-account. B. A record containing all the accounts of a company and their balances. C. An accounting system where each transaction affects and is recorded in at least two accounts; the sum of the debits for each entry must equal the sum of its credits. D. A company's chronological record of each transaction in one place that shows debits and credits for each transaction. E. An increase in an asset and expense account, and decrease in a liability, owner's capital, and revenue account; recorded on the left side of a T-account. F. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense item. G. A representation of a ledger account used to understand the effects of transactions. H. A list of accounts and their balances at a point in time. I. The process of transferring journal entry information to the ledger accounts. J. Verifiable evidence that transactions have occurred used to record accounting information.

A debit is used to record which of the following:

An income statement is also called an earnings statement, a statement of operations or a profit and loss statement.

List the four steps in recording transactions.

A debit entry is always an increase in the account.

An asset created by prepayment of an insurance premium is:

At a given point in time, a business's trial balance is a list of all of its general ledger accounts and their balances.

Jay's Limo Services paid $300 cash to employees for work performed in the current period. Which of the following general journal entries will Jay's Limo Services make to record this transaction?

At year-end, Henry Laundry Service noted the following errors in its trial balance: 1. It understated the total debits to the Cash account by $500 when computing the account balance. 2. A credit sale for $311 was recorded as a credit to the revenue account, but the offsetting debit was not posted. 3. A cash payment to a creditor for $2,600 was never recorded. 4. The $680 balance of the Prepaid Insurance account was listed in the credit column of the trial 128 balance. 5. A $24,900 van purchase was recorded as a $24,090 debit to Equipment and a $24,090 credit to Notes Payable. 6. A purchase of office supplies for $150 was recorded as a debit to Office Equipment. The offsetting credit entry was correct. 7. An additional investment of $4,000 by Del Henry was recorded as a debit to Del Henry, Capital and as a credit to Cash. 8. The cash payment of the $510 utility bill for December was recorded (but not paid) twice. 9. The revenue account balance of $79,817 was listed on the trial balance as $97,817. 10. A $1,000 cash withdrawal was recorded as a $100 debit to Del Henry, Withdrawal and $100 credit to cash. Using the form below, indicate whether each error would cause the trial balance to be out of balance, the amount of any imbalance, and whether a correcting journal entry is required.

Debits increase asset and expense accounts.

Compare the list of accounts below and choose the list that contains only accounts that would be classified as asset accounts on the Chart of Accounts.