Why is Prepaid Rent considered an asset account?
> In each of the following sentences, fill in the blanks with the word debit or credit:
> Indicate whether each of the following accounts normally has a debit balance or a credit balance: 1. Cash 2. Blaine Brownell, Capital 3. Fee Income 4. Accounts Payable 5. Supplies 6. Equipment 7. Accounts Receivable 8. Salaries Expense
> Johnson Cleaning Service has the following account balances on December 31, 20X1. Set up a T account for each account and enter the balance on the proper side of the account.
> Using the information provided in Exercise 2.8, prepare a statement of owner’s equity for the month of September and a balance sheet for Rojas Wealth Management Consulting as of September 30, 20X1.
> On December 1, Karl Zant opened a speech and hearing clinic. During December, his firm had the following transactions involving revenue and expenses. Did the firm earn a net income or incur a net loss for the period? What was the amount? Paid $6,200 for
> At the beginning of September, Helen Rojas started Rojas Wealth Management Consulting, a firm that offers financial planning and advice about investing and managing money. On September 30, the accounting records of the business showed the following infor
> The following equation shows the effects of a number of transactions that took place at Cantu Auto Repair Company during the month of July. Describe each transaction.
> Anna Abraham is the accounts payable clerk for Jiffy Delivery Service. This company runs 10 branches in the San Diego area. The company pays for a variety of expenses. Anna writes the checks for each of the vendors and the controller signs the checks. An
> Technology World had the following revenue and expenses during the month ended July 31. Did the firm earn a net income or incur a net loss for the period? What was the amount?
> The Business Center had the transactions listed below during the month of June. Show how each transaction would be recorded in the accounting equation. Compute the totals at the end of the month. The headings to be used in the equation follow. TRANSACTIO
> The following financial data are for the dental practice of Dr. Jose Ortiz when he began operations in July. Determine the amounts that would appear in Dr. Ortiz’s balance sheet. 1. Owes $42,000 to the Sanderson Equipment Company. 2. Has cash balance of
> Why is it important for business records to be separate from the records of the business’s owner or owners? What is the term accountants use to describe this separation of personal and business records?
> What types of people or organizations are interested in financial information about a firm, and why are they interested in this information?
> Briefly describe the flow of data through a simple accounting system.
> Where does the accountant obtain the data needed for the adjusting entries?
> Why is a postclosing trial balance prepared?
> Where does the accountant obtain the data needed for the closing entries?
> What three procedures are performed at the end of each accounting period before the financial information is interpreted?
> 1. Why should management be concerned about paying its invoices on a timely basis? 2. Why is it important for a firm to maintain a satisfactory credit rating? 3. Suppose you are the new controller of a small but growing company and you find that the firm
> Name the steps of the accounting cycle.
> How does the straight-line method of depreciation work?
> Are the following assets depreciated? Why or why not? a. Prepaid Insurance b. Delivery Truck c. Land d. Manufacturing Equipment e. Prepaid Rent f. Furniture g. Store Equipment h. Prepaid Advertising i. Computers
> Why is an accumulated depreciation account used in making the adjustment for depreciation?
> What is book value?
> What three amounts are reported on the balance sheet for a long-term asset such as equipment?
> Why is it necessary to journalize and post adjusting entries?
> What effect does each item in Question 1 have on owner’s equity?
> A firm purchases machinery, which has an estimated useful life of 10 years and no salvage value, for $60,000 at the beginning of the accounting period. What is the adjusting entry for depreciation at the end of one month if the firm uses the straight-lin
> Divide into groups of four individuals. Your company is named Cole’s Cooking Supplies. Assign one person as Cole’s sales associate; one as the company’s A/R clerk; one as the customer Louisa’s Cooking School; and one as Louisa’s A/P clerk. Record the tra
> What adjustment would be recorded for expired insurance?
> What are prepaid expenses? Give four examples.
> Why is it necessary to make an adjustment for supplies used?
> Give three examples of assets that are subject to depreciation.
> What effect does each of the following items have on net income? a. The owner withdrew cash from the business. b. Credit customers paid on outstanding balances that were past due. c. The business bought equipment on account. d. The business journalized a
> What procedure is used to record an entry in the general journal?
> What is the value of having a description for each general journal entry?
> What is a compound journal entry?
> What is the accounting cycle?
> What are posting references? Why are they used?
> An excerpt from the Consolidated Statements of Earnings for The Home Depot, Inc., is presented below. Review the financial data and answer the following analysis questions. Analyze: 1. The Home Depot, Inc.’s statement reports one figure
> What is posting?
> What is a ledger?
> In what order are accounts arranged in the general ledger? Why?
> What is an audit trail? Why is it desirable to have an audit trail?
> How should corrections be made in the general journal?
> What is the purpose of a journal?
> The terms debit and credit are often used in describing the effects of transactions on different accounts. What do these terms mean?
> Indicate whether each of the following types of account would normally have a debit balance or a credit balance: a. An asset account b. A liability account c. The owner’s capital account d. A revenue account e. An expense account
> How is the balance of an account determined?
> Credit memos are created when a product is returned. A debit to Sales Returns and Allowances and a credit to Accounts Receivable are recorded when a credit memo is created. A credit memo will reduce A/R and write off the invoice. You have noticed that th
> Accounts are classified as permanent or temporary accounts. What do these classifications mean?
> When a chart of accounts is created, number gaps are left within groups of accounts. Why are these number gaps necessary?
> In what order do accounts appear in the chart of accounts?
> What is the purpose of a chart of accounts?
> Why is the modern system of accounting usually called the double-entry system?
> What are accounts?
> What are expenses?
> What is revenue?
> Why does the third line of the headings differ on the balance sheet and the income statement?
> 1. How does the Sales Returns and Allowances account provide management with a measure of operating efficiency? What problems might be indicated by a high level of returns and allowances? 2. Suppose you are the accountant for a small chain of clothing st
> What information is shown in the heading of a financial statement?
> What information does the statement of owner’s equity contain?
> What information does the income statement contain?
> What information does the balance sheet contain?
> What are assets, liabilities, and owner’s equity?
> Describe the effects of each of the following business transactions on assets, liabilities, and owner’s equity. a. Bought equipment on credit. b. Paid salaries to employees. c. Sold services for cash. d. Paid cash to a creditor. e. Bought furniture for c
> How does net income affect owner’s equity?
> How is net income or net loss determined?
> What is the fundamental accounting equation?
> Employees sometimes make mistakes and errors in recording accounting transactions. Is this considered fraud?
> Internal control and fraud prevention is an area tested on the Certified Bookkeeper’s exam. Certification in your field indicates you have a certain level of education and training. Go to the American Institute of Professional Bookkeepers’ website at www
> Name two common internal control and fraud prevention procedures.
> What is the goal of internal control?
> Define fraud.
> Define internal control.
> What is a limited liability company (LLC)?
> How does one become a Certified Bookkeeper (CB)?
> What does the Certified Bookkeeper (CB) designation imply?
> What is the purpose of the Public Company Accounting Oversight Board?
> What led to the passage of the Public Company Accounting Reform and Investor Protection Act of 2002?
> What is the function of the Securities and Exchange Commission?
> 1. An officer of Westway Corporation recently commented that when he receives the firm’s financial statements, he looks at just the bottom line of the income statement—the line that shows the net income or net loss for the period. He said that he does no
> What groups consistently offer opinions about proposed FASB statements?
> What is the purpose of the Financial Accounting Standards Board?
> What are the three major areas of accounting?
> What is tax planning?
> What are the major functions or activities performed by accountants in private industry?
> What are the three types of business entities, and how do they differ?
> What is the purpose of the postclosing trial balance?
> What account balances or other amounts are included on two different financial statements for the period? Which statements are involved?
> What information is provided by the statement of owner’s equity?
> Edward Foster is a building contractor. He and his customer have agreed that he will submit a bill to them when he is 25 percent complete, 50 percent complete, 75 percent complete, and 100 percent complete. For example, he has a $300,000 room addition. W
> Selecting the right employees is a critical step for enhancing the entity’s system of internal control and fraud prevention. Reflected below are several possible ways to check the background of employees. For each item listed, indicate why the background
> How do current liabilities and long-term liabilities differ?
> Give examples of some current assets that usually are classified as Current Assets on the balance sheet.
> What is the purpose of the balance sheet?
> What are operating expenses? Are financing expenses included in operating expenses?
> Which section of the income statement contains information about the purchases made during the period and the beginning and ending inventories?
> Fuji Company had a current ratio of 2.0 in 20X1 and 2.2 in 20X2. Does this signify an improvement or decline in Fuji Company’s liquidity from 20X1 to 20X2?
> Jarrett Company’s inventory turnover ratio was nine times in 20X1 and eight times in 20X2. Did Jarrett Company sell its inventory more quickly, or more slowly, in 20X2 compared to 20X1?
