Exam 3: The Accounting Cycle: Capturing Economic Events

Ledger accounts are updated first,and then transactions are recorded in the journal.

Ceramic Products,Inc.reports these account balances at January 1,2015 (shown in alphabetical order): On January 5,Ceramic Products collected $12,000 of its accounts receivable and paid $11,000 on its note payable.On January 6,2015,total liabilities are:

If the trial balance has a smaller debit balance than credit balance,it signifies:

Given the following list of accounts and their amounts for Hayden's Co.in alphabetical order,prepare a trial balance for December 31,2014 as it should be presented.

Journalize and post basic transactions Geller Landscaping was organized on April 5 when the corporation issued 20,000 shares of capital stock to Larry Geller in exchange for $60,000 cash. * On April 8,the business acquired gardening equipment by paying cash of $26,000 and signing a $20,000 note payable,due in four monthly installments of $5,000 each,beginning on April 15. * On April 15,Larry Geller made the first payment on the note payable by writing a check from the business bank account. Instructions: Journalize these three transactions and post to the ledger accounts.

A business that is profitable and liquid will have more accounts with credit balances than with debit balances.

Recognizing revenue when it is earned and not when cash is received and recognizing expenses when the related goods or services are used rather than when they are paid for is called:

A journal entry to record revenue could include each of the following,except:

Matching principle In April,Grinnel Paving,Inc.acquired a large quantity of crushed stone on account with payment due in 90 days.The stone was used in May when Grinnel Paving,Inc.completed a large parking lot for a local shopping center.In early July,Grinnel Paving,Inc.paid the supplier from which the crushed stone had been purchased.In which month should Grinnel Paving,Inc.recognize the cost of the crushed stone as an expense? What accounting principle provides the justification for the answer?

An increase in a liability is recorded by a credit; an increase in owners' equity by a debit.

Ledger accounts are updated through a process called posting.

Davis,Inc.,a music group,entertained at a black-tie dinner dance on April 26,and collected the fee in full at the end of the evening.This transaction:

Decreases to owners' equity accounts are recorded using debits.

A trial balance that is out of balance indicates that:

Preparing a journal entry in proper form involves all the following except:

The accrual basis of accounting recognizes expenses only when they are paid.

Which of the following errors would not be disclosed by preparation of a trial balance?

Increases in owners' equity are recorded by credits; increases in assets and in liabilities are recorded by debits.

The essential point of a double-entry system of accounting is that every transaction:

Every business transaction is recorded by a debit to a balance sheet account and a credit to an income statement account.