Exam 2: Analyzing and Recording Transactions

A trial balance taken at year-end showed total credits exceed total debits by $4,950. This discrepancy could have been caused by:

An accountant has debited an account for $3,500 and credited a liability account for $2,000. Which of the following would be an incorrect way to complete the recording of this transaction?

At year-end, Harris Cleaning 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 balance. 5. A $24,900 truck purchase was recorded as a $24,090 debit to Vehicles 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 Harris was recorded as a debit to Del Harris, 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 Harris, 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.

A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error?

All of the following are liability accounts except:

The trial balance is a list of all accounts and their balances at a point in time taken from the ledger.

Which of the following is the formula used to calculate the debt ratio?

The record in which transactions are first recorded is the:

Increases in assets are _______________ to asset accounts, increases in liabilities are _______________ to liability accounts.

Of the following errors, which one by itself will cause the trial balance to be out of balance?

On January 1 of the current year, Bob's Lawn Care Service 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 Bob 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.

For each of the following errors, indicate on the table below the amount by which the trial balance will be out of balance and which trial balance column (debit or credit) will have the larger total as a result of the error. a. $100 debit to Cash was debited to the Cash account twice. b. $1,900 credit to Sales was posted as a $190 credit. c. $5,000 debit to Office Equipment was debited to Office Supplies. d. $625 debit to Prepaid Insurance was posted as a $62.50 debit. e. $520 credit to Accounts Payable was not posted.

Double-entry accounting is an accounting system:

Which of the following statements is correct?

The chart of accounts is a list of all the accounts used by a company and includes an identification number assigned to each account.

A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

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

A simple account form widely used in accounting as a tool to understand how debits and credits affect an account balance is called a:

The debt ratio helps to assess the risk a company has of failing to pay its debts and is helpful to both its owners and creditors.