Deck 5: Recording, Storing and Reporting Accounting Information

Question 1

An ________________ is a means by which a business identifies, measures, records and retains accounting information about its activities so that it can report this information in its financial statements.

Answer 1

accounting system

Question 2

A business uses ________________ to record and retain monetary information from its transactions.

Answer 2

accounts

Question 3

A _______________ is the entire set of accounts that a business uses.

Answer 3

general ledger

Question 4

The left side of the T account is called the _________ side and the right side is called the ______ side.

Question 5

When the business earns revenue, the ultimate effect of the revenue increase is to increase the ________ __________.

Question 6

Asset accounts are increased by __________ entries and decreased by ________ entries.

Question 7

Liability accounts are ___________ by credit entries and ___________ by debit entries.

Question 8

The __________________ rule states that in the recording of a transaction, the total amount of the debit entries must equal the total amount of the credit entries for the transaction.

Question 9

The steps a business completes during each accounting period to record, retain and report the monetary information from its transactions are referred to as the ______________ __________.

Question 10

A business uses information from source documents to record each transaction in a ________________.

Question 11

A general journal includes information about each transaction including the _______ of the transaction, the _________ to be debited and credited, the amounts of ______ and _______ entries and an explanation of each transaction.

Question 12

______________ is the process of transferring the debit and credit information for each journal entry to the accounts in a business' general ledger.

Question 13

A chart of accounts is a numbering system designed to organise a business' accounts efficiently and to reduce____________ in the _____________ and ________________ process.

Question 14

The balance in the Accounts Payable control account must always _________ the total of all the accounts in the accounts payable subsidiary ledger or file.

Question 15

A ____________ _____________ is a schedule that lists the titles of all the accounts in a business' general ledger, the debit or credit balance of each account and the totals of the debit and credit balances.

Question 16

Adjusting entries are journal entries that a business makes at the end of its accounting period to bring the business' ____________ and _____________ account balances up to date and to show the correct ending balances in its __________ and ___________ accounts.

Question 17

The liability ____________ _____________ is the obligation of a business to provide goods or services in the future, resulting from an advance receipt of cash.

Question 18

An ____________ _____________ is an expense that a business has incurred during the accounting period but that it has not paid or recorded.

Question 19

____________ _____________ are journal entries a business makes at the end of the accounting period to create a zero account in each revenue, expense and withdrawal account.

Question 20

The owner's equity of a company is called ____________ _____________.

Question 21

Debit amounts are always recorded on the left of the T-account and the credit amount is always recorded on the right side of the T-account.

Question 22

Each asset account typically has a credit balance.

Question 23

Debit entries always increase the balance of an account.

Question 24

Withdrawal accounts ate increased by debit entries and decreased by credit entries.

Question 25

The major steps involved in the accounting cycle include recording the transaction in the general journal, posting the journal entries, recording adjusting entries, preparing the financial statements and posting closing entries.

Question 26

A general journal only needs to include the accounts to be debited and credited for the transaction and the accounts to be debited and credited.

Question 27

If A Ltd pays B Ltd $340 for inventory purchased on account three weeks earlier, the liability account is decreased by this amount to recognise the $340 paid.

Question 28

A chart of accounts is a numbering system designed to organise a business account efficiently and to reduce errors in the recording and accumulating process.

Question 29

When posting occurs the accounting cycle becomes source document ? transaction ? journal ? ledger.

Question 30

A business with a manual accounting system usually posts at the end of each year.

Question 31

The general ledger is the most important ledger because balances of accounts contained within it are used to draw up the Trial Balance and subsequently the financial reports.

Question 32

The accounts receivable account tells us how much is owed in total by debtors, but it does not tell us which debtors owe which amounts.

Question 33

The total amount of the debit entries is normally different to the amount of the credit entries in the general ledger accounts.

Question 34

Adjusting entries are journal entries that a business makes at the end of its accounting period to bring the business revenue and expense account balances up-to-date and to show the correct ending balances in its asset and liability accounts.

Question 35

A prepaid expense is an economic resource for which a business has paid cash and expects to use in its operating activities in the near future.

Question 36

A business records the apportionment of the cost of each prepaid item between an expense and an asset in an adjusting entry in its accounts payable subsidiary ledger.

Question 37

Unearned revenue is an economic resource of a business resulting from an advance receipt of cash.

Question 38

Some adjusting entries involve estimated amounts because they are based on expected future events.

Question 39

The adjusting entry for depreciation is debit (increase) to the contra-asset account Accumulated Depreciation and a credit (decrease) to the expense account Depreciation Expense.

Question 40

Which of the following best describes a general ledger?

A) A detailed record of all cash received and paid.
B) It is the entire set of accounts that a business uses.
C) A document that summarises all of the account balances.
D) A list of all assets and liabilities.

Question 41

Which one of the following is NOT a characteristic of a T account?

A) There is a left-hand side showing debit entries.
B) There is a right-hand side showing credit entries.
C) At the end of a period the account balances.
D) Decreases are always recorded on the right-hand side.

Question 42

Asset accounts:

A) are increased by debit entries and decreased by credit entries.
B) are decreased by debit entries and increased by credit entries.
C) are increased by both debit entries and credit entries.
D) are decreased by both debit entries and credit entries.

Question 43

Liability accounts:

A) normally have a debit balance.
B) normally have a credit balance.
C) appear in the income statement.
D) are increased by debit entries.

Question 44

Which of the following best describes the double entry rule?

A) There can only be two entries for each transaction.
B) There must be both an increase and a decrease for an asset account for each transaction.
C) One entry must affect owner's equity.
D) The total amount of the debit entries must equal the total amount of the credit entries.

Question 45

Which of the following is not part of the information contained in a general journal?

A) The name of the person who prepared the journal.
B) The date of the transaction.
C) The accounts to be debited and credited.
D) The amounts of the debit and credit entries.

Question 46

The journal entry to record the owner's investment of $20 000 cash in to their business is:

A) Asset account (cash at bank) increases (debit) by $20 000 and a liability (loan) increases (credit) by $20 000.
B) Liability (loan) increases (debit) by $20 ,000 and owner's equity increases (credit) by $20 000.
C) Asset (cash at bank) increases (debit) by $20,000 and owner's equity increases (credit) by $20 000.
D) Liability (loan) decreases (debit) by $20,000 and owner's equity increases (credit) by $20,000.

Question 47

In accounting 'posting' refers to:

A) Sending of invoices to customers.
B) Opening of the mail on a daily basis.
C) Despatching of inventory items by courier to customers.
D) The process of transferring the debit and credit information for each journal entry to the accounts in a business' general ledger.

Question 48

A trial balance is:

A) A schedule that lists the debit or credit balances of each account.
B) A list of errors in the general ledger.
C) A list of customers and the amounts that they owe.
D) A list of suppliers and the amounts that are owed.

Question 49

The purpose of adjusting entries is to:

A) balance the trial balance.
B) bring the business' revenue and expense account balances up to date and to show the correct ending balances in its asset and liability accounts.
C) close of all the general ledger accounts at the end of a period in preparation for the next period.
D) adjust errors.

Question 50

Which one of the following is NOT an example of a prepaid expense?

A) Supplies on hand.
B) Supplies expense.
C) Insurance paid for one year in advance.
D) Rent paid for one year in advance.

Question 51

Suppose that a customer pays a deposit for work to be done next year. The business will increase an asset account (cash at bank) and will:

A) Increase owner's equity (revenue).
B) Decrease an asset (accounts receivable).
C) Increase a liability (unearned revenue).
D) Increase an asset (revenue).

Question 52

Which of the following is an example of an adjusting entry involving an estimated item?

A) The amount of an invoice sent to a customer.
B) The amount of depreciation on equipment.
C) The amount of an invoice received from a supplier.
D) The amount for petrol purchased on account for the company motor vehicle.

Question 53

Which of the following financial statements is normally prepared first?

A) Income statement.
B) Balance sheet.
C) Statement of changes in equity.
D) Statement of cash flows.

Question 54

An income statement is the financial statement that summarises the result of a business' earnings activities, that is:

A) Cash in, cash out and cash balance.
B) Assets, liabilities and owner's equity.
C) Inventory in, inventory out and inventory balance.
D) Revenues, expenses and net income.

Question 55

Which of the following is NOT normally shown in the statement of changes in equity?

A) Changes in the cash balance during the period.
B) Additional investments by the owner in the business.
C) The business' net income.
D) Owner withdrawals during the period.

Question 56

A balance sheet shows:

A) the financial performance of a business for a specific period of time.
B) the financial position of a business at a specific point in time.
C) both the financial performance and financial position of a business at a specific point in time.
D) the titles of all account in the general ledger, the debit or credit balances of each account and the totals of the debit and credit balances

Question 57

The owner's equity of a company is called shareholders' equity and consists of at least two parts:

A) Owner's equity and reserves.
B) Contributed capital and current assets.
C) Reserves and retained earnings.
D) Contributed capital and retained earnings.

Question 58

Which one of the following accounts must be closed to zero at the end of the accounting period?

A) Asset
B) Liability
C) Revenue
D) Capital

Question 59

Briefly explain the purpose of general ledger accounts and provide some examples of these accounts.

Question 60

Outline the purpose of a chart of accounts.

Question 61

Explain the use of subsidiary ledgers.

Question 62

Describe the use and contents of a trial balance.

Question 63

Explain an accrued expense.

Question 64

Explain the order in which a business prepares it financial statements.

Question 65

What does an income statement summarise and what are the main features of an income statement?

Question 66

Explain what is shown in the statement of changes in owner's equity.

Question 67

List and describe the three elements of a balance sheet.

Question 68

MJay's Accounting Ltd is a small accounting services business which commenced business on 1 January 2019.
During the first month of operations, these events and transactions occurred:
Prepare all of the journal entries for the above noted transactions. Note: narrations are not required and GST should be ignored.

Question 69

Bruce Li commenced his concrete polishing business on 1 July 2018, trading as Li Concrete Polishing. The transactions for his first month of business are given below. Bruce Li records the payments for insurance as a prepayment (Prepaid Insurance) and records the corresponding expenses on balance date.
Further information as at 31 July 2018:
• Mobile telephone phone expenses of $400 were owing for July. An invoice had not been received on balance date.
• The depreciation expense for the equipment for July is determined to be $270.
• Insurance prepaid for August and September is $400.
• Services performed but not invoiced amounted to $700.
Prepare all of the journal entries for the above transactions (narrations are not required).