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34 Cards in this Set
- Front
- Back
Which one of the following statements regarding the debit/credit processing of revenues and expenses is true? |
Credits increase revenues. |
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Net Income refers to: |
The difference between what was earned and the costs incurred during a period. |
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During June, the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements? |
The income statement shows the effects of the transactions in June. |
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During April, the Grass is Greener Company buys and pays for a six-month supply of fertilizer in order to receive a bulk discount. The cost of fertilizer is recorded: |
as an asset, which will later be reduced as the fertilizer is used. |
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Company A receives $10,000 in advance this month for work to be performed next month. This month, the company should: -Debit Cash $10,000 and credit Service Revenue $10,000. |
Debit Cash $10,000 and credit Unearned Revenue $10,000. |
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In January, a company pays for advertising space in the local paper for ads to be run during the months of January, February, and March at $1,500 a month. The payment would be recorded in January as a: |
debit of $1,500 to Advertising Expense, a debit of $3,000 to Prepaid Advertising, and a credit of $4,500 to Cash. |
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Which of the following is not true about the Income Statement? |
Amounts received from customers in payment of their accounts arising from service in the prior period would be revenues in the income statement for the current period. |
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A company received a bill of $3,500 for utilities used in the current month. The journal entry to record this would include: |
a credit to Accounts payable for $3,500. |
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The December 31, 2013, adjusted trial balance of a company, where all accounts have normal balances is: |
1280 |
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Which of the following statements regarding the need for adjustments is not true? |
Adjustments help the financial statements to present the best picture of whether the company's activities were profitable for the period. |
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Which of the following statements regarding the presentation of a trial balance is correct? |
The order of accounts is assets, liabilities, stockholders' equity, dividends, revenues and expenses. |
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Which of the following statements regarding the effect of a net loss on the closing process is true? |
If a company has a net loss during the current accounting period, then the ending retained earnings will be smaller than the beginning retained earnings. |
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Accrual adjustments involve: |
increasing assets and revenues or increasing liabilities and expenses moving in the same direction. |
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During the month, a company uses up $4,000 of supplies. At the end of the month, the related adjusting journal entry would result in: |
a decrease in an asset and an equal increase in expenses. |
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A company pays wages every two weeks. Wages amount to $100 a day, 7 days a week. On March 31, the company pays wages for the two weeks ending March 24. At the end of the month, the related adjusting journal entry will include a |
debit to Wage Expense for $700 and a credit to Wages Payable for $700. |
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One of the major advantages of making adjustments in order to improve the quality of financial statements is that they: |
ensure that revenues and expenses are recognized during the period they are earned and incurred. |
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Which of the following would appear in the credit column of an adjusted trial balance? |
Income tax payable. |
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Deferred expenses (prepaid expenses) are initially recorded as assets, but over time are expected to become |
expenses. |
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a. Borrowed $660,000 from the bank on December 1, signing a note payable, due in six months. |
Cash660,000 DEBIT |
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b. Purchased a new snowplow for $28,750 cash on December 31. |
Equipment28,750 DEBIT |
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c. Purchased ski supplies for $16,800 on account. |
Supplies16,800 DEBIT |
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d. Incurred $24,800 in routine maintenance expenses for the chairlifts; paid cash. |
Repairs and Maintenance Expense24,800DEBIT |
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e. Received $96,500 for season passes (beginning in the new year). |
Cash96,500 DEBIT |
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f. Daily lift passes were sold this month for a total of $94,400 cash. |
Cash94,400 DEBIT |
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g. Received a $500 deposit on a townhouse to be rented for five days in January 2014. |
Cash500 DEBIT |
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Paid half the charges incurred on account in (c). |
Accounts Payable8,400 DEBIT |
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i. Paid $21,800 in wages to employees for the month of December. |
Salaries and Wages Expense21,800 DEBIT |
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Payments received for goods that have not yet been delivered or services that have not yet been performed. |
Unearned Revenue |
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Any outlay of money by a company for any purpose. |
Expenditure |
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The concept that revenue should be recorded when earned, not necessarily when payment is received. |
Revenue Recognition Principle |
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Revenues should be recorded when they are earned and expenses when they are incurred. |
Accrual Basis |
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The practice of dividing the life of the business into months and years. |
Time Period Assumption |
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Any use or sacrifice of a company's resources to generate revenue. |
Expense |
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Total revenue minus total expenses. |
Net Income |