Chapter Four Questions

Chapter Four Questions - Chapter Four Questions 1 State the...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter Four Questions 1. State the accounting equation. Assets = Liabilities + Stockholders’ Equity. 2. What are the two points you must remember in order to be able to convert most business events into debits and credits? Assets increase with debits. Debits = Credits 3. What is a chart of accounts? A chart of accounts is the list of all accounts in which a company’s data can be stored. 4. What does a general ledger contain? A general ledger contains the detail in each account in a company’s accounting system . The information in all journal entries is posted to the general ledger. 5. What is a journal entry? A journal entry is the result of a business event or transaction . It shows the effects of the transaction on the company’s accounts, through the debits = credits process. 6. Why are adjusting entries needed? Adjusting entries are needed in order to assure that the information in the general ledger, trial balance, and financial statements is reasonable . Without reasonable information, the financial statements cannot be relied upon for decision making. 7. What is the name given to a trial balance prepared after adjusting entries have been posted to the general ledger? Adjusted trial balance . 8. Why is unearned fees revenue a liability? Unearned fees revenue is created when a customer pays for services in advance . Thus, the company owes the customer the services until the services are provided . Dollar amounts owed are liabilities. 9. Why does income taxes expense appear as a separate line on the income statement? Income taxes appear as a separate line on the income statement because they are not controlled by management (taxes are imposed by governments) and they are often large dollar amounts. 10. What is interest expense? Interest expense is the cost of borrowing money. 11. State the formula for calculating interest. Interest = Principal x Interest Rate x Time . 12. Why is the time component of the interest formula usually stated as a fraction? For interest calculations, interest rates are usually stated in annual terms . Thus, if money is borrowed for less than 365 days, the time component is needed to convert the annual interest rate to the rate appropriate for the time for which the money is borrowed. Chapter Four Exercises Exercise 4.1: Supplies The Pappaconstantino Corporation's January 31 unadjusted trial balance included many accounts, only four of which are shown below . Account Name Debits Credits Cash $4,679 Supplies 593 Fees Revenue $8,577 Supplies Expense 0 During January, the company used up a total of $376 of supplies. 1. Determine the company's supplies expense for January. $376 . Expenses are resources used up. Since $376 of supplies were used up, the supplies expense is $376 . 2. Determine the adjusted balance in the company's supplies account on January 31....
View Full Document

This note was uploaded on 10/09/2011 for the course ACCT 60.201 taught by Professor Monty during the Spring '11 term at UMass Lowell.

Page1 / 26

Chapter Four Questions - Chapter Four Questions 1 State the...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online