The three most common adjusting entries are depreciation, prepaid expenses, and bad debts.
If the trial balance report is in balance, it is not necessary to make adjusting journal entries.
Depreciation is a cash
1. Which one of the following users of accounting information is considered to be an external
user of accounting information rather than an internal user of accounting information?
Investments intended to be held for a period of time usually extending beyond one year.
Debt and equity securities such as stocks, bonds, and long-term notes receivable.
Tangible assets not currently used in operations, e.g., land
The residual interestin the assets that remain after deducting the liabilities.
A measure of the capital contributed to the company by its owners.
Contribution can be through cash, noncashassets, or valuable se
Accounts receivable: An asset created by selling products or services on credit. Amounts due
from customers for credit sales.
Accounts receivable method: A method of estimating bad debts using balance sheet relations.
Also known as Balance Sheet method.
Classified balance sheet: A balance sheet that presents the assets and liabilities in relevant
Closing entries: Journal entries recorded at the end of each accounting period that transfer the
end-of-period balances in revenue, expense, and with
Cash discount: A reduction in the price of merchandise that is granted by a seller to a purchaser
in exchange for the purchaser paying within a specified period of time called the discount period.
Classified, multiple-step income statement: An income stat
Accounting equation: A description of the relationship between a company's assets, liabilities,
and equity; expressed as Assets = Liabilities + Owner's Equity; also called the balance sheet
Accounts payable: A liability created by buying goods o
Account form balance sheet: A balance sheet that lists assets on the left and liabilities and
owner's equity on the right side of balance sheet.
Accounting period: The length of time covered by financial statements and other reports; also
Acid-test ratio: A ratio used to assess a company's ability to cover its current debts with existing
assets calculated as quick assets (cash, short term investments, and receivables) divided by
current liabilities; also called quick ratio.
Account: A place or location within an accounting system in which the increases and decreases
in a specific asset, liability, or equity are recorded and stored.
Account balance: The difference between the increases (including the beginning balance) and
Average cost method: See for weighted average inventory costing.
Conservatism: A shortened reference to the conservatism principle.
Conservatism principle: The accounting principle that guides accountants to select the less
optimistic estimate when two es
Accounting: An information system that identifies, measures, records and communicates
relevant, reliable, and comparable information about an organization's economic activities.
Audit: A check of an organization's accounting systems and records.
Accounting Information System: The people, records, methods, and equipment that collect and
process data from transactions and events, organize them in useful forms, and communicate
results to decision makers.
Accounts Payable Ledger: A subsidiary ledger
The typical accounting worksheet has five sets of columns with each set having a debit column
on the left and a credit column on the right. In moving from left to right across the worksheet,
which of the following lists describes the proper order for fo
When the weighted average method of perpetual inventory tracking is used, at what point is the
new average cost calculated?
Only at the end of the year.
After each sale of the given inventory item.
After each new purchase of the same inventory
A proprietorship employs one full-time accountant. This person is considered an employee. On
the desk in front of her are five different business documents. Which one of the following would
not be considered an original source document from the propriet
Although it is possible to find an exception to the following statement, the vast majority of
adjusting entries follow which pattern described below?
One of the accounts debited or credited is an income statement
account while the second account debi
Company A is taking the end-of-the-year physical inventory. Its accounting period ends on
December 31. Which of the following items would not be counted in the ending inventory count?
Items sold on December 29 and shipped the same day where the
The _ is a period of time that establishes the frequency of tax deposits.
The funds withheld from employee wages that are transferred to the federal government by
payroll tax deposits
Depending on the size and/or age of
Embezzlement, payoffs and skimming are examples of
A business that handles a large amount of cash can insure against theft by getting
for each of its cash handlers.
can be cons
Entries in the general journal are posted after they are entered in the general ledger.
You must post two entries in a general journal, and total debits equal total credits.
If using a computerized accounting sys
Following transactions, making journal entries is the second step in the accounting cycle.
Journal entries made only to asset, liability, and equity accounts; you do not make journal entries
to revenues and expenses.
The final step in the account cycle is
closing the books
Current ratio, acid test, and working capital are measurements of
Accounts that are zeroed out at the end of an accounting period are called
is a proces
- Bookkeeping: the method in which businesses track their financial transactions
- Accounting: total structure of records used to record, classify, and report info about a
businesss financial transactions
Separate entity assumption: the con
The difference between debits and credits
- debits(left) = credits(right)
- an account is a record that keeps track of inc. and dec. in a specific item
- Not the same as actual bank account
- Indep. record you keep to track your cash balance
Steps of the Accounting Cycle
Adjusting Journal Entries
Closing the Books
Source Document: evidence of the transaction
- Transactions should have some sort of eviden
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