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Exam 2: Accounting System and Financial Statements

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Question 31

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For each of the accounts in the following table (1) identify the type of account as an asset, liability, equity, revenue, or expense, and (2) identify the normal balance of the account.

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Question 32

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A company's formal promise to pay (in the form of a promissory note) a future amount is a(n) :

A) Unearned revenue.
B) Prepaid expense.
C) Credit account.
D) Note payable.
E) Account receivable.

F) A) and B)
G) A) and C)

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Question 33

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Jason Hope decided to open a hotel, set up as a corporation, in his hometown. Prepare journal entries to record the following transactions. Hope uses the accounts Room Rental Revenue and Event Revenue. All expenses for special events are recorded as Event Expense.

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.

The process of transferring general journal entry information to the ledger is called:

Larry Matt, Inc. completed these transactions during December of the current year: Prepare general journal entries to record these transactions.

Conner Piper began business as Conner's Bookkeeping, Inc. on May 1. Prepare a trial balance, as of May 31 using the account information provided below:

A bookkeeper 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, a trial balance showed total credits exceed total debits by $4,950. This difference could have been caused by:

A journal entry that affects no more than two accounts is called a compound entry.

On December 3, the ABBJ Company paid $1,400 cash in salaries to office personnel. Prepare the general journal entry to record this transaction.

Neither U.S. GAAP nor IFRS require the use of accrual basis accounting.

Asset accounts are normally decreased by debits.

Identify each of the following accounts as a revenue (R), expense (E), asset (A), liability (L), or equity (SE) by placing initials (R,E,A,L or SE) in the blanks. ____ 1. Salary Expense ____ 2. Cash ____ 3. Equipment ____ 4. Common Stock ____ 5. Fees Revenue ____ 6. Accounts Receivable ____ 7. Accounts Payable ____ 8. Dividends ____ 9. Supplies ____ 10. Unearned Revenue ____ 11. Prepaid Insurance ____ 12. Office Furniture

___________________ are promises of payment from customers to sellers.

Geraldine Parker, the owner of Gi Gi's Dance Studio, Inc., started the business by investing $10,000 cash and donating a building worth $20,000. Identify the general journal entry below that Gi Gi's will make to record the transaction.

Credits always increase account balances.

On a trial balance, if the Debit and Credit column totals are equal, then:

Items such as sales tickets, bank statements, checks, and purchase orders are examples of a business's source documents.

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.