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Exam 2: Financial Statements and the Accounting System

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Question 101

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A company's list of accounts and the identification numbers assigned to each account is called a:

A) Source document.
B) Journal.
C) Trial balance.
D) Chart of accounts.
E) General Journal.

F) B) and D)
G) None of the above

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Question 102

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Unearned revenues are classified as liabilities.

A) True
B) False

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Question 103

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A company's chart of accounts is a list of all the accounts used and includes an identification number assigned to each account.

The balances for the accounts of Milo's Management Co.for the year ended December 31 are shown below.Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance.

Preparation of a trial balance is the first step in processing a financial transaction.

Explain the recording and posting processes.

A law firm collected $1,800 on account for work performed in the previous month.Which of the following general journal entries will the firm make to record this transaction?

Mary Sunny began business as Sunny Law Firm on November 1.Record the following November transactions by making entries directly to the T-accounts provided.Then,prepare a trial balance,as of November 30. a)Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b)Purchased $7,500 of office equipment from John Bronx on credit. c)Completed legal work for a client and received $1,500 cash in full payment. d)Paid John Bronx.$3,500 cash in partial settlement of the amount owed. e)Completed $4,000 of legal work for a client on credit. f)The firm paid $2,000 cash in dividends. g)Received $2,500 cash as partial payment for the legal work completed for the client in (e). h)Paid $2,500 cash for the legal secretary's salary.

Jarrod Automotive,owned and operated by Jarrod Johnson,began business in September of the current year.Jarrod,a mechanic,had no experience with recording business transactions.As a result,Jarrod entered all of September's transactions directly into the ledger accounts.When he tried to locate a particular entry he found it confusing and time consuming.He has hired you to improve his accounting procedures.The accounts in his General Ledger follow: Prepare the general journal entries,in chronological order (a)through (e),from the T-account entries shown.Include a brief description of the probable nature of each transaction.

On January 1 of the current year,Jimmy's Sandwich Company reported stockholders' equity totaling $122,500.During the current year,total revenues were $96,000 while total expenses were $85,500.Also,during the current year paid $20,000 in cash dividends.No other changes in equity occurred during the year.If,on December 31 of the current year,total assets are $196,000,the change in total stockholders' equity during the year was:

Indicate on which of the financial statements the following items appears.Use I for income statement,RE for statement of retained earnings,and B for balance sheet.More than one statement may be appropriate for some items.

Describe the link between a business's income statement,the statement of retained earnings,and the balance sheet.

The chronological record of each complete transaction that has occurred in a business is called the:

The right side of an account is called the debit side.

Stockholder investments always decrease equity.

A debit is used to record an increase in all of the following accounts except:

A credit is used to record an increase in all of the following accounts except:

The journal is known as a book of original entry.

The record of all accounts and their balances used by a business is called a:

________ is the process of transferring journal entry information from the journal to the ledger.