An expanded version of the accounting equation could be:
A + Rev = L + OE – Exp
A – L = Paid-in Capital – Rev – Exp
A = L + Paid-in Capital + Beginning Retained Earnings + Rev – Exp
A = L + Paid-in Capital – Rev + Exp
In the seller’s records, the sale of merchandise on account would:
Increase assets and increase expenses.
Increase assets and decrease liabilities.
Increase assets and increase paid-in capital.
Increase assets and decrease revenues.
In the buyer’s records, the purchase of merchandise on account would:
Increase assets and increase expenses.
Increase assets and increase liabilities.
Increase liabilities and increase paid-in capital.
Have no effect on total assets.
A debit entry will:
Decrease an asset account.
Increase a liability account.
Increase paid-in capital.
Increase an expense account.
A credit entry will:
Increase an asset account.
Increase a liability account.
Decrease paid-in capital.
Increase an expense account.
A credit entry to an account will:
Always decrease the account balance.
Always increase the account balance.
Increase the balance of a revenue account.
Increase the balance of an expense account.
A debit entry to an account will:
Always decrease the account balance.
Always increase the account balance.
Increase the balance of a revenue account.
Increase the balance of an expense account.
Sage, Inc. has 20 employees who each earn $100 per day and are paid every Friday. The end of the accounting period is on a Wednesday. How much wages should the firm accrue at the end of the period?
$2,000.
$1,000.
$0.
$6,000.
Which of the following is not one of the 5 questions of transaction analysis?
What’s going on?
Which accounts are affected?
Is this an accrual?
Does the balance sheet balance?
Does my analysis make sense?
The effect of an adjustment is:
To correct an entry that was not in balance.
To increase the accuracy of the financial statements.
To record transactions not previously recorded.
To close the books.
A journal entry recording an accrual:
Results in a better matching of revenues and expenses.
Will involve a debit or credit to cash.
Will affect balance sheet accounts only.
Will most likely include a debit to a liability account
Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom’s books at the end of every month that the loan is outstanding to record the:
Amount of interest paid during the month.
Amount of total interest to be paid when the note is paid off.
Amount of principal payable at the maturity date of the note.
Accrued interest expense for the month.
The accounting concept/principle being applied when an adjustment is made is usually:
matching revenue and expense.
consistency.
original cost.
materiality.
When a firm purchases supplies for its business:
The supplies account should always be debited.
The supplies expense account should always be debited.
Either the supplies account or the supplies expense account should be credited.
An adjustment will probably be required as supplies are used.
The effect of an adjustment on the financial statements is usually to:
make the balance sheet balance.
increase net income.
increase the accuracy of both the balance sheet and income statement.
match revenues and assets.
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