Exam (elaborations)
Bookkeeping Basics Part 10 Questions and Answers 2024
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Bookkeeping Basics Part 10
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Bookkeeping Basics Part 10Anything a business owns of value, or a resource of value, that has the potential to be
transformed into cash. - answer Asset
The list of all of the accounts and sub-accounts used to categorize transactions. -
answer Chart of accounts
The report covering the sources and uses of cash by a business. - answer Statement of
cashflows
The financial statement that reports a business's assets, liabilities, and equity at a
specific point in time. - answer Balance sheet
When Craig, the owner of a landscaping business, buys equipment, the purchase
appears as a debit on his business's balance sheet. What does this mean? - answerA
debit is an increase in assets or expenses or a decrease in liabilities, owner's equity or
revenue.
When Craig sells mulch, the sales revenue appears as credit on his business's books.
What does this mean? - answerA credit is a decrease in assets or expenses or an
increase in liabilities, owner's equity or revenue.
Craig considers the investment in the business he owns as equity. What does this
mean? - answerEquity is an owner's stake in the company, how much the owner has
invested into the business or withdrawn from the business over time.
Income earned through business, gross proceeds or sales. - answerRevenue
Costs associated with the action of running a business. - answerExpenses
Money a business owes to others. - answerLiability
The report that shows a business's revenues and expenses during a particular period. -
answerIncome statement
Other than the transaction journal, what is another place that we can view the individual
transactions that
Craig has made? - answerGeneral ledger
Which section will the credit card transaction be shown
on the balance sheet? - answerTotal liabilities
, Which section includes the account for the credit card purchases for the period? -
answerWhich section includes the account for the credit card purchases for the period?
Which type of account is accounts receivable? - answerAssets
You're the owner of a small landscaping business that provides lawn care services to
residential customers. You charge $100 per service, and you usually get paid at the end
of each month. In June, you provided 1 service each to 10 different customers, but only
8 of them paid you by June 30. The other 2 customers paid you on July 5. -
answerUnder accrual accounting, revenue is recognized when it is earned, regardless
of when cash is received. Therefore, you would report $1,000 as revenue for June since
you provided 10 services at $100 each. Under cash-basis accounting, revenue is
recognized only when cash is received.
Therefore, you would report only $800 as revenue for June since you received payment
from 8 customers at $100 each. The payment from the other 2 customers would be
reported as revenue in July under cash-basis accounting.
What is a credit in accounting? - answerA decrease in assets or expenses or an
increase in liabilities, owner's equity or revenue.
You're a bookkeeper for a small law firm that provides legal services to clients on a
monthly retainer basis.
You use accrual accounting to record the financial transactions of the firm. In June, you
billed 10 clients for a total of $20,000, but only 8 of them paid you by June 30. The other
2 clients paid $2,000 each on July 10.
You also incurred $5,000 in expenses for rent, utilities, and supplies in June, which you
paid on June 30.
Question: How would you report your revenue and expenses for June under the
matching principle? - answerUnder the matching principle, revenue and expenses
should be recognized in the same period as when they are earned and incurred,
regardless of when cash is received or paid. Therefore, you would report $20,000 as
revenue for June since you bill 10 clients for the legal services you provided in that
month. You would also report $5,000 as expenses for June since you incurred them for
the rent, utilities, and supplies you used in that month.
What is a debit in accounting? - answerAn increase in an asset or a decrease in a
liability or equity.
The Reliability Assumption - answerA company must have proof of what it records in its
financial statements.
The Conservatism Assumption - answerA company must record its assets and
revenues at the lowest possible value and its liabilities and expenses at the highest
possible value.
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