Basics of accounting

Fall 2014
Test 3.
1.Matchthetermtothecorrectdefinition:
TERMS:
1.AccountingEquation
2.Asset
3.Expense
4.BalanceSheet
5.IncomeStatement
6.NetIncome
7.Revenue
8.Statementof
OwnersEquity
9.Liability
10.StatementofCash
Flows
11.NetLoss

DEFINITIONS:
A.Aneconomicresourcethatisexpectedtobeofbenefitinthefuture
B. An economic obligation (a debt) payable to an individual or an
organizationoutsidethebusiness
C.Excessoftotalexpensesovertotalrevenues
D.Excessoftotalrevenuesovertotalexpenses
E.Thebasictoolofaccounting,statedasAssets=Liabilities+Equity
F.Decreaseinequitythatoccursfromusingassetsorincreasingliabilities
inthecourseofdeliveringgoodsorservicestocustomers
G.Amountsearnedbydeliveringgoodsorservicestocustomers
H.Reportofcashreceiptsandcashpaymentsduringaperiod
I.Reportofanentitysassets,liabilities,andequityasofaspecificdate
J.Reportofanentitysrevenues,expensesandnetincome/netlossforthe
period
K.Reportthatshowsthechangesincapitalforaperiodoftime

Quick Check
1.

2.

a.
b.
c.
d.
3.

Whichsequencecorrectlysummarizestheaccountingprocess?
a.Journalizetransactions,posttotheaccounts,prepareatrialbalance
b.Journalizetransactions,prepareatrialbalance,posttotheaccounts
c.Posttotheaccounts,journalizetransactions,prepareatrialbalance
d.Prepareatrialbalance,journalizetransactions,posttotheaccounts
Theleftsideofanaccountisusedtorecordwhichofthefollowing?
Debitorcredit,dependingonthetypeofaccount
Increases
Credits
Debits
Yourbusinesspurchasedsuppliesof$2,500onaccount.Thejournalentrytorecord
thistransactionisasfollows:
a.Supplies2,500
Accountsreceivable2,500

b.Supplies2,500
Accountspayable2,500
c.Accountspayable2,500
Supplies2,500
d.Inventory2,500
Accountspayable2,500
4.

Thedetailedrecordofthechangesinaparticularasset,liability,orownersequity
iscalled
a.anaccount

b.ajournal
c.aledger
d.atrialbalance
5.ThetrialbalanceofHarperServiceCenteronMarch1,2014,liststheentitys
assets,liabilities,andequityonthatdate.
AccountTitle
Cash
Accountsreceivable
Accountspayable
Harper,capital
Total

Debit
$26000
$4500

$30500

Credit

$2000
$28500
$30500

DuringMarch,thebusinessengagedinthefollowingtransactions:
1. Borrowed$45,000fromthebankandsignedanotepayableinthenameofthebusiness.
2. Paidcashof$40,000toacquireland.
3. Performedserviceforacustomerandreceivedcashof$5,000.
4. Purchasedsuppliesonaccount,$300.
5. Performedcustomerserviceandearnedrevenueonaccount,$2,600.
6. Paid$1,200onaccount.
7. Paidthefollowingcashexpenses:salaries,$3,000;rent,$1,500;andinterest,$400.
8. Received$3,100onaccount.
9. Receiveda$200utilitybillthatwillbepaidnextweek.
10. Harperwithdrewcashof$1,800.
1.
2.
3.

Requirements:
Journalizeeachtransaction.Keyjournalentriesbytransactionletter(Aassets,L
liabilities,Eequity,Rrevenues,Expexpenses).
Posttotheledger.
PreparethetrialbalanceofHarperServiceCenteratMarch31,2014.