Questions and Answers of Accounting What The Numbers Mean

What does it mean when an account has a debit balance?
What does it mean to say that asset and expense accounts normally have debit balances?
What does it mean when a liability, owners’ equity, or revenue account is credited?
What does it mean when “the books are in balance”?
What does it mean when a revenue or expense must be accrued?
What does it mean when an adjustment must be made?
What does it mean to analyze a transaction?
What does it mean to use a T-account to determine what activity has affected the account during a period?
The process of answering five questions to ensure that a transaction is understood. The questions are: (1) What's going on? (2) What accounts are affected? (3) How are they affected? (4) Does the
The left side of an account; an increase in asset and expense accounts or a decrease in liability, owners' equity, and revenue accounts. a. Balance sheet equation Transactions b. C. On account d.
Economic interchanges between entities that are accounted for and reflected in financial statements. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post
A chronological record of transactions. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting) g. Ledger h. Account i. Chart of accounts j.
A journal entry usually made during the process of closing the books that results in more accurate financial statements. = a. Balance sheet equation Transactions b. C. On account d. Accrued (or
Assets Liabilities + Owners' Equity (A = L + OE) expresses the fundamental structure of the balance sheet and is the basis of bookkeeping procedures. a. Balance sheet equation Transactions b. C. On
Used to describe a purchase or sale for which cash will be paid or received at a later date. A "credit" transaction. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e.
The process of recording a transaction in the respective ledger accounts using a journal entry as the source of information recorded. a. Balance sheet equation Transactions b. C. On account d.
A record of transactions arranged by account name. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting) g. Ledger h. Account i. Chart of
The arithmetic sum of the additions and subtractions to an account through a given date. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting)
An index of the accounts contained in a ledger. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting) g. Ledger h. Account i. Chart of accounts
The right side of an account; a decrease in asset and expense accounts or an increase in liability, owners' equity, and revenue accounts. a. Balance sheet equation Transactions b. C. On account d.
Evidence of a transaction that supports the journal entry recording the transaction. - a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting) g.
The process of posting transactions and adjustments to the ledger and preparing the financial statements. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f.
Recognition that an amount is owed but has not been paid or received. a. Balance sheet equation Transactions b. C. On account d. Accrued (or accrual) e. Journal f. Post (posting) g. Ledger h. Account
Which of the following transactions resulted in a $35,000 increase in assets and a $35,000 increase in liabilities?a. Collected accounts receivable of $35,000.b. Paid accounts payable of $35,000.c.
Which of the following is not a correct expression of the accounting equation?a. Assets = Liabilities + Owners’ Equity.b. Assets = Liabilities — Owners’ Equity.c. Assets = Liabilities + Paid-In
Normal account balances are as follows:a. Cash, Accounts Receivable, and Sales are debits.b. Interest Expense, Notes Payable, and Retained Earnings are credits.c. Merchandise Inventory, Cost of Goods
Which of the following is not an example of a source document?a. Purchase invoice.b. Chart of accounts.c. Cash register tape printout.d. Receipt from sales register at the point of purchase.e. Check
Comparison of the balance sheet of Kohl Company at the end of 2009 with its bal¬ ance sheet at the end of 2008 showed that total assets had decreased by $34,500 and owners’ equity had increased by
Total assets remain the same whena. depreciation expense is recorded.b. common stock is issued for cash.c. an account payable is paid to a creditor.d. an account receivable is reclassified as a note
Which of the following groups of accounts all have debit balances?a. Land, Equipment, and Paid-In Capital.b. Accounts Receivable, Merchandise Inventory, and Salary Expense.c. Notes Receivable,
If equipment is acquired by paying $12,000 in cash and issuing a $7,000 note payable,a. total assets are decreased by $12,000.b. total assets are increased by $19,000.c. total assets are increased by
Credits are used to recorda. decreases to assets and increases to expenses, liabilities, revenues, and owners’ equity.b. decreases to assets and expenses and increases to liabilities, revenues, and
Who the users of accounting information are and why they find accounting information useful.
The role that the Financial Accounting Standards Board (FASB) plays in the development of financial accounting standards.
It means that accounting is a service activity that helps many different users of accounting information who use the information in many ways.
It means to perform professional services for clients principally in the areas of auditing, income taxes, management consulting, and/or accounting systems evaluation and development.
It means that the individual has met the education and experience requirements, and has passed the examination to qualify for a license as a certified public accountant.
It means that generally accepted accounting principles sometimes permit alter- native ways of accounting for identical transactions, thus requiring professional judgment, and that these principles
It means that the FASB has completed an extensive process of research and develop- ment, including receiving input from interested individuals and organizations, and has made an authoritative
It means that countries have not been able to agree on many accounting and reporting issues and that financial statements issued by an entity from another , country must be carefully studied to
It means that the individual is impartial, free from conflict of interest, and will not experience a personal gain from the activity in which she or he is involved.
It means that the accounting and financial reporting topics explained in the financial accounting part of this text should:a. Relate to external financial reporting.b. Support business and economic
The process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions or informed judgments. a. Accounting b. Entity C. Financial
Accounting that recognizes revenues and expenses as they occur, even though cash receipts from revenues and cash disbursements related to expenses may occur before or after the event that causes
The process of examining the financial statements of an entity by an independent third party with the objective of expressing an opinion about the fairness of the presentation of the entity's
Procedures that are used to keep track of an entity's financial transactions and to accumulate the results of its operations. a. Accounting b. Entity C. Financial accounting d. Bookkeeping . p.
Pronouncements of the Financial Accounting Standards Board (FASB) that constitute generally accepted accounting principles. a. Accounting b. Entity C. Financial accounting d. Bookkeeping . p.
Accounting that is concerned with the use of economic and financial information to plan and control the activities of an entity and to support the management decision-making process. a. Accounting b.
An organization, individual, or group of organizations or individuals for which accounting services are performed. a. Accounting b. Entity C. Financial accounting d. Bookkeeping . p. Generally
A unit of the federal government that is responsible for establishing regulations and ensuring that full disclosure is made to investors about large companies and their securities traded in
Pronouncements of the Financial Accounting Standard Board and its predecessors that constitute appropriate accounting for various business transactions (principles used for reporting financial
The personal characteristic of honesty, including being forthright in dealings and communications with others. a. Accounting b. Entity C. Financial accounting d. Bookkeeping . p. Generally accepted
Common examples of "users" of the accounting information related to an organization includea. the management of the organization.b. c. investors and creditors. employees.d. the Securities and
As it relates to financial reporting, which of the following is not required of an accounting entity?a. A financial statement presenting the amount that the entity expects to earn next year.b. C. A
In SFAC No. 1, which of the following ideas was not expressed?a. Information largely reflects financial effects of past transactions and events.b. Financial information must always be accurate
Which of the following ideas were expressed in SFAC No. 1?a. C.d. Financial reporting is not an end in itself but is intended to provide useful information to decision makers. The objectives of
Which of the following statements related to the origins and traditions of auditing is the most appropriate description?a. Auditing has always followed a codified set of rules designed to detect and
Examples of how investors, creditors, and others commonly use reported earnings figures and the related information about the elements of financial statements include all of the following excepta.
Maryville Inc. incurred the following costs during June:Required:During the month, 53,000 units of product were manufactured and 48,000 units of product were sold. On June 1, Maryville carried no
The information presented here represents selected data from the December 31, 2022, balance sheets and income statements for the year then ended for three firms:Required:Calculate the missing amounts
This exercise provides practice in understanding the operation of T-accounts and transaction analysis. For each situation, you must solve for a missing amount. Use a T-account for the balance sheet
Stockholders’ equity totaled $246,000 at the beginning of the year. During the year, net income was $36,000, dividends of $9,000 were declared and paid, and $30,000 of common stock was issued at
Prepare a bank reconciliation as of June 30 from the following information:a. The June 30 cash balance in the general ledger is $1,940.b. The June 30 balance shown on the bank statement is $1,168.c.
The following information is available from Gray Co.’s accounting records for the year ended December 31, 2022 (amounts in millions):Required:a. The net cash provided by operating activities for
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:Required:a. Calculate return on investment, based on net income and average total assets, for 2023 and
A department of Delta Co. incurred the following costs for the month of June. Variable costs, and the variable portion of mixed costs, are a function of the number of units of activity:During July,
Acme Inc. incurs the following costs during July:Required:Calculate Acme’s total manufacturing costs for July. Sales expense.. Direct labor..... Factory supplies.. Advertising.. Raw material
Presented here is the income statement for Big Sky Inc. for the month of February:Based on an analysis of cost behavior patterns, it has been determined that the company’s contribution margin ratio
Harris Company experiences the following cost behavior patterns each week:Fixed costs: supervisor’s salary $1,600; factory rent $4,000Mixed costs: utilities $2,400 + $8.40 per unitVariable costs
Bentley estimates manufacturing overhead of $1,200,000 for 2022 and will apply overhead to units produced based on 400,000 machine hours. During 2022, Bentley used $1,280,000 of raw materials, paid
Coronado Company applies manufacturing overhead to production at the rate of $8 per direct labor hour and ended March with $24,000 underapplied overhead. Actual manufacturing overhead incurred for
The following information is from ABC Company’s general ledger for the month of September: Beginning and ending finished goods inventory, respectively, were 168,000 and 156,000. Cost of goods sold
The following cost behavior pattern describes anticipated manufacturing overhead costs for 2022: $240,000 + $8/unit. During the year, 30,000 units were produced and 28,000 units were
The following cost behavior patterns describe anticipated manufacturing costs for 2022: raw material, $7/unit; direct labor, $10/unit; and manufacturing overhead, $240,000 + $8/unit.Required:If
Ironstone Inc. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.Required:a. For 2022, the
HealthTech Inc. manufactures and sells diagnostic equipment used in the medical profession. Its job costing system was designed using an activity-based costing approach. Direct materials and direct
Nautical Footwear Inc. manufactures women’s boating shoes. Manufacturing overhead is assigned to production on a machine-hour basis. For 2022, it was estimated that manufacturing overhead would
Janson Inc. produces pickup truck bumpers. Overhead is applied on the basis of machine hours required for cutting and fabricating. A predetermined overhead application rate of $25.40 per machine hour
TopBass Inc. manufactures fishing equipment. During 2022, total costs associated with manufacturing 30,000 fly-cast fishing rods (a new product introduced this year) were as follows:Required:a.
Trendy Creations Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and
Angora Creations Co. manufactures wool sweaters. Costs incurred in making 45,000 sweaters in September included $180,000 of fixed manufacturing overhead. The total absorption cost per sweater was
Williamson Inc. manufactures digital voice recorders. During 2022, total costs associated with manufacturing 52,000 of the new EZ 9900 model (introduced this year) were as follows:Required:a.
The following table summarizes the beginning and ending inventories of Springfield Manufacturing Inc. for the month of September:Raw materials purchased during the month of September totaled
Morrison & Company incurred the following costs during August:Manufacturing overhead is applied on the basis of $25 per direct labor hour. Assume that overapplied or underapplied overhead is
Gillman Co. is forecasting sales of 80,600 units of product for August. To make one unit of finished product, five pounds of raw materials are required. Actual beginning and desired ending
Each gallon of Old Brut, a popular aftershave lotion, requires three ounces of ocean scent. Budgeted production of Old Brut for the first three quarters of 2022 is as follows:Management’s policy is
Olympia Productions Inc. makes award medallions that are attached to ribbons. Each medallion requires 18 inches of ribbon. The sales forecast for March is 4,000 medallions. Estimated beginning
SAS is a world leader in business analytics software, delivering breakthrough technology to transform the way organizations do business. Activity based costing (ABC) is a proven methodology that
ABC Company’s actual unit sales in the current year for January, February, and March were 20,000, 17,000, and 23,000 units, respectively. Current year selling price is $20. An analysis of general
Brooklyn Studio’s sales are all made on account. The firm’s collection experience has been that 25% of a month’s sales are collected in the month the sale is made, 60% are collected in the
ABC Company has a cash balance of $22,000 on August 1 and requires a minimum ending cash balance of $20,000. Cash receipts from sales budgeted for August are $306,180. Cash disbursements budgeted for
Scottsdale Co. has actual sales for July and August and forecast sales for September, October, November, and December as follows:Based on past experience, it is estimated that 40% of a month’s
Osage Inc. has actual sales for May and June and forecast sales for July, August, September, and October as follows:Required:a. The firm’s policy is to have finished goods inventory on hand at the
Oakwood Creations Co. makes decorative candle pedestals. An industrial engineer consultant developed ideal time standards for one unit of the Berkley model pedestal. The standards follow, along with
Lakeway Manufacturing Co. manufactures and sells household cleaning products. The company’s research department has developed a new cleaner for which a standard cost must be determined. The new
D&J Furniture, a retail store, has an average gross profit ratio of 48%. The sales forecast for the next four months follows:Management’s inventory policy is to have ending inventory equal to
Precious Stones Ltd. is a retail jeweler. Most of the firm’s business is in jewelry and watches. The firm’s average gross profit ratio for jewelry and watches is 70% and 40%, respectively. The
Refer to the PrimeTime Sportswear data presented in Problem 14.21.Data From in Problem 14.21PrimeTime Sportswear is a custom imprinter that began operations six months ago. Sales have exceeded
Form a group of three or four students to research, evaluate, and report on software solutions available to support the budgeting needs of an organization. Choose three planning/budgeting products
The monthly cash budgets for the second quarter of 2022 follow ($000 omitted) for Tuscano Mfg. Co. A minimum cash balance of $15,000 is required to start each month, and a $50,000 line of credit has

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