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essentials accounting

Questions and Answers of Essentials Accounting

The conservatism concept therefore has two parts:1. Recognize increases in equity only when they are reasonably[certain / possible].2. Recognize decreases in equity as soon as they are
A brand new pencil is a(n) [asset / liability / equity] of the entity that owns it.
Every time an employee writes with a pencil, part of the asset’s value [increases / decreases], and the entity’s equity also [increases /decreases].
Would it be possible, theoretically, to find out each day the number of partly used pencils and to make a journal entry showing the amount of pencils that were used up and the corresponding “pencil
The accountant considers that the asset value of pencils was entirely used up at the time they were issued to the user. To do otherwise would be a waste of time. This solution is simple and
The treatment of pencils is an example of the materiality concept .The materiality concept states that the accountant may disregard im _______ events. When accountants consider the asset value of
The other side of the coin is that the financial statements must disclose all material facts. For example, if a large fraction of a company’s inventory is found to be worthless, the m concept
The materiality concept therefore has two parts: (1) [disregard /disclose] trivial (i.e., unimportant) matters, and (2) [disregard / disclose]all important matters.
To review, the conservatism concept is this: recognize increases in equity only when they are r ________ c _____ but recognize decreases as soon as they are r ________ p ______ . The materiality
Consider an entity that manufactures goods and then sells them. In accounting, the revenue from these goods is recognized at the time they are delivered to the customer, not at the time they are
If a company sells services rather than goods, revenue is recognized at the time the services are [contracted for / delivered].
Goods (such as shoes) are tangible products. Services (such as repairing computers) are intangible products. Both goods and services are products. Thus, the general rule is that revenue from a
At the time of delivery, revenue is said to be realized. The realization concept is that revenue is recognized and recorded in the period in which it is r ____ ed.
In February, Brush Company contracts to paint Joseph’s house.The house is painted in March, and Joseph pays Brush Company in April. Brush Company should recognize revenue in (what month?).
Potter Company manufactures some imitation carrots in March.In April it receives an order from Peter Rabbit, for one carrot. Potter Company delivers the carrot in May. Peter Rabbit pays the bill in
Revenue is realized when a sale is completed by the delivery of a product. Because of this, the word “sales” is often used along with revenue, as in the phrase “s r .”
A salesperson may say that he or she has “made a sale” when the order was written, even though the product is to be delivered at some future time. In accounting, writing a sales order [is / is
In January, Aird Company sold and delivered a motorcycle to Mike Mills, who paid $1,800 cash.In this example, revenue is recognized in the [month before / same month as / month after] the related
In January, Aird Company sold another motorcycle for $3,800 and delivered it to Shannon Mills. Shannon agreed to pay for the motorcycle in 30 days.In this case revenue is recognized in the [month
When revenue is recognized before the related cash receipt, as in the preceding transaction, the revenue is accompanied by the right to collect the cash, which is an account receivable. Thus, the
When a customer pays an entity for a credit purchase, the entity records an increase in Cash and a corresponding decrease in Accounts Receivable. Thus, when Aird Company receives a check for $3,800
So far we have treated the cases in which 1. revenue is recognized in the same period as the associated cash receipt, and 2. revenue is recognized before the associated receipt of cash.There remains
In March, King Company received $3,000 in advance from a firm to prepare an advertising brochure. It delivered the brochure in June. It therefore no longer had the liability, Advances from Customers.
A magazine publisher received a check for $50 in 2011 for a magazine subscription. The magazines will be delivered in 2012. Write the entry that the publisher should make in 2011. Dr. Cr.. 50 50 50
A publisher received $50 for a magazine subscription in 2011. In 2012, when the magazines are delivered, the publisher recognizes the $50 revenue and records a corresponding decrease in the liability
The customer’s advance may provide for revenue that will be earned over several future accounting periods. Suppose in 2011 a publisher received $100 for a magazine subscription, with the magazines
In 2011, a publisher received $100 for a magazine subscription, with the magazines to be delivered in 2012 and 2013. The entry for 2012 would be:At the end of 2012 [$100 / $50 / $25 / $0] would be
In 2011, a publisher received $100 for a magazine subscription, with the magazines to be delivered in 2012 and 2013. The entry for 2013 would be:At the end of 2013 [$100 / $40 / $50 / $25 / $0] would
Revenue is recognized in the period in which services are delivered.If a landlord receives cash from a tenant in March and in return permits the tenant to use an apartment in April, May, and June,
In March, a tenant paid the landlord $3,000 cash covering rent for April, May, and June. This type of revenue is called rental revenue . How much revenue would the landlord recognize each month, and
When a bank lends money, it delivers a service; that is, the bank provides the borrower with the use of the money for a specified period of time. The bank earns revenue for the service it delivers
Interest revenue is similar to rental revenue. Banks deliver a service when they “rent” money; landlords deliver a service when they rent apartments. In both cases, revenue is realized in the
To summarize, accountants recognize revenue in the month before the related cash receipt by crediting Revenues and debiting a(n) [asset / liability / equity] account entitled A ______ R ________ .
Accountants recognize revenue in the month after the related cash receipt by debiting Cash and crediting a(n) [asset / liability /equity] account when the cash is received. Revenue is recognized when
Aird Company sold a motorcycle to Bryan Harder for $3,000 on credit, but Harder never paid the $3,000. Since Aird Company’s assets decreased by one motorcycle but there was no actual increase in
Obviously, if Aird Company knew in advance that Harder would not pay for the motorcycle, Aird would not have delivered it.Although Aird [would / would not] knowingly sell a motorcycle to someone who
Recognizing only the amount of revenue that is reasonably certain to be received is required by the [conservatism / materiality / realization]concept.
In 2011, Aird Company sold $650,000 of motorcycles to customers, all on credit. It estimated that 2% of these credit sales would never be collected; that is, they would become bad debts . Its
Aird Company recorded each sale as revenue at the time the motorcycles were delivered. In order to measure its increase in equity properly, it must [increase / decrease] the total amount of the
After this decrease, the amount recognized as revenue is$ . This is the amount that is [possible / reasonably certain] to be realized. This is in accordance with the [conservatism /materiality]
Since the Accounts Receivable account includes amounts from customers who probably will never pay their bills, it overstates the real asset value. Thus, if the Aird Company decreases its equity by
However, accountants usually can’t decrease the Accounts Receivable account directly because they don’t know which customers will not pay their bills. Therefore, accountants usually set up a
Although this decrease in equity theoretically resulted from the overstatement of revenue, accountants usually record it as an account called Bad Debt Expense . The amount recorded as Bad Debt
The entry to record Aird Company’s estimate that Bad Debt Expense should be increased by $13,000 and an Allowance for Doubtful Accounts of $13,000 should be established is: Dr. Cr. 13,000 13,000
On December 31, 2011, Aird Company had $125,000 of Accounts Receivable before subtracting the Allowance for Doubtful Accounts. Fill in the amounts that would be reported on Aird Company’s December
Sometime in 2012, Aird Company recognizes that it is never going to collect the $3,000 owed by Harder. It therefore writes off the bad debt . It does this by decreasing Accounts Receivable and also
Aird Company’s equity in 2011 was reduced by the estimated bad debts on sales made in 2011, but its equity in 2012 [was / was not]affected by this write-off of a bad debt.
In the above entry, the gross Accounts Receivable was reduced by$3,000 and the Allowance for Doubtful Accounts was also reduced by$3,000. Therefore, the write-off [increased / decreased / had no
As with accounts receivable, other monetary assets are usually reported on the balance sheet at the amounts that are r ________ c _____ to be received. By contrast, nonmonetary assets, such as
In Part 1 we described the current ratio, which is: Current A Current L S S
Another useful ratio is days’ sales uncollected . This is the number of days of sales that are reported in Accounts Receivable at the end of the accounting period. Sales per day are total credit
Calculate the days’ sales uncollected ratio for McGill Company from the following data: Accounts receivable, December 31, 2011. Credit sales for the year 2011 Days' Sales Uncollected $ 365 $
The days’ sales uncollected ratio indicates whether customers are paying their bills when they are due. If McGill Company expects customers to pay within 60 days from the date of the sale, the
_____10. To verify that a transaction has been entered, you can type in a range of dates from the following selections:a. Select Reports; Company and Financial, Trial Balance.b. Select Reports;
_____9. Northwind Traders classifies Office Supplies as the following type of item:a. Service.b. Inventory.c. Non-inventory item.d. All of the above.e. None of the above.
_____8. When Northwind Traders pays for office supplies purchased on account, the accounts debited and credited are:a. Dr. Office Supplies; Cr. Accounts Payable/Vendor.b. Dr. Accounts Payable/Vendor;
_____7. When you post a transaction for purchasing office supplies on account, the accounts debited and credited are:a. Dr. Office Supplies; Cr. Accounts Payable/Vendor.b. Dr. Accounts
_____6. A list that shows a summary of all unpaid and partially paid vendor bills is called:a. Payment list.b. Enter bills list.c. Record credit memos list.d. Bill/Item receipt list.e. None of the
_____5. A request from a company to a vendor, usually for purchasing stock items is called a/an:a. Invoice.b. Purchase order.c. New Credit memo.d. Sales invoice.e. None of the above.
_____4. The Vendor list includes all of the following EXCEPT:a. Current view.b. Vendor ID.c. Preferences.d. Vendor name.e. None of the above.
3. The current balance owed to each vendor is shown on the:a. Customer list.b. Item list.c. Vendor list.d. Credit memo list.e. None of the above.
_____2. The Vendors home page includes selections for:a. Entering bills.b. New purchase orders.c. Paying bills.d. All of the above.e. None of the above.
1. When each transaction’s debits equal credits, this is known as:a. Product based accounting.b. Vendors and payables.c. Customers and receivables.d. Double-entry accounting.e. None of the above.
6. What button to you use to post time entries?
5. How do you change Employee IDs on the employee list to numeric order?
4. What feature is used to show employee IDs on the Employee List?
3. How do you change the Employees home page from the task flow view (looks like a flowchart diagram) to a list view?
2. List the links included on the Employees Start a Task list.
1. List the links included on the Employees Find list.
3. How should a salary offer be made?
2. What is the name of the book cited in this article and who is the author?
1. List five steps for determining how much a job is worth.
1. From where did cash receipts come?
2. MOA automatically calculates financial statements once entries are recorded and posted.
3. Used a word processing program to write a summary about the website(s) that you visited.
2. Completed the Internet activity for the encyclopedia of business terms.
1. Used your Internet browser to go to the book’s website.
3. What was the overall change in cash?
2. For what were cash payments used?
Exercise 7-2: Answer the following questions about the cash flow statement. Use the following abbreviations to identify the financial statements: P& L (Profit and Loss); BS (Balance Sheet); CFS (Cash
If necessary, start MOA and open the service based sample company, Fabrikam, Inc. Restore the Chapter 7.sbb backup file. This backup was made on page 213. Open Fabrikam, Inc. Answers the questions
10. When a payment is received from a customer, what accounts are debited and credited?
9. When a sales invoices is recorded and posted, what accounts are debited and credited?
8. What does the Payment List show?
7. What is a sales invoice?
6. What is a sales order? When should a sales order be used?
5. What details are shown on the Quotes List?
4. What does an inventory warning mean?
3. What does the Item List show?
2. What is the total outstanding balance of customer invoices?
1. What tasks can be performed from the Customers home page?
_____8. What feature do you use if a payment does not involve a customer?a. Customers; Payments.b. Banking; Write Checks.c. Banking; Make Deposit.d. Vendor; Add a new payment.e. None of the above.
____7. If you type a name of an account, ____________ completes the field automatically.a. Drill down.b. Double-clicking.c. Find.d. Auto fill.e. All of the above.
_____6. To see all of the transactions for a selected bank account, do the following:a. From the Banking Find list, link to Account Register, then select the account.b. From the Banking Start a Task
_____5. In order to change the name of an account, do the following:a. Left-click on the account; right-click Open Selected Items.b. Right-click on the account; left-click Open Selected Items.c. On
_____4. Before funds were transferred, Account No. 1010, Checking Account had a balance of:a. $2,000.00.b. $3,989.53.c. $4116.90.d. $3,943.74.e. None of the above.158 Chapter 5 The McGraw-Hill
_____3. A list of all the accounts used by a company is called:a. General journal.b. Account reconciliation.c. Matching transactions.d. Chart of accounts.e. All of the above.
_____2. Except for the following, each one of these items is included on the Banking Start a Task list.a. Forecast cash flow.b. Write checks.c. Make deposits.d. Transfer funds.e. None of the above.
1. MOA’s banking feature(s) include:a. Control of funds into and out of the company.b. Summarize the company’s banking activities.c. An account register.c. Chart of accounts.d. All of the

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