ACC 224 (chapter 2) Flashcards
What is an account in accounting?
An account is an individual accounting record of increases and decreases in a specific asset, liability, stockholders equity, revenue, or expense item.
Examples include Accounts Payable, Service Revenue, and Salaries and Wages Expense.
What are the three parts of an account?
An account consists of a title, a left or debit side, and a right or credit side.
What is a T-account?
A T-account is a basic form of an account that resembles the letter T, showing the title, left (debit) side, and right (credit) side.
What do the terms debit and credit indicate?
Debit indicates the left side of an account, while credit indicates the right side.
What are the abbreviations for debit and credit?
The abbreviations are Dr. for debit and Cr. for credit.
What does it mean to debit an account?
Debiting an account means entering an amount on the left side of the account.
What does it mean to credit an account?
Crediting an account means making an entry on the right side of the account.
How is a debit balance determined?
An account shows a debit balance if the total of the debit amounts exceeds the credits.
How is a credit balance determined?
An account shows a credit balance if the credit amounts exceed the debits.
What is the origin of the abbreviation for debit?
One theory suggests it comes from the Latin word ‘debere’, while credit comes from ‘credere’.
What does every positive item in the tabular summary represent?
Every positive item represents a receipt of cash.
What does every negative amount in the tabular summary represent?
Every negative amount represents a payment of cash.
How are increases in cash recorded in the account form?
Increases in cash are recorded as debits.
How are decreases in cash recorded in the account form?
Decreases in cash are recorded as credits.
What is the balance of Softbyte’s Cash account?
The balance is a debit of $8,050.
What are the two main benefits of using the T-account form?
- Reduces recording errors.
- Helps determine totals and account balance.
What is the basis of accounting systems worldwide?
The double-entry accounting system.
What must be true for debits and credits in a transaction?
Debits must equal credits.
What does the double-entry system help ensure?
It helps ensure the accuracy of recorded amounts and helps detect errors.
How are increases in assets recorded in the double-entry system?
Increases in assets are entered on the left side.
How are decreases in liabilities recorded in the double-entry system?
Decreases in liabilities are recorded opposite to increases in assets.
What is the effect of debits on liabilities?
Debits decrease liabilities.
What is the effect of credits on liabilities?
Credits increase liabilities.
What is the effect of debits on assets?
Debits increase assets.
What is the effect of credits on assets?
Credits decrease assets.
What type of balance do asset accounts normally show?
Asset accounts normally show debit balances.
What type of balance do liability accounts normally show?
Liability accounts normally show credit balances.
What indicates an error in an asset account?
A credit balance in an asset account usually indicates an error.
What indicates an error in a liability account?
A debit balance in a liability account usually indicates an error.
What is a correct abnormal balance example?
A credit balance in the Cash account when overdrawn is a correct abnormal balance.
What are the two parts of stockholders’ equity?
Common stock and retained earnings.
How does cash investment affect the Common Stock account?
Cash is debited and Common Stock is credited.
What is the normal balance for the Common Stock account?
The normal balance is the side where increases in the account are recorded.
What is the normal balance in the Common Stock account?
The normal balance in the Common Stock account is a credit for increase and a debit for decrease.
What does Retained Earnings represent?
Retained Earnings represents the portion of stockholders’ equity that has been accumulated through the profitable operations of the company.
How is Retained Earnings increased and decreased?
Retained Earnings is increased by credits (e.g., net income) and decreased by debits (e.g., net loss).
What is a dividend?
A dividend is a distribution by a corporation to its stockholders, commonly in the form of cash.
How do dividends affect stockholders’ equity?
Dividends reduce stockholders’ claims on retained earnings and decrease stockholders’ equity.
What is the normal balance for the Dividends account?
The Dividends account normally has a debit balance, with debits recorded for increases and credits for decreases.
How do revenues and expenses affect stockholders’ equity?
When a company recognizes revenues, stockholders’ equity is increased; revenue accounts are increased by credits and decreased by debits.
How do expenses affect stockholders’ equity?
Expenses decrease stockholders’ equity.
How are expense accounts affected by debits and credits?
Expense accounts are increased by debits and decreased by credits.
What is the effect of debits on revenues and expenses?
Debits decrease revenues and increase expenses.
What is the effect of credits on revenues and expenses?
Credits increase revenues and decrease expenses.
What should credits to revenue accounts exceed?
Credits to revenue accounts should exceed debits.
What should debits to expense accounts exceed?
Debits to expense accounts should exceed credits.
What is the normal balance for revenue accounts?
Revenue accounts normally show credit balances.
What is the normal balance for expense accounts?
Expense accounts normally show debit balances.
What are the major revenue accounts for the Chicago Cubs?
Admissions (ticket sales), Concessions, Television and radio, Advertising.
What are the major expense accounts for the Chicago Cubs?
Players’ salaries, Administrative salaries, Travel, Ballpark maintenance.
Where are common stock and retained earnings reported?
In the stockholders’ equity section of the balance sheet.
Where are dividends reported?
On the retained earnings statement.
Where are revenues and expenses reported?
On the income statement.
What happens to dividends, revenues, and expenses at the end of the period?
They are eventually transferred to retained earnings.
How does a change in dividends, revenues, or expenses affect stockholders’ equity?
A change in any one of these three items affects stockholders’ equity.
What is the basic equation in accounting?
Assets = Liabilities + Stockholders’ Equity
What is the purpose of the Income Statement?
To report revenues, expenses, and net income or net loss.
What does the Retained Earnings Statement include?
Beginning retained earnings, net income, and dividends.
What are the components of the Balance Sheet?
Assets, Liabilities, and Stockholders’ Equity.
What is included in Stockholders’ Equity?
Common stock and retained earnings.
What must total debits equal?
Total credits for the accounting equation to balance.
What is the normal balance for asset accounts?
Debit.
What is the normal balance for liability accounts?
Credit.
What accounts will Kate need for her business?
Asset accounts for investments and liability accounts for debts.
What does the Summary of Debit/Credit Rules illustrate?
The effects of debits and credits on each type of account.
What accounts would Hair It Is, Inc. likely use to record transactions for opening day?
Cash (debit balance), Supplies (debit balance), Notes Payable (credit balance), Equipment (debit balance), Accounts Payable (credit balance), Common Stock (credit balance)
If the business borrows money.
What is the first step in the recording process?
Analyze each transaction for its effect on the accounts.
What is the second step in the recording process?
Enter the transaction information in a journal.
What is the third step in the recording process?
Transfer the journal information to the appropriate accounts in the ledger.
What type of stockholders’ equity account does Kate need when she begins the business?
Common Stock.
What is the purpose of a journal in the recording process?
To record transaction information before it is posted to the ledger.
What is the final step in the recording process?
Post-closing trial balance.
What are journals in a computerized accounting system?
Journals are kept as files, and accounts are recorded in electronic databases.
What is the principle of double-entry accounting?
Every transaction must affect at least two accounts!
What is the journal referred to as?
The journal is referred to as the book of original entry.
What does the journal show for each transaction?
The journal shows the debit and credit effects on specific accounts.
What is the most basic form of journal used by companies?
Every company has a general journal.
What are the typical components of a general journal?
A general journal has spaces for dates, account titles and explanations, references, and two amount columns.
What are the significant contributions of the journal to the recording process?
- It discloses in one place the complete effects of a transaction.
- It provides a chronological record of transactions.
- It helps to prevent or locate errors.
What is journalizing?
Entering transaction data in the journal is known as journalizing.
What does a complete journal entry consist of?
- The date of the transaction.
- The accounts and amounts to be debited and credited.
- A brief explanation of the transaction.
What was the first transaction recorded for Softbyte Inc. on September 1?
Stockholders invested $15,000 cash in the corporation in exchange for common stock.
What was the second transaction recorded for Softbyte Inc. on September 1?
Softbyte purchased computer equipment for $7,000 cash.
How is the date of the transaction recorded in the journal?
The date of the transaction is entered in the Date column.
How is the debit account title recorded in the journal?
The debit account title is entered first at the extreme left margin of the column headed ‘Account Titles and Explanation.’
How is the credit account title recorded in the journal?
The credit account title is indented and entered on the next line in the column headed ‘Account Titles and Explanation.’
What appears below the credit account title in a journal entry?
A brief explanation of the transaction appears on the line below the credit account title.
What is the purpose of leaving a space between journal entries?
The blank space separates individual journal entries and makes the entire journal easier to read.
What does the Ref. column stand for in a journal?
The column titled Ref. stands for Reference and is left blank when the journal entry is made.
When is the Ref. column used in journal entries?
This column is used later when the journal entries are transferred to the ledger accounts.
Why is it important to use correct account titles in journalizing?
Erroneous account titles lead to incorrect financial statements.
What is the main criterion for selecting account titles?
Each title must appropriately describe the content of the account.
What should a company do once it chooses a specific account title?
It should record under that account title all later transactions involving the account.
What should you do in homework problems regarding account titles?
Use specific account titles when they are given.
What should you do when account titles are not given?
Select account titles that identify the nature and content of each account.
What should account titles used in journalizing not contain?
They should not contain explanations such as Cash Paid or Cash Received.
What is a simple entry?
An entry that involves only two accounts, one debit and one credit.
What is a compound entry?
An entry that requires three or more accounts in journalizing.
What is the standard format for a compound entry?
All debits must be listed before the credits.
What transaction did Butler Company engage in on July 1?
Butler Company purchased a delivery truck costing $14,000, paying $8,000 cash and agreeing to pay $6,000 on account later.
What activities should be recorded in a journal?
Any activities that affect assets, liabilities, or stockholders’ equity should be recorded in a journal.
What should you analyze regarding transactions?
Analyze the effects of transactions on asset, liability, and stockholders’ equity accounts.
How are cash and common stock recorded when issued for cash?
20,000
1. Cash
20,000
Common Stock
(Issued common stock for cash)
How is equipment purchased on account recorded?
4,800
2. Equipment
4,800
Accounts Payable
(Purchase of equipment on account)
What is recorded when no transaction has occurred?
- No entry because no transaction has occurred.
What is a ledger?
The entire group of accounts maintained by a company.
What information does the ledger provide?
The balance in each of the accounts and tracks changes in these balances.
What types of ledgers do companies use?
Various kinds, but every company has a general ledger.
What does a general ledger contain?
All the asset, liability, and stockholders’ equity accounts.
What accounts are included in the asset accounts of the general ledger?
Equipment, Land, Supplies, Accounts Receivable, Cash.
What accounts are included in the liability accounts of the general ledger?
Interest Payable, Salaries and Wages Payable, Accounts Payable, Unearned Service Revenue, Notes Payable.
What accounts are included in the stockholders’ equity accounts of the general ledger?
Salaries and Wages Expense, Service Revenue, Dividends, Retained Earnings, Common Stock.
How are accounts arranged in the ledger?
Accounts are arranged in the sequence presented in financial statements, starting with balance sheet accounts: assets, liabilities, stockholders’ equity, revenues, and expenses.
What does the ledger provide?
The ledger provides the balance in each of the accounts.
What does the Cash account show?
The Cash account shows the amount of cash available to meet current obligations.
What does the Accounts Receivable account show?
The Accounts Receivable account shows amounts due from customers.
What does the Accounts Payable account show?
The Accounts Payable account shows amounts owed to creditors.
What is the simple T-account form used for?
The simple T-account form is often useful for illustration purposes.
What is the typical form of account used in ledgers?
The typical form used in ledgers is a structured three-column form of account.
What are the three columns in the three-column form of account?
The three columns are debit, credit, and balance.
How is the balance in the account determined?
The balance in the account is determined after each transaction.
What is the purpose of the explanation space and reference columns?
They provide special information about the transaction.
What should a company do when its investment securities decline in value?
The company is supposed to reduce the recorded value of the securities on its balance sheet and record a loss.
What unethical behavior occurred at Credit Suisse Group during the financial crisis of 2008?
Employees were charged with intentionally overstating the value of securities that had suffered declines of approximately $2.85 billion.
What might have motivated employees to overstate the value of investment securities?
Fear of panic among shareholders and clients, and personal self-interest tied to bonuses based on the value of the investment securities.
What is posting in the recording process?
Posting is the procedure of transferring journal entries to the ledger accounts.
What does posting accumulate?
Posting accumulates the effects of journalized transactions into the individual accounts.
What is the first step in posting?
In the ledger, enter the date, journal page, and debit amount shown in the journal for the account(s) debited.
What should be written in the reference column of the journal when posting?
Write the account number to which the debit amount was posted.
What is the third step in posting?
In the ledger, enter the date, journal page, and credit amount shown in the journal for the account(s) credited.
What should be written in the reference column of the journal for credit amounts?
Write the account number to which the credit amount was posted.
What is a key item to remember when posting?
Posting should be performed in chronological order.
Why is timely posting important?
Timely posting ensures that the ledger is up-to-date.
What does the reference column of a ledger account indicate?
The reference column indicates the journal page from which the transaction was posted.
What should an accountant do after the last entry has been posted?
The accountant should scan the reference column in the journal to confirm that all postings have been made.
What is the explanation space of the ledger account used for?
The explanation space of the ledger account is used infrequently because an explanation already appears in the journal.
What is the purpose of the Chart of Accounts?
The Chart of Accounts lists the accounts and the account numbers that identify their location in the ledger.
How does the number of accounts vary between companies?
The number of accounts depends on the amount of detail management desires; smaller companies may have fewer accounts than larger corporations.
What is the typical numbering system for accounts?
The numbering system usually starts with balance sheet accounts followed by income statement accounts.
What do the account numbers 101-199 represent in Pioneer Advertising Inc.’s chart of accounts?
Accounts 101-199 indicate asset accounts.
What do the account numbers 200-299 represent?
Accounts 200-299 indicate liabilities.
What do the account numbers 301-399 represent?
Accounts 301-399 indicate stockholders’ equity accounts.
What do the account numbers 400-499 represent?
Accounts 400-499 indicate revenues.
What do the account numbers 601-799 represent?
Accounts 601-799 indicate expenses.
What do the account numbers 800-899 represent?
Accounts 800-899 indicate other revenues.
What do the account numbers 900-999 represent?
Accounts 900-999 indicate other expenses.
What is included in Pioneer Advertising Inc.’s assets?
Assets include Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, and Accumulated Depreciation—Equipment.
What liabilities does Pioneer Advertising Inc. have?
Liabilities include Notes Payable, Accounts Payable, Unearned Service Revenue, Salaries and Wages Payable, and Interest Payable.
What stockholders’ equity accounts are listed for Pioneer Advertising Inc.?
Stockholders’ equity accounts include Common Stock, Retained Earnings, Dividends, and Income Summary.
What revenues are reported for Pioneer Advertising Inc.?
Revenues include Service Revenue.
What expenses are reported for Pioneer Advertising Inc.?
Expenses include Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense, Rent Expense, and Utilities Expense.
What is the account for Interest Expense in Pioneer Advertising Inc.?
The account for Interest Expense is 905.
Why do companies leave gaps in their chart of accounts?
Companies leave gaps to permit the insertion of new accounts as needed during the life of the business.
What should a company do when it records a financial transaction involving revenue?
If a company determines that a transaction involves revenue, it records revenue.
What happens if a company has an expense in a transaction?
If it has an expense, then it records an expense.
What issue did Hain Celestial Group face regarding revenue recognition?
Hain Celestial Group did not provide income information for over a year due to revenue irregularities.
What was the consequence of Hain Celestial Group missing four deadlines for reporting earnings?
The food company suffered a 34% drop in its stock price.
What fraudulent activity was Obsidian Energy charged with?
Obsidian Energy was charged with fraudulently moving millions of dollars in expenses from operating expenses to capital expenditure accounts.
Why is it important to get the basic transaction right?
Getting the basic transaction right is the foundation for relevant and representationally faithful financial statements.
What does the transaction analysis process involve?
The purpose of transaction analysis is to identify the type of account involved and determine whether to make a debit or a credit to the account.
What should you do before preparing a journal entry?
You should always perform transaction analysis before preparing a journal entry.
What resource is available for learning about the accounting cycle?
An Accounting Cycle Tutorial is available in the Wiley online course.
What is a transaction in accounting?
A transaction is an economic event that affects the financial position of a business.
What is the basic analysis equation in accounting?
Assets = Liabilities + Stockholders’ Equity
What is debit-credit analysis?
Debits increase assets and expenses, while credits increase liabilities, revenues, and stockholders’ equity.
What is a journal entry?
A journal entry records the details of a transaction in the general journal.
What does it mean to post to the ledger?
Posting to the ledger involves transferring journal entry information to the general ledger accounts.
What happens on October 1 when C. R. Byrd invests cash in Pioneer Advertising?
Cash increases by $10,000 and Common Stock increases by $10,000.
What is the journal entry for the investment of cash?
Debit Cash $10,000 and credit Common Stock $10,000.
What is the cash flow impact of the investment?
Cash Flows increase by $10,000.
What happens on October 1 when Pioneer purchases office equipment?
Equipment increases by $5,000 and Notes Payable increases by $5,000.
What is the journal entry for the purchase of office equipment?
Debit Equipment $5,000 and credit Notes Payable $5,000.
What is the cash flow impact of the purchase of office equipment?
Cash Flows have no effect.
What is Unearned Service Revenue?
Unearned Service Revenue is considered a liability even though the word ‘payable’ is not used.
What happens when cash is received for future services?
When cash is received for future services, it is recorded as Unearned Service Revenue, increasing liabilities.
What is the journal entry for receiving a cash advance of $1,200?
Debit Cash $1,200 and credit Unearned Service Revenue $1,200.
(Received cash from R. Knox for future services)
What is the effect on assets and liabilities when cash is received for future services?
Assets increase by $1,200 (Cash) and liabilities increase by $1,200 (Unearned Service Revenue).
What happens when Pioneer pays office rent in cash?
When Pioneer pays office rent, the Rent Expense account increases and Cash decreases.
What is the journal entry for paying $900 in office rent?
Debit Rent Expense $900 and credit Cash $900.
(Paid October rent)
What is the effect on assets and stockholders’ equity when rent is paid?
Assets decrease by $900 (Cash) and stockholders’ equity decreases by $900 (Rent Expense).
What is the effect of paying for a one-year insurance policy?
The asset Cash decreases by $600, and the asset Prepaid Insurance increases by $600.
Example: On October 4, Pioneer pays $600 for a one-year insurance policy that will expire next year on September 30.
What happens to assets when a payment is made for prepaid expenses?
Debits increase assets, so Prepaid Insurance is debited by $600, and Cash is credited by $600.
Example: Debit Prepaid Insurance $600; Credit Cash $600.
What is the impact of purchasing supplies on credit?
The asset Supplies increases by $2,500, and the liability Accounts Payable increases by $2,500.
Example: On October 5, Pioneer purchases an estimated 3-month supply of advertising materials on account for $2,500.
What is the journal entry for purchasing supplies on account?
Debit Supplies $2,500 and credit Accounts Payable $2,500.
Example: General Journal entry on Oct. 5: Supplies 126 $2,500; Accounts Payable 201 $2,500.
What is the cash flow effect of purchasing supplies on credit?
There is no effect on cash flows.
Example: Cash Flows remain unchanged.
What happens when Pioneer hires employees on October 9?
There is no effect on cash flows as it is only an agreement to begin a business transaction on October 15.
A business transaction has not occurred yet.
What is the weekly salary for each employee hired by Pioneer?
Each employee is to receive a weekly salary of $500 for a 5-day work week.
When is the first payment to employees scheduled?
The first payment is made on October 26.
What occurs on October 20 for Pioneer?
Pioneer receives $10,000 in cash from Copa Company for advertising services performed in October.
How does the cash flow change after receiving $10,000?
The asset Cash increases by $10,000 and the revenue account Service Revenue increases by $10,000.
What is the debit entry for the cash received?
Debit Cash $10,000 to increase assets.
What is the credit entry for the service revenue?
Credit Service Revenue $10,000 to increase revenues.
What is the journal entry for the transaction on October 20?
General Journal entry:
Oct. 20
Cash 10,000
Service Revenue 10,000
(Received cash for services performed)
What is a transaction?
A transaction is an economic event that affects the financial position of a business.
What is basic analysis in accounting?
Basic analysis involves examining transactions to determine their impact on accounts.
What is the equation analysis?
Equation analysis refers to the examination of the accounting equation: Assets = Liabilities + Stockholders’ Equity.
What is debit-credit analysis?
Debit-credit analysis involves determining which accounts are debited and credited in a transaction.
What is a journal entry?
A journal entry records the details of a transaction, including accounts affected and amounts.
What does it mean to post to a ledger?
Posting to a ledger means transferring journal entry information to the respective accounts in the ledger.
What happens when salaries are paid?
When salaries are paid, the Salaries and Wages Expense account increases and Cash decreases by the same amount.
Example: On October 26, Pioneer pays $4,000 in salaries.
What is the effect of debits on expenses?
Debits increase expenses.
What is the effect of credits on assets?
Credits decrease assets.
What occurs when a dividend is declared and paid?
When a dividend is declared and paid, the Dividends account increases and Cash decreases.
Example: On October 31, Pioneer pays a $500 cash dividend.
What is the effect of debits on dividends?
Debits increase dividends.
What is the effect of credits on cash?
Credits decrease cash.
What is the date of the first journal entry for Pioneer Advertising Inc.?
October 1, 2027
What account is debited for the issuance of common stock?
Cash
What account is credited when common stock is issued for cash?
Common Stock
What is the purpose of the note payable issued on October 4?
Issued 3-month, 12% note for office equipment
What account is debited for the advance received from R. Knox?
Cash
What account is credited for the advance received from R. Knox?
Unearned Service Revenue
What expense is recorded for October office rent?
Rent Expense
What account is debited for the prepaid insurance policy?
Prepaid Insurance
What account is credited when supplies are purchased on account?
Accounts Payable
What account is debited when cash is received for services performed?
Cash
What account is credited for salaries paid to date?
Salaries and Wages Expense
What account is debited when a cash dividend is declared and paid?
Dividends
What is shown in Illustration 2.32?
The ledger, with all balances in red.
What is the Cash account number?
No. 101
What was the beginning balance of Cash on March 1?
$600
What is the ending balance of Cash after posting transactions?
$2,388
What is the Supplies account number?
No. 126
What is the Prepaid Insurance account number?
No. 130
What is the Equipment account number?
No. 157
What is the Notes Payable account number?
No. 200
What is the Accounts Payable account number?
No. 201
What is the Unearned Service Revenue account number?
No. 209
What is the Common Stock account number?
No. 311
What is the Dividends account number?
No. 332
What is the Service Revenue account number?
No. 400
What is the Salaries and Wages Expense account number?
No. 726
What is the Rent Expense account number?
No. 729
What does posting involve?
Transferring the journalized debits and credits to specific accounts in the ledger.
How do you determine the ending balance?
By netting the total debits and credits.
What is a trial balance?
A trial balance is a list of accounts and their balances at a given time.
When do companies usually prepare a trial balance?
Companies usually prepare a trial balance at the end of an accounting period.
In what order are accounts listed in a trial balance?
Accounts are listed in the order of Assets, Liabilities, Stockholders’ equity, Revenues, and Expenses.
How are debit and credit balances presented in a trial balance?
Debit balances appear in the left column and credit balances in the right column.
What must be true about the totals of the debit and credit columns in a trial balance?
The totals of the two columns must be equal.
What does a trial balance prove?
The trial balance proves the mathematical equality of debits and credits after posting.
What can a trial balance uncover?
A trial balance may uncover errors in journalizing and posting.
What are the steps for preparing a trial balance?
- List the account titles and their balances in the appropriate debit or credit column.
- Total the debit and credit columns.
- Verify the equality of the two columns.
What is the total debit and credit for Pioneer Advertising’s trial balance?
Total debits and total credits are both $28,700.
What is a trial balance?
A trial balance is a necessary checkpoint for uncovering certain types of errors.
What does a trial balance reveal?
It can reveal errors such as if only the debit portion of a journal entry has been posted.
Does a trial balance guarantee freedom from recording errors?
No, a trial balance does not guarantee freedom from recording errors.
What are some limitations of a trial balance?
Errors may exist even if the trial balance columns agree, such as:
1. A transaction is not journalized.
2. A correct journal entry is not posted.
3. A journal entry is posted twice.
4. Incorrect accounts are used.
5. Offsetting errors are made.
What happens if equal debits and credits are posted?
The total debits will equal the total credits, even if they are to the wrong account or in the wrong amount.
What is the difference between an error and an irregularity?
An error is an unintentional mistake, while an irregularity is an intentional misstatement.
What are common causes of errors in a trial balance?
Errors generally result from mathematical mistakes, incorrect postings, or transcribing data incorrectly.
What should you do if a trial balance does not balance?
Determine the amount of the difference and follow these steps:
1. Re-add the trial balance columns if the error is $1, $10, $100, or $1,000.
2. Check for a balance equal to half the error if divisible by 2.
3. Retrace account balances if divisible by 9.
4. Scan the ledger and journal for omitted postings.
How are dollar signs used in trial balances?
Dollar signs are typically used only in the trial balance and financial statements, shown for the first item and the total of the column.
What is the purpose of underlining in a trial balance?
A single line is placed under the column for totals, and total amounts are double-underlined to indicate final sums.
Why is accuracy important in recording transactions?
Accuracy is crucial because mistakes can lead to significant financial penalties and loss of trust.
For example, Bank One Corporation was fined $1.8 million due to an unreliable accounting system.
What issues arose with Fannie Mae’s accounting?
Fannie Mae announced large accounting errors that alarmed investors, regulators, and politicians, raising concerns about undetected problems.
This is significant as Fannie Mae plays a key role in the home-mortgage market.
What was the state of Waste Management, Inc.’s financial records?
Before overhauling its accounting system, Waste Management, Inc. had disorganized financial records, resulting in 10,000 employees receiving erroneous pay slips.
What is the purpose of the Sarbanes-Oxley Act?
The Sarbanes-Oxley Act was enacted to reduce the occurrence of financial reporting errors by increasing employee responsibility.
What must be true for companies to issue financial statements?
Companies must ensure that their accounting equations (debits and credits) are balanced at year-end.
What accounts are included in SnowGo Corporation’s trial balance?
SnowGo Corporation’s trial balance includes accounts such as Cash, Accounts Receivable, Prepaid Insurance, Equipment, and various liabilities and equity accounts.
What is the total debit and credit in SnowGo Corporation’s trial balance?
The total debit and credit in SnowGo Corporation’s trial balance is $158,000.
What is the main difference between the Christian Bible and the Jewish Bible?
The Christian Bible includes the New Testament, while the Jewish Bible does not.
Are the Jewish Hebrew Bible and the Christian Old Testament identical?
No, they are not identical.
What does the term ‘Canon’ originally refer to?
‘Canon’ is a Greek word meaning ‘reed’ and came to refer to a rule or standard by which things could be compared or judged.
How was ‘canon’ used by Alexandrian grammarians?
They used ‘canon’ to refer to a list of standard or classic authors worthy of attention and imitation.
What is the connotation of ‘canon’ when used in reference to the Bible?
It marks a closed, unchangeable set of texts of central religious significance.
What does the rabbinic comment on Ecclesiastes 12.12 suggest about the Bible?
It suggests that the Bible (with its interpretation) is the single sufficient text for the religious community.
How does the canonization process of the Hebrew Bible differ from that of the New Testament?
The canonization of the Hebrew Bible is obscure and not attested in contemporaneous sources, unlike the New Testament which was canonized at councils.
What theory did many scholars hold about the canonization of the Hebrew Bible until the mid-twentieth century?
They thought it was canonized in the same fashion as the New Testament, positing an early rabbinic council at Jabneh.
What do some scholars prefer to use instead of the word ‘canon’ when referring to the Hebrew Bible?
They prefer to speak of how the Hebrew Bible became the Hebrew Bible.
What is the earliest Jewish ‘Bible’ according to most scholars?
The Torah or Pentateuch, which includes the five books from Genesis through Deuteronomy.
What was the misconception about the development of the Torah associated with Ezra?
Many scholars had associated the development of the Torah with Ezra, seeing the ‘law of your God’ as the Pentateuch, but this assertion goes beyond the evidence.
When did the Jewish community recognize the Torah as central?
By the Persian period (sixth to fourth centuries BCE).
What is the first part of the tripartite canon according to rabbinic tradition?
The Torah is the first part of a tripartite canon, followed by Nevi’im (prophets) and Ketuvim (writings).
What acronym is used to refer to the Hebrew Bible?
The acronym Tanak(h) stands for Torah, Nevi’im, and Ketuvim.
How many books are in the Hebrew Bible according to traditional Jewish sources?
There are twenty-four canonical books according to traditional Jewish sources.
What are the components of the twenty-four books in the Hebrew Bible?
There are five in the Torah, eight in Nevi’im, and eleven in Ketuvim.
What is the historical significance of the Alexandrian canon?
Older scholarship referred to the four-part, twenty-two-book arrangement as the Alexandrian canon, in contrast to the tripartite, twenty-four-book Palestinian canon.
What is the composition of Nevi’im?
Nevi’im is composed of the former prophets (Joshua, Judges, Samuel, Kings) and the latter prophets (Isaiah, Jeremiah, Ezekiel, and the twelve minor prophets).
What books are included in Ketuvim?
Ketuvim includes Psalms, Proverbs, Job, the five scrolls (Ruth, Song of Solomon, Ecclesiastes, Lamentations, Esther), Daniel, Ezra-Nehemiah, and Chronicles.
What does the term ‘holy writings’ refer to?
The earliest rabbinic term for the Bible is ‘holy writings.’
What is the significance of the Dead Sea Scrolls in relation to the biblical canon?
The Dead Sea Scrolls do not contain a copy of Esther, while many manuscripts of Jubilees have survived, indicating different conceptions of the Bible.
What does the bipartite structure of the Bible refer to?
The bipartite structure may refer to the Torah and other works, as seen in references to ‘the law and the prophets.’
How is the tripartite canon reflected in rabbinic literature?
The tripartite canon is reflected in sources like Luke 24:44, which refers to ‘the law of Moses, the prophets, and the psalms.’
What does the canonization process imply about the order of Nevi’im and Ketuvim?
The evidence suggests that Nevi’im was canonized before Ketuvim.
What was the timeline for the canonization of the Hebrew Bible?
The Torah was canonized in the Persian period, Nevi’im in the late Persian or early Greek period, and Ketuvim last, possibly around the time of the destruction of the Second Temple.
How many biblical books did Josephus refer to?
Josephus referred to twenty-two biblical books.
What are some differences found in early biblical manuscripts?
Differences can include variant spellings and major textual variations that affect meaning.
