Accounting I - Chapter 8 Review Tool

Question 1

Capital

Answer 1

Accounts for the cash and cash equivalents that a business possesses.

A net income or loss will increase or decrease this.

Question 2

Credit

Answer 2

Transfer of value FROM that account.

An entry that records a decrease in assets or an increase in liability. Decrease in expenses or an increase in revenue.

For temporary accounts, a credit increases net income on the company’s income statement, while a debit reduces net income

A net income is entered in this column of the Balance Sheet section

Question 3

Balance Sheet Section

Answer 3

Asset, liability, and owner’s equity accounts. After Trial Balance section, extend/transfer appropriate amounts to this section.

Includes all permanent general ledger accounts

Question 4

Debit

Answer 4

Transfer of value TO that account

A net income is entered in this column at the bottom of the Income Statement section.

Question 5

Double Rule

Answer 5

A double line drawn under an amount when the amounts above are totals and no other entries will be made.

Question 6

Extending

Answer 6

Transferring balances from the Trial Balance

Question 7

Heading

Answer 7

Explains who, what, when of the work sheet

Question 8

Income Statement Section

Answer 8

Includes only the temporary general ledger accounts.

Question 9

Matching Principle

Answer 9

Expenses incurred in an accounting period are matched against revenue for the same period (expenses must be recorded in the same period as related revenues)

Ex. if they earn $10,000 worth of product sales in November, the company will pay them $1,000 in commissions in December. The matching principle stipulates that the $1,000 worth of commissions should be reported on the November statement along with the November product sales of $10,000.

Question 10

Net Income

Answer 10

When the amount left after expenses for the period have been subtracted from revenue for the period. (expenses < revenue)

Question 11

Net Loss

Answer 11

When the Income Statement debit column total is greater than the Income Statement credit column total. (expenses > revenue)

Question 12

Ruling

Answer 12

Drawing a line under a column of amounts

Question 13

Single Rule

Answer 13

Line drawn under a column of amounts meaning that the entries above are ready to be totaled.

Question 14

Transposed

Answer 14

When digits of a value are accidentally reversed

Question 15

Trial Balance

Answer 15

Includes all the general ledger accounts

Question 16

Worksheet

Answer 16

A working paper used to collect information from the ledger accounts

Question 17

Given a trial balance, heading?

Answer 17

1. Who
2. What (“Work Sheet”)
3. When (“For the Month Ended [Month Day, Year]”)

Question 18

Given a trial balance, single rule?

Answer 18

1 line to derive total balance

Question 19

Given a trial balance, double rule?

Answer 19

2 lines to end the work sheet

Question 20

Given a trial balance, balanced?

Answer 20

Amounts equal in the trial balance (debits = credits)

Question 21

Given a trial balance, transposed? affected?

Answer 21

Ex. 56 is recorded as 65
It affects the trial balances
Divide by 9 to know for sure

Question 22

Given a trial balance, net income/loss?

Answer 22

Net Income: expenses < revenue
Net Loss: expenses > revenue