Chapter 4 - College Accounting: A Practical Approach Flashcards
What is a worksheet?
A tool accountants use to organize and check data before preparing formal financial statements
Is a worksheet a formal statement?
NO
How many sections does the worksheet have?
5
What are the sections of the worksheet?
- Trial Balance
- Adjustments
- Adjusted Trial Balance
- Income Statement
- Balance Sheet
What are the purpose of adjusting entries?
Bring accounts up to date and recognize the revenue & expenses in the proper accounting period
What are some examples of items you need to adjust on the worksheet?
- supplies
- Prepaids
- Equipment (depreciation)
- expense (salaries, rent and supplies)
What is depreciation?
The allocation of the cost of an asset over its useful life
What is the most simple method of depreciation?
Straight line method
What does the below equation represent?
(Cost - Residual Value) / Estimated Years of Usefulness
Straight line depreciation
Are dollar signs and commas used on worksheets?
NO
Does a trial balance have to be completed separately from the worksheet?
NO it can be prepared right in the work sheet or if you prefer separate
Should adjustments on the work sheet still follow the rules of double entry accounting?
YES
What is the original cost considered in accounting? The Term for it..
Historical Cost
Which reports reflect the historical cost?
Balance sheet and ledger
What determines the used up amount of equipment over a set period of time?
Depreciation
What rules are set forth by the CRA for reporting depreciation for tax purposes?
CCA / Capital Cost Allowance
What is the definition of the straight line depreciation method?
Equal amounts are take over a successive period of time
What is residual value?
The value of an item at the end of its useful life
Depreciation is what kind of account?
Expense
Accumulated Depreciation is what type of account?
Contra-Asset
What is the purpose of the accumulated depreciation account?
Keep a running total of depreciation apart from the historical cost
Do Contra-Asset accounts work the same as asset accounts in terms of debits and credits?
NO
What is a book value?
Remaining portion of the historical cost after depreciation is deducted that can be further reduced
What is another name for book value?
Carrying Value
Are book value and market value the same?
NO
What would cause the historical cost to change?
If it is sold, retired or improved
What rules do you want to think of when dealing with accrued salaries?
That revenue and expenses are recorded when they occurred not when the exchange of cash happens
What is an accrued salary?
Unrecorded or unpaid salary’s that are not yet due
What is another name for accrued salaries?
Salaries Payable
What type of accounts is accrued salaries?
Liability
When doe the accrued salaries liability account get reduced?
When the salary is paid
What information does the adjusted trial balance show?
Summarizes the previous two sections of the worksheet
To get the adjusted trial balance, what do you do?
Add the two previous columns and transfer the totals to the side with the larger figure
What rule should you keep in mind when calculating the adjusted trial balance?
Debits and credits must balance
What information doe the income statement on the worksheet show?
The adjusted revenue and expenses from the adjusted trial balance
What two accounts are not listed on the income statement that we have added to the worksheet?
Accrued salaries and accumulated deprecation
What are the three steps of preparing the income statement on the worksheet?
- Total the debits and credits
- Calculate the difference and place in the correct columns
- Total the 2 columns
What accounts transfer from the adjust trial balance to the balance sheet on the worksheet?
- assets
- contra assets
- liabilities
- capital
- withdrawals
Which column does the net income carry over to?
Credit column
What should you do with your finished worksheet before preparing the formal statements?
Double check your work
For the formal income statement, will all the figures be listed in the worksheet?
YES
Are there debit and credit columns on the formal income statement?
NO
What is the inside column of the formal income statement used for?
Subtotalling
What does not go on the formal income statement ?
Withdrawals
Which is the first formal statement to be prepared after the worksheet?
Income Statement
What will not be potentially portrayed on the worksheet you may need for preparing the formal statement of owners equity?
Beginning capital
Where can you find the beginning capital for the formal statement of owners equity?
The Ledger
What often doesn’t matche between the worksheet and the formal balance sheet?
The accounts
Why do the accounts not match on the worksheet and the formal balance sheet?
They are grouped differently
What account reduces the equipment on the formal balance sheet from the worksheet?
Accumulated deprecation
What account reduces the owners equity on the formal balance sheet from the worksheet?
Withdrawals
Why must you make the adjustments from the worksheet?
To ensure the ledger accounts correspond with the reports
What do you use to adjust the journal with the adjustments from the worksheet?
Adjusting journal
When must you make adjustments from worksheet by?
The start of the next accounting period
