Chapter 4: Types of Major Accounts Flashcards
The basic storage of information in accounting.
Account
This is income that arises in the course of the ordinary activities of a business
Revenue
This is income that may or may not arise in the course of the ordinary activities of a business.
Gains
These are decreases in assets or increases in liabilities resulting in to decrease in equity, other than those relating to transactions with the business owners.
Expense
These are expenses that may, or may not arise in the course of the ordinary activities of the entity.
Losses
It is a list of all the accounts used by a business.
Chart of accounts
This refers to the left side of the account
Debit
This refers to the right side of the account
Credit
It is the financial statement that presents the assets, liabilities, and equity of a business
Balance sheet
It is the financial statement that presentsthe income and expenses and consequently the profit or loss, of a business
Income statement
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME or EXPENSE
Accounts receivable
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Interest expense
Expense
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Cash
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Owner’s Capital
Equity
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Equipment
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Freight-out
Expense
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Gains
Income
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Sales
Income
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Inventory
Assets
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Unearned income
Liabilities
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Notes receivable
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Salaries expense
Expense
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Salaries payable
Liabilities
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Owner’s drawings
Equity
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Building
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Cost of Sales
Expense
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Service fees
Income
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Advances from customers
Equity
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Prepaid insurance
Asset
Indicate whether each of the accounts listed below is an ASSET, LIABILITY, EQUITY, INCOME, or EXPENSE
Depreciation
Expense
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Inventory
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Accounts receivable
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Interest expense
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Salaries payable
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Owner’s Capital
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Equipment
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Freight-out
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Gains
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Sales
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Unearned income
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Notes receivable
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Cash
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Salaries expense
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Owner’s drawings
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Building
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Cost of sales
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Service fees
Income statement
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Unearned revenue
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Prepaid insurance
Balance sheet
Indicate whether each of the accounts listed below is a BALANCE SHEET account or an INCOME STATEMENT account
Depreciation
Income statement
True or False
The difference between the total debits and total credits in an account represents the balance of that account
True
True or False
An account has total debits of 100 and total credits of 20. This account has a balance of 120
False
True or False
An account has total debits of 100 and total credits of 20. This account has a balance of 120
The balance of the account above is referred to as a debit balance
True
True or False
If the total credits in an account exceed the total debits, the account has a debit balance
False
True or False
Debit refers to the left side of an account while credit refers to the right
True
True or False
An account is usually depicted through a “T-account”. A “T-account” is called such because it tastes like tea
False
True or False
Assets, liabilities, and equity are income statement accounts
False
True or False
The “used up” portion of a prepayment (e.g., prepaid rent) is an expense while the “unused” portion is an asset
True
True or False
Your business is renting a commercial space. The monthly rent is 100. At the start of Month 1, you paid three-month advanced rent of 300
If you prepare financial statements at the end of Month 1, your balance sheet will show a “prepaid rent” of 100.
False
True or False
Your business is renting a commercial space. The monthly rent is 100. At the start of Month 1, you paid three-month advanced rent of 300
If you prepare financial statements at the end of Month 1, your income statement will show a “rent expense” of 100
True
True or false
Accounts receivable represents receivables supported by oral or informal promise to pay.
True
True or False
Money is recorded in the “cash” account
True
True or False
Notes payable refers to obligations supported by oral or informal promise to pay by the debtor.
False
True or False
An entity that borrows money from the bank will most likely present interest income in its income statement
False
True or False
Accounts payable and accounts receivable are opposites, meaning if Entity A has an account payable to Entity B, Entity B, in return, has an account receivable from Entity A
True
True or False
There are three major types of accounts used in accounting
False
True or False
Allowance for bad debts represents the aggregate amount of estimated losses from uncollectible accounts receivable
True
True or False
Cost of sales (or Cost of Goods Sold) represents the value of inventories that have been sold, and consequently charged as an expense, during the accounting period
True
True or False
Freight out is an expense account
True
True or False
The building is a liability account
False
Receivables that are supported only by oral or informal promises to pay
a. cash
b. accounts receivable
c. accounts payable
d. notes receivable
b. accounts receivable
Salaries earned by employees but not yet paid
a. salaries expense
b. salaries payable
c. employee points
d. employee credits
b. salaries payable
Salaries earned by employees, whether paid or not
a. salaries expense
b. salaries auable
c. employee points
d. employee credits
a. salaries expense
Revenues earned from the sale of goods
a. inventory income
b. goods income
c. sales
d. service fees
c. sales
Entity A sells an asset that is not an inventory for 100 The carrying amount of the asset is 80. The difference represents a
a. gain
b. loss
c. revenue
d. interest income
a. gain
Investments or contributions by the business owner and profits and losses of the business are recorded in this account
a. owner’s capital
b. owner’s drawing
c. sales
d. salaries expense
a. owner’s capital
Income collected in advance but not yet paid
a. unearned income
b. early income
c. sales
d. service fees
a. unearned income
Obligations supported by oral or informal promises to pay by the debtor
a. cash
b. accounts receivable
c. accounts payable
d. notes payable
c. accounts payable
The cost of inventories that have been sold during the period
a. cost of sales
b. cost of inventories
c. inventory
d. selling expense
a. cost of sales
The amount of estimated losses from uncollectible accounts receivable
a. good expense
b. bad expense
c. ugly expense
d. bad debt expense
d. bad debt expense
Goods that are held for sale by a business
a. cash
b. accounts receivable
c. accounts payable
d. inventory
d. inventory
The structure owned and being used by a business in its operations
a. building
b. base
c. castle
d. kingdom
a. building
The portion of the cost of a building that is already recognized as an expense since the building was acquired and made available for use
a. accumulate depreciation - building
b. upkeep
c. accumulated upkeep
d. repairs and maintenance expense
a. accumulate depreciation - building
The cost of unused office and other supplies
a. prepaid rent
b. prepaid supplies
c. cash
d. accounts receivable
b. prepaid supplies
Interest incurred by a borrower but not yet paid
a. interest payable
b. interest expense
c. notes payable
d. notes receivable
a. interest payable
Interest incurred by a borrower, whether paid or not
a. interest payable
b. interest expense
c. notes payable
d. notes receivable
b. interest expense
Obligations supported by written or formal promises to pay by the debtor in the form of promissory notes
a. notes receivable
b. accounts receivable
c. accounts payable
d. notes payable
d. notes payable
The seller’s cost of delivering goods to customer
a. freight-out
b. freight-in
c. freight-good
d. freight-bad
a. freight-out
The cost of promotional or marketing activities during the period
a. market expense
b. advertising expense
c. groceries
d. insurance expense
b. advertising expense
The cost of gasoline, hotel accommodation, taxi fare, and similar expenditures
a. transportation and travel expense
b. interest expense
c. taxi expense
d. gas expense
a. transportation and travel expense
Receivables that are supported by written or formal promises to pay in the form of promissory notes
a. inventory
b. accounts receivable
c. notes payable
d. notes receivable
d. notes receivable
It refers to money held and bank deposits that are available for unrestricted use by the business
a. cash
b. accounts receivable
c. inventory
d. notes receivable
a. cash
The unused portion of rent paid in advance
a. prepaid rent
b. rent expense
c. cash
d. inventory
a. prepaid rent
The lot on which the building of the business has been constructed
a. building
b. lot
c. land
d. earth
c. land
Interest earned by a lender but not yet collected
a. interest receivable
b. interest income
c. notes payable
d. notes receivable
a. interest receivable
Interest earned by a lender, whether collected or not
a. interest receivable
b. interest income
c. notes payable
d. notes receivable
b. interest income
Temporary withdrawals of the owner from the business during the period are recorded in this account
a. owner’s capital
b. owner’s drawing
c. withdrawal expense
d. salaries expense
b. owner’s drawing
Revenues earned used in an accounting period
a. unearned income
b. rendering income
c. sales
d. service fees
d. service fees
The cost of supplies in an accounting period
a. prepaid supplies
b. supplies cost
c. supplies expense
d. surprise expense
c. supplies expense
The portion of the cost of a building or equipment that has been charged as an expense in the current accounting period
a. accumulated deduction
b. deduction expense
c. accumulated depreciation
d. depreciation expense
d. depreciation expense
You are a business owner. You provided 5M cash to your business as the initial capital. Which of the following accounts is increased by this transaction
a. owner’s payable
b. owner’s capital
c. accounts receivable
d. accounts payable
b. owner’s capital
You purchased goods that are held for sale in the ordinary course of business activities. Which of the following accounts is increased by this transaction
a. cash
b. owner’s capital
c. accounts receivable
d. inventory
d. inventory
You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year. Which of the following accounts is increased by this transaction
a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable
b. notes payable
You obtained a 1M loan from a financing company. The financing company made you sign a contract promising to repay the loan after a year.
From the point of view of the financing company who lent you the loan. which of the following accounts is increased?
a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable
d. notes receivable
A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. Which of the following accounts is increased by this transaction?
a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable
c. accounts receivable
A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week.
From the point of view of the customer who bought the goods from your business, which of the following accounts is increased?
a. accounts payable
b. notes payable
c. accounts receivable
d. notes receivable
a. accounts payable
You purchased a computer for 50,000. Which of the following accounts is increased by this transaction?
a. cash
b. owner’s capital
c. computer equipment
d. inventory
c. computer equipment
You purchased a computer for 50,000. You expect to use the computer over the next 5 years. How much is the depreciation expense per year?
a. 50,000
b. 10,000
c. 7, 143
d. 5,000
b. 10,000
You purchased a computer for 50,000. You expect to use the computer over the next 5 years. After using the computer for two years, how much is the balance of the Accumulated depreciation - computer equipment account?
a. 50,000
b. 30,000
c. 20,000
d. 10,000
c. 20,000
You purchased a computer for 50,000. After the end of Year 2, how much is the carrying amount of the computer equipment?
a. 50,000
b. 30,000
c. 20,000
d. 0
b. 30,000
