Chapters 6 & 7 Flashcards
A record of the daily transactions of a business is a:
❏ a. balance sheet.
❏ b. journal.
❏ c. ledger.
❏ d. chart of accounts.
b. The journal is a chronological record of transactions, in order of
their occurrence.
A record of the business transactions by account is found in the:
❏ a. balance sheet.
❏ b. journal.
❏ c. ledger.
❏ d. chart of accounts.
c. The ledger is a record of business transactions by account.
What is normal accounting flow?
❏ a. Ledger > Journal > Transaction > Financial
statements
❏ b. Transaction > Ledger > Journal > Financial
statements
❏ c. Transaction > Journal > Ledger > Financial
statements
❏ d. Journal > Transaction > Ledger > Financial
statements
c. Transaction > Journal > Ledger > Financial
statements
A financial transaction is first posted in your organization’s:
❏ a. chart of accounts.
❏ b. ledger.
❏ c. journal.
❏ d. balance sheet.
c. The journal is the first place a transaction is recorded.
In which type of account (asset, liability, expense or revenue)
would each of the following entries appear on the books?
❏ a. A new payroll computer
❏ b. Purchase of computer paper
❏ c. Money in a payroll checking account
❏ d. Wages paid to employees
❏ e. Social security tax and Medicare tax withheld but not deposited
❏ f. Employer cost of group-term life insurance
❏ g. Office furniture
❏ h. Deposit of employer portion of social security tax and Medicare
tax
❏ i. Mortgage on the addition to your building
a. Asset
b. Expense (It is used
to produce a service.)
c. Asset
d. Expense
e. Liability
f. Expense
g. Asset
h. Expense
i. Liability
How would each of the following be posted?
❏ a. Increase an asset account.
❏ b. Decrease a liability account.
❏ c. Increase an expense account.
❏ d. Decrease an asset account.
❏ e. Increase a revenue account.
a. Debit (DR)
b. Debit (DR)
c. Debit (DR)
d. Credit (CR)
e. Credit (CR)
Would each of the following entries be posted in the account as a
debit (DR) or a credit (CR)?
❏ a. Purchase of a desk in an asset account
❏ b. Purchase of stationery in an expense account
❏ c. Withdrawal from a payroll checking account
❏ d. Employer contributions to a 401(k) plan in an expense account
❏ e. State income tax withheld but not deposited in a liability account
❏ f. Federal income tax withheld but not paid in a liability account
❏ g. Mortgage payment in a liability account
Remember how increases (and decreases) are posted in each type
of account.
a. Debit (DR)
b. Debit (DR)
c. Credit (CR)
d. Debit (DR)
e. Credit (CR)
f. Credit (CR)
g. Debit (DR)
What is an IRS decision on how the tax laws apply to a set of facts
involving a single taxpayer called?
❑ a. Private Letter Ruling
❑ b. News Release
❑ c. Revenue Ruling
a. A Private Letter Ruling provides direction to a specific taxpayer
requesting guidance on how the law will be enforced given specific
actions that the taxpayer may have taken or wishes to take. These
determinations can be used only by the taxpayer asking for the
ruling.
You receive a penalty notice from a governmental agency. The information
is not readily available. What should you do first?
❑ a. Conduct a thorough investigation and send the report to the
agency.
❑ b. Ignore the letter because it will take time to locate the information.
❑ c. Send a short letter to the agency stating that the issue is being
reviewed.
❑ d. Call the agency and tell them you plan to locate the information
and send it in a few months.
c. These notices must be responded to as quickly as possible. Penalty
notices will continue to accrue interest and other fees if the
notice is not handled promptly. Even a short letter to the agency
stating that the issue is being reviewed can reduce the penalties
that may be assessed.
Effective feedback, whether positive or negative, should be given as
soon as possible after an incident.
❑ a. True
❑ b. False
True
You receive a letter of inquiry concerning an employee. What
should you do?
❑ a. Follow your company’s policy on the release of employee
information.
❑ b. Ignore the letter because it’s the employee’s issue.
❑ c. Send a short letter to the agency stating that the issue is being
reviewed.
❑ d. Call the requestor and tell them you plan to locate the information
and send it in a few months.
a. Requests for employee information must be handled within company
policy. Failure to provide information that an employee has
requested may prevent the employee from purchasing a new home.
Privacy of employee information should be a top priority of the payroll
manager, but not necessarily a high priority of the payroll staff.
❑ a. True
❑ b. False
False. Every member of the payroll department should be cognizant
of the importance of protecting employee information at all times.
A payroll will regularly generate entries into all of the following types of accounts EXCPET:
a. asset
b. expense
c. liability
d. revenue
d. Payroll generally does not touch the revenue account, which is the income received for goods sold and services rendered.
