Chart of Accounts

Question 1

What is a chart of accounts?

Answer 1

A listing of the names of the accounts that a company has identified for recording transactions in its general ledger.

Question 2

In what order are accounts typically listed in a chart of accounts?

Answer 2

• Balance sheet accounts
• Income statement accounts

Question 3

What are the main categories under balance sheet accounts?

Answer 3

• Assets
• Liabilities
• Owner’s (Stockholders’) Equity

Question 4

What are the main categories under income statement accounts?

Answer 4

• Operating Revenues
• Operating Expenses
• Non-operating Revenues and Gains
• Non-operating Expenses and Losses

Question 5

How can a company’s organization chart influence its chart of accounts?

Answer 5

It can serve as an outline, with each department accountable for its own expenses.

Question 6

What is the typical structure of account numbers in a chart of accounts?

Answer 6

Account numbers are often five or more digits, with each digit representing a division, department, or type of account.

Question 7

If the first digit of an account number is ‘1’, what type of account does it represent?

Answer 7

Asset account

Question 8

What type of account does a first digit of ‘5’ indicate?

Answer 8

Operating expense account

Question 9

In a chart of accounts, what is the purpose of leaving gaps between account numbers?

Answer 9

To allow for the addition of accounts in the future.

Question 10

What are the account numbers for current assets in a sample chart of accounts?

Answer 10

10000 - 16999

Question 11

What account number range is typically assigned for long-term liabilities?

Answer 11

25000 - 26999

Question 12

Fill in the blank: The account number range for operating revenues is _______.

Answer 12

30000 - 39999

Question 13

True or False: A chart of accounts for a small company will generally be as large and complex as that of a large corporation.

Answer 13

False

Question 14

What is the purpose of the ‘To Increase’ column in a small company’s chart of accounts?

Answer 14

To indicate whether a debit or credit will increase the amount in the account.

Question 15

What does ‘Accumulated Depreciation’ represent?

Answer 15

The amount of an asset’s cost that has been allocated to Depreciation Expense since acquisition.

Question 16

What type of account is ‘Unearned Revenues’?

Answer 16

Liability account

Question 17

How many accounts are needed for every transaction according to the double-entry system?

Answer 17

At least two accounts

Question 18

What is the general rule for increasing an asset account?

Answer 18

Debit the account

Question 19

What is the general rule for increasing a liability account?

Answer 19

Credit the account

Question 20

What is the typical treatment of expense accounts in terms of debits and credits?

Answer 20

Expense accounts are debited and have debit balances.

Question 21

What happens to the amount in the ‘Mary Smith, Drawing’ account at the end of the year?

Answer 21

It is transferred into the ‘Mary Smith, Capital’ account.

Question 22

What is the account number for ‘Cash’ in a small company’s chart of accounts?

Answer 22

101

Question 23

What does the account ‘Interest Payable’ represent?

Answer 23

Amount owed for interest on Notes Payable up until the balance sheet date.

Question 24

Fill in the blank: ‘Salaries Expense’ is classified as a _______.

Answer 24

Operating Expense

Question 25

What is the purpose of accounting software regarding the chart of accounts?

Answer 25

To assist in recording transactions and often automatically assigns accounts.

Question 26

What should you consider when using accounting materials?

Answer 26

They are an introduction and complexities may not be presented.