Exam 1

Question 1

Step one of accounting cycle

Answer 1

Analyze business transactions form source documents

Question 2

Step two of accounting cycle

Answer 2

Record journal entries in the general journal

Question 3

Step three of accounting cycle

Answer 3

Post the entries to the general ledger and prepare and unadjusted trial balance

Question 4

Step four of accounting cycle

Answer 4

Adjust the accounts and prepare and adjusted trial balance

Question 5

Step five of accounting cycle

Answer 5

Prepare financial statements

Question 6

Step six of accounting cycle

Answer 6

Prepare closing entries and then prepare a post closing trial balance

Question 7

Journal entry format

Answer 7

1. Debits before credits
2. Indent credits
3. Debits equal credits

Question 8

Pregnant Alice

Answer 8

(Washington. D. C.)

Assets Up
Liabilities Up
Income(revenue). Up
Capital. Up
Expenses Up

Question 9

Types of business

Answer 9

Merchandising/ retail
Manufacturing
Service

Question 10

Financial accounting

Answer 10

Measures business activity

Communicates information to investors and creditors

Question 11

Managerial accounting

Answer 11

Accounting info that is provided for internal users (managers)

Question 12

Legal structure

Answer 12

Corporation: unlimited life, limited liability
Sole proprietorship: limited life
Partnership: limited life

Question 13

Users of financial statements

Answer 13

Management 
Competitions 
Consumers 
Employees
Government
Investors
Lenders
Suppliers 
Unions

Question 14

Good ethics good for business

Answer 14

1. Avoid small ethical lapses
2. Focus on long term reputation
3. Expect to suffer adverse consequences for holding an ethical position

Question 15

Accounting equation

Answer 15

Assets = liabilities + shareholder equity

Question 16

Shareholders equity

Answer 16

Shareholders equity = total assets - total liabilities

Question 17

Net income equation

Answer 17

Net income = revenue - expenses

Question 18

WIRE

Answer 18

OE = investments - withdrawals + revenue - expenses

Question 19

4 financial statement

Answer 19

• income statement
• statement of stockholders equity
• balance sheet
• cash flow statement

Question 20

Which financial statement if for a point in time?

Answer 20

Balance sheet

Question 21

Which financial statement is for a period of time

Answer 21

Income statement
Statement of stockholder equity ?
Cash flow statement?

Question 22

What accounts are on the balance sheet?

Answer 22

All asset, liability, and stockholder equity accounts

I.e. Cash, accounts receivable, investments, buildings, equipment, notes payable, retained earnings

Question 23

Which accounts are on an income statement?

Answer 23

Revenue, expenses, gains and losses

I.e. Sales, service revenue, salary expense, rent expense

Question 24

Define debit

Answer 24

Put on the left side

Question 25

Define credit

Answer 25

Put on the right side

Question 26

Assets

Answer 26

Cash 
Equipment 
Fixtures 
Inventory 
Supplies 
Prepaid
Accounts receivable

Question 27

Liability

Answer 27

Payable
Unearned
Deferred

Question 28

Owners equity

Answer 28

Sole proprietor/ partnership
- name, capital. Up with C

• name, withdrawal
• name, drawing Up with d

Corporation

• common stock
• perfected stock. Up with c
• capital stock
• dividends Up with d
• Retained earnings Up with c

Question 29

Expense

Answer 29

“Expense”

Cost of… goods / merchandise sold

Question 30

Normal

Answer 30

Increasing

Pregnant Alice it’s “normal” for her to get bigger

Question 31

COA

Answer 31

Chart of accounts

Complete list of every account in an accounting system

Question 32

Purpose of trial balance

Answer 32

Debit = credits