Math Knowledge

Question 1

Define Assets

Answer 1

Increase in amount of assets recorded by debits

Increase in the dollar amount of the account

Question 2

Define Liability

Answer 2

Decrease in amount of liabilities recorded by debits

Decrease in the dollar amount of the account

Question 3

Define Debit

Answer 3

Less Money the checkbook owes to you

Question 4

Define Credit

Answer 4

More money the checkbook owes to you

Question 5

Define Accounting Record

Answer 5

The book of original entry

Contains information about each business transaction

Question 6

Define General Journal

Answer 6

Provides a place to record: date, name of the accounts involved, an explanation, the account numbers of the accounts, and the effect on the accounts named

Question 7

Define Posting

Answer 7

Process of copying journal entry information and transferring it from the journal to the ledger

Question 8

Define Double Entry System of Accounting

Answer 8

Equal debit and credit entries are made for every transaction

Question 9

Balance Sheet Equation

Answer 9

Assets (Increase debits, decrease credits)

Liabilities + Owner’s Equity (Decrease debit and increase credit)

Question 10

Define Revenues

Answer 10

Increases in revenues are credit

The bank owes you more money (+)

Question 11

Define Expenses

Answer 11

Increases in expenses are debits

The bank owes you less money (-)

Question 12

Increase in value is represented by?

Answer 12

Credit

Question 13

Increase in outflow is represented by?

Answer 13

Debit

Question 14

What are the four basic rules that govern the recording of transactions?

Answer 14

1) Each transaction must be recorded separately
2) The transactions must be recorded so that Assets = Liability + Owner’s Equity
3) Each transaction will affect at least two accounts
4) Every transaction must be recorded such that debits equal credits

Question 15

John pays $10.50 in cash for OTC products. Create a T account.

Answer 15

Cash
Debit | Credit
$10.50

Sales
Debit | Credit
$10.50

Question 16

Easy definition of liability

Answer 16

Money you have to pay

Question 17

Easy definition of Account’s Receivable

Answer 17

Money that is owed to the store/company

Question 18

When is an Account Receivable account used?

Answer 18

When a sale is made but some or none of the total price is collected from the patient/3rd party with the intent to pay later

Question 19

John does not have health insurance and is a self-pay patient. Today, John charges $50 of prescriptions and will pay this off by the end of the month. Create a T account.

Answer 19

Accounts Receivable
Debit | Credit
$50

Sales
Debit | Credit
$50

Question 20

Mr Jones, pharmacist, process through Caremark a prescription claim for $200. The claim is adjudicated correctly and he is required to collect a $45 copayment. Create a T account.

Answer 20

Cash
Debit | Credit
$45

Accounts Receivable
Debit | Credit
$155

Sales
Debit | Credit
$200

Question 21

What are pre-paid expenses?

Answer 21

ASSETS bc the owner was able to secure the use of this item for the long term

Question 22

Your landlord on January 1st extends your pharmacy lease for another 12 months at $2000 per month. You pay for the entire year to get this rate. Create a T account.

Answer 22

Prepaid Expenses
Debit | Credit
$24000

Cash
Debit | Credit
$24000

Question 23

On February 1st, your accountant creates a transaction that accounts for the consumption of the value of one month of prepaid assets as well as records an expense for the company. Create a T account.

Answer 23

Rent Expense
Debit  | Credit
$2000
Prepaid Expense
Debit | Credit
            $2000

Question 24

You buy $6000 of drug products from Mckesson on credit on January 2nd. Create a T account.

Answer 24

Drug Purchase
Debit | Credit
$6000

Accounts Payable
Debit | Credit
$6000

Question 25

On January 10th, you pay Mckesson for the entire total of $6000. Create a T account.

Answer 25

Accounts Payable
Debit | Credit
$6000

Cash
Debit | Credit
$6000

Question 26

Owner’s Equity is affected by?

Answer 26

Any money flowing into or out of the business

Question 27

Paul increases his investment in Williams Pharmacy by $50,000 on January 1st. Create a T account.

Answer 27

Cash
Debit | Credit
$50000

Paul Williams, Capital
Debit | Credit
$50000

Question 28

One February 1st, Paul withdraws $3000 from the business for personal living expenses. Create a T account.

Answer 28

Paul, Withdrawal
Debit  | Credit
$3000
Cash 
Debit | Credit
            $3000

Question 29

Define Contra-accounts

Answer 29

Accounts that represent discounts, returns or allowances that directly reduce the value of sales or purchases accounts

Question 30

Contra-accounts normally have?

Answer 30

Debit balances

Question 31

Define Net Sales

Answer 31

Math expression that results from subtracting the discounts and returns from the gross or total amount of sales that was recorded in the sales ledger

Question 32

Mrs. Jones buys a faulty nebulizer-value $50 paid in cash. Create a T account.

Answer 32

Cash
Debit | Credit
$50

Sales
Debit | Credit
$50

Question 33

Now Mrs. Jones brings back her faulty nebulizer. Create a T account.

Answer 33

Sales Return
Debit | Credit
$50

Cash
Debit | Credit
$50

Question 34

Merchandise Sold at 2$ off if paid within 10 days of invoice (total is $100) but they do not pay within the 10 days. Create a T account.

Answer 34

Accounts Receivable
Debit | Credit
$100

Sales
Debit | Credit
$100

Question 35

Merchandise Sold at 2$ off if paid within 10 days of invoice (total is $100) and they do pay within the 10 days. Create a T account.

Answer 35

Cash
Debit | Credit
$98
Discount
Debit | Credit
$2
Accounts Receivable
Debit | Credit
             $100

Question 36

Define Purchase account

Answer 36

Cost of merchandise bought for resale during the accounting period
Expense account
Accumulation of dollars in this account is reflected by debit
Usually have a credit balance

Question 37

Define Freight-In

Answer 37

A business account for transportation costs associated with purchases

Question 38

Mrs Smith pays you $300 cash for her prescription that she buys. Create a T account.

Answer 38

Cash
Debit | Credit
$300

Sales
Debit | Credit
$300

Question 39

Susie Clark goes to your pharmacy with a prescription for a new medication and is told that her co-pay is $45. She is covered by Blue-Cross. She receives the prescription and notices on the tax receipt that the cost was $200. How did the pharmacists account for the sale of this prescription? Create a T account.

Answer 39

Cash
Debit | Credit
$45

Accounts Receivable
Debit | Credit
$155

Sales
Debit | Credit
$200

Question 40

Mrs. Smith wants to charge her $300 prescription on her personal store account (not credit card!)

Answer 40

Accounts Receivable
Debit | Credit
$300

Sales
Debit | Credit
$300

Question 41

Paying for 6 months rent at $1000 a month

Answer 41

Prepaid Expense
Debit | Credit
$6000

Cash
Debit | Credit
$6000

Question 42

You have consumed 1 month of your prepaid expense. Create a T account.

Answer 42

Rent Expense
Debit | Credit
$1000

Prepaid Expense
Debit | Credit
$1000

Question 43

Bob Smith Pharmacy purchase $300 of drugs on credit from the wholesaler.

Answer 43

Purchases
Debit | Credit
$300

Accounts Payable
Debit | Credit
$300

Question 44

Bob Smith Pharmacy pays cash for $300 of supplies for Office Max that will be consumed within the accounting period.

Answer 44

Office Supplies Expenses
Debit | Credit
$300

Cash
Debit | Credit
$300

Question 45

Dr. Patry invests $5000 in the business from his personal bank account

Answer 45

Cash
Debit | Credit
$5000

Dr. Patry, Capital
Debit | Credit
$5000