December 18 Review 1

Front

On a work sheet, the balance of the owner's drawing account is extended to the

Back

Balance Sheet Debit column.

Answer explanation

The owner's drawing account represents withdrawals by the owner, which reduce equity. Therefore, it is recorded in the Balance Sheet Debit column, reflecting a decrease in owner's equity.

Front

The entry to establish a $200.00 petty cash fund is

Back

debit Petty Cash, $200.00; credit Cash, $200.00.

Answer explanation

The correct entry to establish a petty cash fund involves debiting Petty Cash to increase it and crediting Cash to decrease it, reflecting the transfer of funds. Thus, the correct choice is debit Petty Cash, $200.00; credit Cash, $200.00.

Front

When cash is paid for insurance, Prepaid Insurance is

Back

increased.

Answer explanation

When cash is paid for insurance, it is recorded as an asset. Prepaid Insurance represents a future benefit, so it is increased to reflect the payment made for coverage that extends into the future.

Front

Financial information on an income statement's Revenue section is obtained from a work sheet's Account Title column and

Back

Income Statement Credit column.

Answer explanation

The Revenue section of an income statement is derived from the Income Statement Credit column, as revenues are recorded as credits in accounting. Therefore, the correct choice is the Income Statement Credit column.

Front

Reporting changes in financial information for a specific period of time in the form of financial statements is an application of the accounting concept

Back

Accounting Period Cycle.

Answer explanation

The Accounting Period Cycle concept involves reporting financial information for specific periods, allowing for the preparation of financial statements that reflect changes over time.

Front

Income Summary is a(n)

Back

temporary account.

Answer explanation

Income Summary is a temporary account used to close revenue and expense accounts at the end of an accounting period. It resets to zero after the closing process, distinguishing it from permanent accounts.

Front

The first digit in the account number 410 means that the account is in the

Back

Revenue division of the general ledger.

Answer explanation

The first digit '4' in the account number 410 indicates that it belongs to the Revenue division of the general ledger, as account numbers are typically categorized by their leading digit.

Front

When the first digit in an account number is 5, the account is in the

Back

Expenses division.

Answer explanation

When the first digit in an account number is 5, it indicates that the account falls under the Expenses division. This classification helps in organizing financial records effectively.

Front

The first step in the posting procedure is writing the

Back

entry amount in the Debit or Credit column of the account.

Answer explanation

The first step in posting is to record the entry amount in the Debit or Credit column of the account. This establishes the financial impact of the transaction before referencing other details.

Front

The journal entry to close Income Summary when there is a net income is

Back

debit Income Summary; credit owner's capital.

Answer explanation

To close the Income Summary with net income, you debit Income Summary to reduce it to zero and credit owner's capital to transfer the income to the owner's equity. Thus, the correct entry is debit Income Summary; credit owner's capital.