Lecture 2 Group A

Which of these events would not be recorded by accountants?

• Received an order from a customer.

• The owner paid his daughter’s school fees from the business bank account.

• Credit sale.

• Depreciation on motor vehicles calculated at the end of the firm’s financial year.

A two-year insurance policy paid for on 1 January can initially be recorded in an asset account

called _.

• prepaid insurance

• insurance payable

• unearned insurance

• debtors

The accounting entry to record the payment of a liability is which of the following?

• Debit an asset account and credit a liability account

• Debit a liability account and credit an asset account

• Debit an equity account and credit a liability account

• Debit a liability account and credit an equity account

A credit entry is made to _.

• decrease an asset, increase a liability, and decrease equity

• decrease an expense, increase income, and increase equity

• increase an asset, decrease a liability, and decrease equity

• decrease an asset, decrease a liability, and increase equity

Happy Harry requires his customers to pay for their orders six weeks before shipping the goods. How should the cash receipts be recorded by Harry?

• Debit bank, credit an asset account

• Debit bank, credit an expense account

• Debit bank, credit a liability account

• Debit bank, credit an income account

Select the entry that correctly records the purchase by Speedy Window Cleaning of 15 months’ worth of cleaning supplies from Southern Cleaning. The purchase is for cash and the invoiced amount is $1500.

• Debit cleaning supplies expense $1500; credit equity $1500

• Debit bank $1500; credit cleaning supplies asset $1500

• Debit cleaning supplies asset $1500; credit bank $1500

• Debit bank $1500; credit cleaning supplies expense $1500

Speedy Window Cleaning paid $120 of advertising for the month with Cheque No. 000221.

• Decrease in equity of $120; increase in assets of $120.

• Decrease in equity of $120; decrease in assets of $120.

• Increase in assets of $120; increase in liabilities of $120.

• Decrease in assets of $120; increase in equity of $120.

The bookkeeper recorded wages for the month as a debit to the Sales account rather than as a debit to wages expense. This error will result in _.

• no effect on profit of the period

• understated liabilities at the end of the period

• understated assets at the end of the period

• overstated profit for the period

Which of these errors would be detected by a trial balance?

• A cash sale was recorded in the sales account as $237 instead of $273 but was correctly recorded in the bank account.

• Office salaries were recorded as office expenses.

• The sales assistant pocketed the cash from a cash sale and did not ring it up on the register.

• Purchase of inventory on credit was recorded as a debit to the plant and equipment account and a credit to creditors.

What is the correct order of the steps in the accounting cycle?

1. Entries are made in the journal

2. A business transaction occurs

3. A trial balance is prepared

4. Entries are made in the ledger

• 2, 4, 1, 3

• 2, 1, 4, 3

• 3, 2, 1, 4

• 2, 4, 3, 1