Semester Exam Review Acct 1

What is double-entry accounting?

• A method of recording financial transactions in only one account

• A system of bookkeeping that records each financial transaction in at least two different accounts.

• A process of tracking expenses without categorizing them

• A system of bookkeeping that records each financial transaction in three different accounts

What is the accounting equation?

• Assets = Liabilities - Equity

• Liabilities = Assets + Equity

• Assets = Liabilities + Equity

• Assets - Liabilities = Equity

Which financial statements are included in the basic accounting concepts?

• Profit statement, equity statement, and investment statement

• Expense statement, liability statement, and revenue statement

• Cash statement, inventory statement, and receivables statement

• Income statement, balance sheet, and cash flow statement

What is the difference between debits and credits in accounting?

• Debits and credits are used interchangeably in accounting.

• Debits are used for liabilities and credits are used for revenue.

• Debits are used to record increases in assets and expenses, while credits are used to record decreases in assets and expenses.

• Debits are used to record decreases in assets and expenses, while credits are used to record increases in assets and expenses.

What is the purpose of a worksheet in accounting?

• To prepare and organize financial information for the preparation of financial statements.

• To keep track of employee vacation days

• To plan the company picnic

• To water the plants in the office

Explain the concept of double-entry accounting.

• Double-entry accounting involves using a single account for all transactions

• Every transaction is recorded in at least two different accounts, with one account debited and the other credited.

• Every transaction is recorded in only one account

• There is no need to record transactions in multiple accounts

How does the accounting equation relate to the balance sheet?

• The accounting equation represents the foundation of the balance sheet.

• The accounting equation is only relevant for cash flow statement, not the balance sheet

• The accounting equation has no relation to the balance sheet

• The accounting equation is used to calculate income statement, not the balance sheet

What are the main components of financial statements?

• Profit and loss statement, expense report, budget analysis

• Payroll record, purchase order, inventory report

• Tax return, credit report, investment portfolio

• Balance sheet, income statement, cash flow statement, and statement of changes in equity

Provide an example of a debit and a credit in an accounting transaction.

• Debit: $100 to Owner's Equity account, Credit: $100 to Retained Earnings account

• Debit: $100 to Accounts Receivable account, Credit: $100 to Inventory account

• Debit: $100 to Cash account, Credit: $100 to Accounts Payable account

• Debit: $100 to Revenue account, Credit: $100 to Expense account

Why is it important to prepare a worksheet in accounting?

• To waste time and resources

• To create unnecessary paperwork

• To organize financial information and ensure accuracy in financial reporting.

• To make financial reporting more confusing