Week 9 revision

What are revenues?

• Income received as a result of usual business operations

• Income received from all activities including selling non-current assets

• Profit received from business activities

• These are all revenues

What are expenses?

• Amounts paid in the course of earning revenues

• All amounts a business pays for anything at all including purchasing non-current assets

• Amounts paid to the owner

• All of these are expenses

What is owner's equity?

• The value of the business to the owner. eg: Assets ($20K) - liabilities ($2K) = Owner's equity ($18K)

• The value of assets in the business. Eg: if a building is $20K, then owner's equity is $20K

• The value of liabilities in the business. Eg: if a loan is $2K, then Owner's equity is $2K

• None of these answers is correct

What are the rules of debits and credits?

• They are used to increase or decrease the balance of an account, depending on the nature of the account.

• For every transaction, the total of debits must equal the total of credits.

• Every transaction will involve two or more accounts and involve both debit and credit amounts.

• These are all rules of debits and credits

Why do we use a general journal?

• Its a place to record all the transactions of a business.

• It shown transactions in date order which is easier to read.

• It helps check that debits equal credits for every entry.

• These are all good reasons.

What is a general ledger?

• A reports that shows all debits and credits a business uses.

• A set of accounts where the balance of each individual account is calculated

• All of these are correct.

• A place where all business transactions are recorded.

What is a trial balance?

• A list of all accounts, their balance and totals of all debits and credits

• A list of only revenue, expense and profit accounts

• A list of only asset, liability and equity accounts

• A list of all accounts with an allocated account number

What is an adjusted trial balance?

• A list of all accounts, their balance and totals of all debits and credits AFTER adjusting entries are done

• A list of all accounts, their balance and totals that have been ADJUSTED so that debits equal credits

• A list that has been ADJUSTED to show only asset, liability and equity accounts

• A list of all accounts that has been ADJUSTED to show accounts after closing entries have been done.

What is a post closing trial balance?

• A trial balance completed after closing entries to check that debits still equal credits

• A trial balance that shows the revenue, expense and withdrawal accounts that have been closed

• A trial balance that is completed before the closing entries are processed

• A trial balance that is completed after adjusting entries are completed.

Why do we need adjusting entries?

• To match revenues and expenses in the same period.

• To ensure profit is correctly calculated for the period

• To ensure assets and liabilities are correctly recorded at the end of the period

• All of these are good reasons