December 19 2024 Review 1

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

• Income Statement Debit column.

• Income Statement Credit column.

• Balance Sheet Debit column.

• Balance Sheet Credit 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.

The entry to establish a $200.00 petty cash fund is

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

• debit Petty Cash, $200.00; credit Miscellaneous Expense, $200.00.

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

• debit Miscellaneous Expense, $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.

When cash is paid for insurance, Prepaid Insurance is

• increased.

• decreased.

• credited.

• none of these.

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.

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

• Income Statement Debit column.

• Income Statement Credit column.

• Balance Sheet Debit column.

• Balance Sheet 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.

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

• Matching Expenses with Revenue.

• Accounting Period Cycle.

• Consistent Reporting.

• Going Concern.

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.

Income Summary is a(n)

• asset account.

• liability account.

• temporary account.

• permanent 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.

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

• Assets division of the general ledger.

• Liabilities division of the general ledger.

• Revenue division of the general ledger.

• Expenses 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.

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

• Assets division.

• Liabilities division.

• Revenue division.

• 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.

The first step in the posting procedure is writing the

• entry date in the Date column of the account.

• journal page number in the Post. Ref. column of the journal.

• account number in the Post. Ref. column of the journal.

• 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.

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

• debit Income Summary; credit Sales.

• debit owner's capital; credit Income Summary.

• debit Income Summary; credit owner's capital.

• debit Sales; credit Income Summary.

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.