ACCT 2101 Lecture Notes - Lecture 3: Accrual, Accounts Payable, Deferral

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jadegoldfish609

14 Sep 2016

School

University of Georgia

Department

Accounting

Course

ACCT 2101

Professor

Swati Bhandarkar

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Document Summary

Accounting cycle: steps a business does in once accounting period. The adjustment process brings accounts to their correct balances. The adjusted trial balance has all the correct account balances so financial statements can be made accurately. Accounting period: any time period a business chooses to report about. Usually one year that begins on january 1 and ends december. Can have accounting periods that are less than one year long (semiannually, quarterly, etc. ) Fiscal year: any 12 consecutive months, not necessary a calendar year. Companies with little seasonal variation in sales often choose the calendar year as their fiscal year. Natural business year: 12-month period that ends when a company"s sales activities are at their lowest point. Companies experiencing season variations in sales often choose a natural business year. Accrual basis accounting: uses the adjusting process to recognize revenues when earned and expenses when incurred. Cash basis accounting: recognizes revenues when cash is received and records expenses when cash is paid.

Related Questions

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

Please include the answer for the depreciation expense and accumulated depreciation. i noticed other posts with this similar questions didnt have the answer to those

Required:

#1.

Prepare journal entries to record the December transactions in the General Journal Tab in the excel template file "Accounting Cycle Excel Template.xlsx". Use the following accounts as appropriate: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation, Accounts Payable, Wages Payable, Common Stock, Retained Earnings, Dividends, Service Revenue, Depreciation Expense, Wages Expense, Supplies Expense, Rent Expense, and Insurance Expense.

1-Dec

Began business by depositing $10500 in a bank account in the name of the company in exchange for

1050 shares of $10 per share common stock.

1-Dec

Paid the rent for the current month, $1450 .

1-Dec

Paid the premium on a one-year insurance policy, $1320 .

1-Dec

Purchased Equipment for $4200 cash.

5-Dec

Purchased office supplies from XYZ Company on account, $300 .

15-Dec

Provided services to customers for $9200 cash.

16-Dec

Provided service to customers ABC Inc. on account, $8200 .

21-Dec

Received $3400 cash from ABC Inc., customer on account.

23-Dec

Paid $170 to XYZ company for supplies purchased on account on December 5 .

28-Dec

Paid wages for the period December 1 through December 28, $5040 .

30-Dec

Declared and paid dividend to stockholders $200 .

#2.

Post all of the December transactions from the âGeneral Journalâ tab to the T-accounts under the âT-Accountsâ tab in the excel template file "Accounting Cycle Excel Template.xlsx". Assume there are no beginning balances in any of the accounts.

#3.

Compute the balance for each T-account after all of the entries have been posted. These are the unadjusted balance as of December 31.

#4.

Prepare the unadjusted trial balance under the âUnadjusted Trial Balanceâ tab in the excel template file "Accounting Cycle Excel Template.xlsx" .

Provide the total of the credit column from the Unadjusted Trial Balance

#5.

Record the following four transactions as adjusting entries under the âGeneral Journalâ tab.

31-Dec

One monthâs insurance has been used by the company $110.

31-Dec

The remaining inventory of unused office supplies is $90.

31-Dec

The estimated depreciation on equipment is $70.

31-Dec

Wages incurred from December 29 to December 31 but not yet paid or recorded total $540.

#6.

Post all of the adjusting entries to the T-accounts under the âT-Accountsâ tab. Compute the balance for each T-account after all of the adjusting entries have been posted. These are the adjusted balance as of December 31.

#7.

Prepare the adjusted trial balance under the âAdjusted Trial Balanceâ tab as of December 31 in the excel template file "Accounting Cycle Excel Template.xlsx" .

Provide the following accounts balances from the Adjusted Trial Balance:

Accumulated Depreciation

Prepare Income Statement, Statement of Stockholderâs Equity, and Classified Balance Sheet under the âFinancial Statementsâ tab for the month ended December 31, 20XX in the excel template file "Accounting Cycle Excel Template.xlsx".

Provide the following amount from the Income Statement:

Provide the following account balance from the Statement of Stockholders' Equity:

Dividends

Provide the following account balances from the Balance Sheet:

Current Assets

Long-Term Assets

Total Liabilities

Total Stockholderâs Equity

Cash

#9.

Record the closing entries under the âGeneral Journalâ tab.

#10.

Post all of the closing entries to the T-accounts under the âT-Accountsâ tab. Compute the balance for each T-account after all of the closing entries have been posted.

Provide the ending balance of Cash at December 31 from the T-account

Provide the balance of the Retained Earnings T-account after closing entries have been posted.

Does the ending balance of the Retained Earnings T-account agree with the balance of Retained Earnings on the Balance Sheet?

Check Point: Total Assets

$ 20,950.00

ultramarineplatypus828

1. Which of the following identifies the proper order of theaccounting cycle?

A. Analyze, Journalize, Unadjusted Trial Balance

B. Analyze, Post, Unadjusted Trial Balance

C. Journalize, Post, Adjusted Trial Balance

D. Unadjusted Trial Balance, Adjusted Trial Balance, Close

E. Adjusted Trial Balance, Adjustments, Financial Statements

2. Interim financial statements refer to financial reports:

A. That cover less than one year, usually spanning one, three orsix-month periods

B. That are prepared before any adjustments have beenrecorded

C. That show the assets above the liabilities and theliabilities above the equity

D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid

E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues

3. The accounting principle that requires revenue to be reportedwhen earned is the:

A. Matching principle

B. Revenue recognition principle

C. Time period principle

D. Accrual reporting principle

E. Going-concern principle

4. Adjusting entries:

A. Affect only income statement accounts

B. Affect only balance sheet accounts

C. Affect both income statement and balance sheet accounts

D. Affect only cash flow statement accounts

E. Affect only equity accounts

5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:

A. Accrual basis accounting

B. Operating cycle accounting

C. Cash basis accounting

D. Revenue recognition accounting

E. Current basis accounting

6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned

B. Debit Cash and credit Unearned Legal Fees

C. Debit Unearned Legal Fees and credit Legal Fees Earned

D. Debit Legal Fees Earned and credit Unearned Legal Fees

E. Debit Unearned Legal Fees and credit Accounts Receivable

7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:

A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440

C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360

D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360

E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440

9. Unearned revenue is reported on the financial statementsas:

A. A revenue on the balance sheet

B. A liability on the balance sheet

C. An unearned revenue on the income statement

D. An asset on the balance sheet

E. An operating activity on the statement of cash flows

10. Which of the following assets is not depreciated?

A. Store fixtures

B. Computers

C. Land

D. Buildings

E. Vehicles

11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:

A. Intangible expenses

B. Prepaid expenses

C. Unearned expenses

D. Net expenses

E. Accrued expenses

13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called

A. Depreciation Expense

B. Unearned Depreciation

C. Prepaid Depreciation

D. Depreciation Value

E. Book Value

14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?

A. $3,250

B. $3,500

C. $4,000

D. $6,500

E. $7,000

15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?

A. $2,700

B. $2,900

C. $3,300

D. $3,500

E. $3,700

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ACCT 2101 Lecture Notes - Lecture 3: Accrual, Accounts Payable, Deferral

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