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Exam 15: Analyzing for Business Transactions

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Question 61

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Credits always increase account balances.

A) True
B) False

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Question 62

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Explain debits and credits and their role in the accounting system of a business.

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Debit refers to the left side of an acco...

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Question 63

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A business's source documents may include all of the following except:

The chronological record of each complete transaction that has occurred in a business is called the:

Increases in liability accounts are recorded as debits.

At the beginning of January of the current year, Little Mikey's Catering ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Mikey $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:

Larry Matt completed these transactions during December of the current year: $\begin{array} { | l | l | } \hline \text { Dec. } 1 & \begin{array} { l } \text { Began a financial services practice by investing } \$ 15,000 \text { cash and office } \\\text { equipment having a } \$ 5,000 \text { value. }\end{array} \\\hline 2 & \text { Purchased } \$ 1,200 \text { of office equipment on credit. } \\\hline 3 & \text { Purchased } \$ 300 \text { of office supplies on credit. } \\\hline 4 & \begin{array} { l } \text { Completed work for a client and immediately received a payment of } \$ 900 \\\text { cash. }\end{array} \\\hline 8 & \text { Completed work for Precept Paper Co. on credit, } \$ 1,700 . \\\hline 10 & \text { Paid for the supplies purchased on credit on December } 3 . \\\hline 14 & \text { Paid for the annual } \$ 960 \text { premium on an insurance policy. } \\\hline 18 & \text { Received payment in full from Precept Paper Co. for the work completed on } \\&\text { December } 8 . \\\hline 27 & \text { Larry withdrew } \$ 650 \text { cash from the practice to pay personal expenses. } \\\hline 30 & \text { Paid } \$ 175 \text { cash for the December utility bills. } \\\hline 30 & \text { Received } \$ 2,000 \text { from a client for financial services to be rendered next year. } \\\hline\end{array}$ Prepare general journal entries to record these transactions.

Unearned revenues refer to a(n) :

ABC Catering received $800 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Identify the accounts that would normally have balances in the credit column of a business's trial balance.

If the common stock account had a $10,000 credit balance at the beginning of the period, and during the period, stockholders invest an additional $5,000, the balance in the common stock account listed on the trial balance will be equal to a debit balance of $5,000.

Paul's Landscaping paid $500 on account for supplies purchased in the prior month. Which of the following general journal entries will Paul's Landscaping make to record this transaction?

Describe the link between a business's income statement, the statement of retained earnings, and the balance sheet.

List the four steps in recording transactions.

Explain how accounts are used in recording information about a business's transactions.

George Butler owned a tugboat and was tired of his current job. He decided to open a business that provides day tugboat tours to tourists along the Mississippi River near his hometown. Prepare journal entries to record the following transactions. May 1 Butler invested $20,000 cash and his tugboat valued at $90,000 in the business in exchange for common stock. May 2 Butler paid $3,000 cash for office equipment to help him keep track of business activities. May 3 Butler bought boating supplies costing $2,500 on credit. May 4 Butler paid the river master $500 cash for the first month's dock rental. May 5 Butler paid $1,800 cash for a six-month insurance policy. May 10 Butler received $2,000 cash from clients for his first tour. May 12 Butler provided a $3,500 tour on credit, the customer has agreed to pay within 10 days May 19 Butler paid for the boating supplies originally purchased on May 3. May 22 Butler receives payment on the account from the client entry on May 12. May 25 Butler received $2,750 cash for additional tours that he completed that day. May 31 Butler paid his crew member a salary of $1,000. May 31 The company paid Butler, its sole stockholder, $2,000 for personal use.

A law firm collected $1,800 on account for work performed in the previous month. Which of the following general journal entries will the firm make to record this transaction?

Dividends are not reported on a business's income statement.

Identify the account below that is classified as a liability in a company's chart of accounts:

When a company provides services for which cash will not be received until some future date, the company should record the amount billed as accounts receivable.