Questions and Answers
What is the length of time for which a business summarizes and reports financial information?
fiscal period
What is a columnar accounting form used to summarize general ledger information needed to prepare financial statements?
work sheet
What is a proof of equality of debits and credits in a general ledger?
trial balance
What are changes recorded on a worksheet to update general ledger accounts at the end of a fiscal period called?
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What is a financial statement that reports assets, liabilities, and owner's equity on a specific date?
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What is a financial statement showing the revenue and expenses for a fiscal period?
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What is the difference between total revenue and total expenses when total revenue is greater?
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What is the difference between total revenue and total expenses when total expenses are greater?
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The accounting concept Consistent Reporting is being applied when a delivery business reports the number of deliveries made one year and the amount of revenue received for deliveries made the next year.
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An accounting period is known as a fiscal period.
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Journals, ledgers, and work sheets are considered permanent records.
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All general ledger account titles are listed on a trial balance in the same order as listed on the chart of accounts.
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The four questions asked when analyzing an adjustment are: Why? Where? When? and How?
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The two accounts affected by the adjustment for supplies are Supplies and Supplies Expense.
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The two accounts affected by the adjustment for insurance are Prepaid Insurance Expense and Insurance.
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Totaling and ruling the Adjustments columns of a worksheet is necessary to prove the equality of debits and credits.
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Two financial statements are prepared from the information on the work sheet.
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Net income on a worksheet is calculated by subtracting the Income Statement Credit column total from the Income Statement Debit column total.
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If errors are found on a worksheet, they must be erased and corrected before any further work is completed.
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When two column totals are not in balance on the worksheet, the difference between totals is calculated and checked.
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If the difference between the totals of Debit and Credit columns on a worksheet can be evenly divided by 9, then the error is most likely in addition.
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If there are any errors in the worksheet's Trial Balance columns, it might be because not all general ledger account balances were copied in the Trial Balance column correctly.
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Errors in the general ledger accounts should never be erased.
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Most errors occur in doing arithmetic.
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The best way to prevent errors is to use a calculator.
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Many businesses choose a one-year fiscal period that ends during a period of high business activity.
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Making adjustments to general ledger accounts is an application of the Matching Expenses with Revenue accounting concept.
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The balance of the supplies account plus the value of the supplies on hand equals the up-to-date balance of the supplies account.
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The value of the prepaid insurance coverage used during a fiscal period is an expense.
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When the Income Statement Credit column total is greater than the Income Statement Debit total on a worksheet, the business has a net income.
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If an amount is written in an incorrect column on a worksheet, the error should be erased and the amount should be written in the correct column.
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If the Trial Balance columns are not equal and the difference is $50.00, the error most likely is a $25.00 amount written in the wrong column.
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Following the same accounting procedures in the same way in each accounting period is an application of the accounting concept ____.
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Reporting changes in financial information for a specific period of time in the form of financial statements is an application of the accounting concept ____.
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On a trial balance, ____.
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Recording revenue from business activities and expenses associated with earning that revenue in the same accounting period is an application of the accounting concept ____.
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On a work sheet, the balance of the owner's capital account is extended to the ____.
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A net loss is entered in the work sheet's ____.
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If a pair of work sheet columns do not balance and the difference between the totals is an amount that appears elsewhere on the work sheet, the error is probably ____.
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If the Trial Balance columns are not equal and the difference is 1, the error often is ____.
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Study Notes
Fiscal Period and Financial Statements
- A fiscal period defines the duration for summarizing and reporting financial data.
- Balance sheet presents assets, liabilities, and owner's equity as of a specific date.
- Income statement displays revenue and expenses over a fiscal period.
Worksheets and Adjustments
- Worksheets serve as columnar forms for summarizing general ledger information essential for financial statements.
- Adjustments are modifications made on a worksheet to update general ledger accounts at the end of a fiscal period.
Trial Balance
- A trial balance verifies the equality of debits and credits within the general ledger.
- General ledger account titles on a trial balance follow the order established in the chart of accounts.
Income Concepts
- Net income arises when total revenue exceeds total expenses, while a net loss results when expenses surpass revenue.
- Reporting must adhere to the Matching Expenses with Revenue accounting concept, ensuring revenues and related expenses are tracked in the same period.
Errors and Corrections
- Errors in worksheets must be corrected before proceeding with further calculations.
- The process of totaling the adjustments on a worksheet helps confirm that debits and credits are balanced.
Concepts of Consistency and Reporting
- Consistent Reporting requires the application of the same accounting practices across accounting periods.
- The Accounting Period Cycle emphasizes reporting financial information changes for specific durations via financial statements.
Handling Specific Financial Situations
- Adjustments to the supplies account involve Supplies and Supplies Expense.
- The value of prepaid insurance used within a period is recognized as an expense.
Income Calculation and Reporting
- An increase in the Income Statement Credit column total relative to the Debit indicates net income.
- In the event of worksheet imbalances, note that a difference divisible by 9 often signals an addition error, rather than an allocation mistake.
Key True/False Concepts
- Consistent Reporting and Matching Expenses with Revenue are vital accounting concepts.
- Most errors arise from arithmetic mistakes, not the complexity of accounting procedures.
- Proper documentation and spreadsheet practices enhance accuracy and prevent discrepancies in financial reporting.
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Description
Explore key concepts related to fiscal periods, financial statements, and necessary adjustments in accounting. This quiz covers the balance sheet, income statement, trial balance, and important income concepts. Test your knowledge on how these elements interact within accounting practices.
