Accounting I Honors Chapter 3 Study Guide
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Questions and Answers

What is a form of recording transactions in chronological order?

journal

What is the term for recording transactions in a journal?

journalizing

What is the information for each transaction recorded in a journal called?

entry

What is the recording of debit and credit parts of a transaction called?

<p>double-entry accounting</p> Signup and view all the answers

What is a business paper form from which information is obtained for a journal entry?

<p>source document</p> Signup and view all the answers

What is a business form ordering a bank to pay cash from a bank account?

<p>check</p> Signup and view all the answers

What form describes the goods or services sold, the quantity, the price, and the terms of sale?

<p>invoice</p> Signup and view all the answers

What invoice is used as a source document for recording a sale on account?

<p>sales invoice</p> Signup and view all the answers

What is a business form giving written acknowledgment for cash received?

<p>receipt</p> Signup and view all the answers

What form contains a brief message to describe a transaction?

<p>memorandum</p> Signup and view all the answers

Information in a journal includes the debit and credit parts of each transaction recorded in one place.

<p>True</p> Signup and view all the answers

The Objective Evidence accounting concept requires that there be proof that a transaction did occur.

<p>True</p> Signup and view all the answers

Examples of source documents include checks, sales invoices, receipts, and memorandums.

<p>True</p> Signup and view all the answers

A memorandum is the source document used when items are paid in cash.

<p>False</p> Signup and view all the answers

A receipt is the source document for cash received from transactions other than sales.

<p>True</p> Signup and view all the answers

A calculator tape is the source document for daily cash sales.

<p>True</p> Signup and view all the answers

The accounts affected when cash is received from the owner as an investment are Cash and Sales.

<p>False</p> Signup and view all the answers

When cash is paid for supplies, the Cash account is debited.

<p>False</p> Signup and view all the answers

When cash is used to pay for insurance, the asset account Prepaid Insurance increases.

<p>True</p> Signup and view all the answers

The source document used when supplies are ordered by telephone on account is a memorandum.

<p>True</p> Signup and view all the answers

The source document used when supplies bought on account are paid for is a receipt.

<p>False</p> Signup and view all the answers

When cash is received from sales, both the Cash account and the Sales account are increased.

<p>True</p> Signup and view all the answers

The source document 'sales invoice' is abbreviated as S in a journal entry.

<p>True</p> Signup and view all the answers

When services are sold on account, an asset account and a liability account are affected.

<p>True</p> Signup and view all the answers

The accounts affected when paying cash for equipment rental are Equipment Rental Expense and Cash.

<p>True</p> Signup and view all the answers

When cash is received on account, one asset account increases and another asset account decreases.

<p>True</p> Signup and view all the answers

The accounts affected when paying cash to the owner for a withdrawal of equity are the capital account and Cash.

<p>False</p> Signup and view all the answers

If there is only one blank line remaining on a journal page, it is standard practice to split the entry and record the second line of the entry on the next page.

<p>False</p> Signup and view all the answers

To correct an error in a journal, simply erase the incorrect item and write the correct item in the same place.

<p>False</p> Signup and view all the answers

If an error is detected in a journal entry after several additional journal entries have been made, the entry should be corrected by drawing a line through the incorrect parts and writing the correct parts on the same line above the error.

<p>True</p> Signup and view all the answers

Match the following accounts affected with their transactions:

<p>Received cash from owner, David Dumire, as an investment = Cash, David Dumire, Capital Paid cash for supplies = Supplies, Cash Paid cash for insurance = Prepaid Insurance, Cash Bought supplies on account from Casey Company = Supplies, Accounts Payable-Casey Company Paid cash on account to Casey Company = Accounts Payable-Casey Company, Cash Received cash from sales = Cash, Sales Sold services on account to T.Sundeen = Accounts Receivable-T.Sundeen, Sales Paid cash for advertising expense = Advertising Expense, Cash Received cash on account from T.Sundeen = Cash, Accounts Receivable-T.Sundeen Paid cash to owner, David Dumire, for a withdrawal of equity = David Dumire, Drawing, Cash</p> Signup and view all the answers

Study Notes

Journalizing Transactions

  • Journal: A record of transactions in chronological order, essential for organizing financial data.
  • Journalizing: The act of entering transaction details into a journal, ensuring accurate documentation.
  • Entry: Represents information for each transaction recorded in a journal, including date, accounts affected, and amounts.

Double-Entry Accounting

  • Double-entry accounting: A system that records both the debit and credit components of each transaction, promoting accuracy and balance in accounting records.

Source Documents

  • Source document: A business form used to gather information for journal entries, essential for supporting financial transactions.
  • Types of source documents include:
    • Check: Orders a bank to pay cash from an account.
    • Invoice: Detailed form documenting goods/services sold, including quantity and price.
    • Sales invoice: A specific invoice serving as a source document for sales on account.
    • Receipt: Written acknowledgment for cash received.
    • Memorandum: Brief message summarizing a transaction.

Accounting Principles

  • Objective Evidence concept: Stipulates that proof of a transaction is required; supported by proper documentation.
  • True statements regarding journals:
    • Includes both debit and credit information in one location.
    • Examples of source documents: checks, invoices, receipts, and memorandums.

Transactions and Accounts Affected

  • When cash is received from sales, both the Cash and Sales accounts increase.
  • Paying cash for supplies affects the Supplies and Cash accounts.
  • Receiving cash for services leads to changes in Cash and Accounts Receivable.
  • Various financial activities involve specific accounts, such as those for investment, withdrawals, and expenses.

Accounting Corrections

  • If one blank line remains on a journal page, the remaining entry should continue on the next page instead of splitting.
  • Errors in journal entries should not be erased. Instead, correct an error by drawing a line through the mistake and noting the correction above it.

Specific Account Transactions

  • Cases involving cash receipts or payments, investments, and withdrawals illustrate how different accounts interact:
    • Cash received from the owner as an investment increases Cash and Capital account.
    • Payment for supplies or services usually reduces Cash accounts while increasing respective asset accounts (e.g., Supplies, Prepaid Insurance).
    • Accounts Payable is affected when supplies are bought on credit, illustrating liabilities in transaction management.

Miscellaneous

  • Important true/false concepts:
    • Cash payment for equipment rental affects both Equipment Rental Expense and Cash accounts.
    • Incorrect journal entries should be corrected without erasing past errors.
    • Acknowledgment of cash received through receipts supports the necessity of accurate documentation in various transactions.

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Description

This study guide consists of essential flashcards covering key concepts from Chapter 3 of Accounting I Honors. It focuses on the process of journalizing transactions, including definitions and examples pertinent to the recording of transactions. Perfect for revising and reinforcing your understanding of journal entries.

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