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Questions and Answers
Which of the following describes a general ledger?
Which of the following describes a general ledger?
When financial statements are prepared, unexpired prepaid accounts are recorded as________________ and the expired prepaid account is reported as a ______.
When financial statements are prepared, unexpired prepaid accounts are recorded as________________ and the expired prepaid account is reported as a ______.
assets, expense
Identify which of the following lists include only examples of assets.
Identify which of the following lists include only examples of assets.
Building, Cash, Accounts Receivable
Prepaid accounts are______ that represent prepayments of future expenses and are increased with a________.
Prepaid accounts are______ that represent prepayments of future expenses and are increased with a________.
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Notes receivable is considered a(n)
Notes receivable is considered a(n)
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Supplies are ________ until they are used. When they are used up, their costs are reported as _______.
Supplies are ________ until they are used. When they are used up, their costs are reported as _______.
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Which of the following are accurate statements regarding how to report or treat prepaid accounts? (Check all that apply.)
Which of the following are accurate statements regarding how to report or treat prepaid accounts? (Check all that apply.)
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Define prepaid accounts.
Define prepaid accounts.
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Which of the following statements is (are) accurate regarding equipment purchased within a business?
Which of the following statements is (are) accurate regarding equipment purchased within a business?
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Which of the following statements are accurate regarding supplies?
Which of the following statements are accurate regarding supplies?
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Prepaid expenses are also called prepaid accounts and are considered assets.
Prepaid expenses are also called prepaid accounts and are considered assets.
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Which of the following statements is accurate regarding the Building account?
Which of the following statements is accurate regarding the Building account?
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Which of the following statements is (are) correct regarding the definition of a liability?
Which of the following statements is (are) correct regarding the definition of a liability?
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Which of the following statements is accurate about the Land account?
Which of the following statements is accurate about the Land account?
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Which statement best describes a T-account?
Which statement best describes a T-account?
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Gunner Company purchased a piece of equipment costing $6,000. She paid $1,000 immediately and put the rest on account. Show how to record this transaction to the T-accounts.
Gunner Company purchased a piece of equipment costing $6,000. She paid $1,000 immediately and put the rest on account. Show how to record this transaction to the T-accounts.
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Which of the following statements is (are) correct regarding a journal?
Which of the following statements is (are) correct regarding a journal?
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Which of the following statements correctly explains how to prepare a trial balance?
Which of the following statements correctly explains how to prepare a trial balance?
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Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.
Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.
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Dollar signs are used in journals and ledgers.
Dollar signs are used in journals and ledgers.
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Study Notes
General Ledger
- A general ledger records all accounts used by a company, detailing their activity and balances.
Financial Statements and Prepaid Accounts
- Unexpired prepaid accounts are recorded as assets; expired prepaid accounts are reported as expenses.
Definition of Assets
- Examples of assets include buildings, cash, and accounts receivable.
Prepaid Accounts
- Prepaid accounts are assets that represent future expense prepayments and are increased with debits.
Notes Receivable
- Classified as an asset in accounting.
Supplies
- Supplies are considered assets until used; costs become expenses once consumed.
Reporting Prepaid Accounts
- The expired portion of prepaid accounts is an expense on the income statement; the unexpired portion is treated as assets.
Equipment Purchase Accounting
- Equipment is recorded as an asset on the balance sheet and its cost is allocated over time as an expense.
Treatment of Supplies
- Unused supplies are assets, categorized into store supplies, office supplies, or simply supplies until utilized.
Definition of Prepaid Expenses
- Also referred to as prepaid accounts, they are assets representing prepayments for future expenses.
Building Account
- Used to record costs associated with land or property purchases necessary for business operations.
Liability Definition
- A liability represents debts owed by the business and claims creditors have against its assets.
Land Account
- The Land account is an asset and records the purchase costs of land.
Asset Accounts
- Key asset accounts include cash, accounts receivable, prepaid accounts, supplies, equipment, buildings, land, and inventory.
Liability Accounts
- Include accounts payable, notes payable, accrued liabilities, and unearned revenue.
Equity Accounts
- Comprise common stock, dividends, revenues, and expenses.
Chart of Accounts
- A list of all ledger accounts with an identification number assigned to each account.
Debit Balances
- Accounts that typically hold a normal debit balance include expenses, dividends, and cash.
Journal
- Acts as the book of original entry for recording transactions chronologically, detailing both debit and credit.
Trial Balance
- A list of each account and its balance used to confirm that total debits equal total credits.
T-Account
- Represents a ledger account showing the effects of transactions, structured in a T shape.
Recording Transactions in T-Accounts
- Example: For an equipment purchase costing $6,000 with a $1,000 cash payment and a $5,000 account payable entry, the Equipment account is debited $6,000, Cash is credited $1,000, and Accounts Payable is credited $5,000.
Preparing a Trial Balance
- Involves listing each account title and balance, ensuring total debits match total credits.
General Journal
- Provides a comprehensive record of each transaction, including debit and credit entries.
Accounting Documents Prior to Financial Statements
- A trial balance is completed before financial statements to assist in their preparation.
Use of Dollar Signs
- Dollar signs are not used in journals and ledgers.
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Description
This quiz covers the essentials of general ledger accounting, including the treatment of prepaid accounts and assets. It addresses how various accounting elements like supplies and notes receivable are categorized. Test your understanding of asset classification and their impact on financial statements.
