Intuit Certified Bookkeeping - Domain 2, Lesson 2

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Questions and Answers

What was the total cash sales reported for the day?

$4,347 (correct)

$2,000

$2,400

$6,747

What type of assets are property and equipment categorized under?

Merchandise inventory

Intangible assets

Fixed assets (correct)

Current assets

Which account should be debited when recording the cost of fritters sold?

Fritter Sales Revenue

Frozen Fritter Inventory

Cost of Fritters Sold (correct)

Accounts Receivable

How does an increase in merchandise inventory affect the accounting equation?

Increases assets and increases owner's equity Signup and view all the answers

What is the total amount of receivable sales from Minnie’s Mall and Mood Food?

$2,400 Signup and view all the answers

Which of the following statements about merchandise versus property and equipment is true?

Merchandise is for sale, while property and equipment are used in operations Signup and view all the answers

Why is it important to separate property and equipment accounts from merchandise inventory accounts?

To maintain clarity in asset management Signup and view all the answers

What is the value of the frozen fritter inventory at the end of the business day?

$400 Signup and view all the answers

What happens to merchandise inventory when a sale is completed?

It is transferred to the cost of goods sold. Signup and view all the answers

Which accounting equation account is affected by the sale of inventory?

Revenues Signup and view all the answers

What characterizes the cost of goods sold account?

It has a natural debit balance. Signup and view all the answers

Which inventory valuation method involves counting the most recently purchased inventory first?

LIFO Signup and view all the answers

When merchandise is sold, which of the following must be recorded in addition to the sale?

Removal of the cost from the inventory account. Signup and view all the answers

In the context of inventory sales, what does 'natural debit balance' mean?

Accounts are primarily increased by debits. Signup and view all the answers

Why might a business prefer using FIFO instead of LIFO for inventory accounting?

To match current costs with current revenues better. Signup and view all the answers

What distinguishes inventory sales from property sales?

Inventory sales typically involve physical goods; property sales may not. Signup and view all the answers

Which accounting entry is necessary to record depreciation?

Increase depreciation expenses and decrease the associated asset account Signup and view all the answers

How does a credit purchase of merchandise inventory impact the accounting equation?

Raises both assets and liabilities while owner’s equity stays the same Signup and view all the answers

What does the term 'service life' refer to in accounting?

The amount of time an asset is expected to be useful Signup and view all the answers

Which of the following statements about merchandise inventory is true?

It does not affect the accounting equation on a cash purchase Signup and view all the answers

What asset types does PP&E encompass?

Property, plants, and equipment Signup and view all the answers

Which of the following represents the correct implications of a sales transaction on accounting equations?

Sales transactions affect assets and owner’s equity but not liabilities Signup and view all the answers

What is the primary depreciation method accepted by the IRS?

Modified Accelerated Cost Recovery System (MACRS) Signup and view all the answers

How is income derived from intellectual property regarded?

It is generated by allowing usage of that property or resource Signup and view all the answers

Study Notes

Intuit Certified Bookkeeping Professional - Domain 2, Lesson 2

Depreciation: Assets depreciate at a consistent rate over their useful life. Accountants decrease a long-term asset's value by increasing depreciation expense.
Income Statements: Assets must always equal the sum of liabilities and owner's equity, according to sales transaction effects.
Merchandise Inventory: Cash purchases of inventory don't change the accounting equation, but credit purchases do impact both merchandise inventory and owner's equity.
Property, Plant, and Equipment (PP&E): This includes property, buildings, and equipment.
Intellectual Property/Resources: Income is earned by allowing others to utilize intellectual property or resources.
Service Life: The period an asset is useful to a company.
Depreciation Methods: Several methods are used, like Modified Accelerated Cost Recovery System (MACRS), straight-line, sum-of-the-years digits, units of production, and double-declining balance.
Depreciation on Income Statements: Depreciation expenses are listed on income statements alongside other expenses, categorized by similar purposes. Net profit or loss comes after expenses and before revenues.
Depreciation and Owner's Equity: Depreciation reduces owner's equity because it decreases net income.
Expenses and Revenue: Net profit/loss is a result of revenue less expenses.
Income Statement Expense Categorization: Expenses should be grouped by purpose for better cost control. This is easier for bookkeepers than alphabetical listing. Grouping is useful for owners because categorization helps control and understand cost categories.
Sales Transactions: Sales can be cash sales or on account. The accounts affected are revenue and either cash or accounts receivable (assets).
Merchandise Inventory and Sales: Recording a sale involves reducing inventory and noting the cost of goods sold.
Common Property, Equipment, and Other Assets: These assets aren't intended for sale, but rather for use. They are valued separately from inventory.
Intellectual Property (IP): A return to the owner on an intellectual property asset can be received as a form of compensation.
Interest Expense: Businesses will pay interest when they owe money that's been borrowed.
Receivables: Accounts generated by allowing customers to pay at a later date for goods or services.
Other Income/Expenses: Include various different types of income and expenses that are not directly related to sales and inventory.

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Description

Test your knowledge on key accounting concepts such as depreciation, income statements, and merchandise inventory. This quiz covers essential aspects of Property, Plant, and Equipment, as well as intellectual property. Prepare to deepen your understanding of accounting principles as a Bookkeeping Professional.