Exam 2: Accounting System and Financial Statements

Based on the following trial balance for Sal's Beauty Shop,prepare an income statement,statement of retained earnings and a balance sheet.Sal made no additional investments in the company during the year.

A written promise to pay a definite sum of money on a specific future date is a(n):

On April 30,Holden Company had an Accounts Receivable balance of $18,000.During the month of May,total credits to Accounts Receivable were $52,000 from customer payments.The Accounts Receivable balance was $13,000 on May 31.What was the amount of credit sales during May?

___________________ is a promise of payment from customers to sellers.

What is a trial balance? What is its purpose?

Transactions are first recorded in the ledger.

Which of the following items would appear on the income statement?

Explain how accounts are used in recording information about transactions.

A company has total liabilities of $550 million and total equity of $300 million.Calculate this company's debt ratio.

Which of the following formulas can be used to calculate the debt ratio?

Preparation of a trial balance is the first step in the analyzing and recording process.

A revenue account normally has a debit balance.

Generally,the ordering of accounts in a trial balance typically follows their identification number from the chart of accounts: assets,liabilities,equity,revenues,and expenses.

A business paid a $100 cash dividend.Assume the company had a $2,000 balance in cash immediately prior to this transaction and that this was the first time dividends had ever been paid.Set up the necessary T-accounts below and show how this transaction would be recorded directly in those accounts.Show ending account balances.

Indicate whether a debit or credit entry would be made to record the following changes in each account: a.To decrease Cash. b.To increase Common Stock. c.To decrease Accounts Payable. d.To increase Salaries Expense. e.To decrease Supplies. f.To increase Revenue. g.To decrease Accounts Receivable. h.To increase Retained Earnings.

Items such as sales slips,invoices,checks,and purchase orders are source documents.

A compound journal entry affects no more than two accounts.

In a double-entry accounting system,the total amount debited must always equal the-total amount credited.

The account used to record the transfers of assets from a business to its stockholders is:

When a company provides services for which cash will not be received until some future date,the company should record unearned revenue for the amount charged to the customer.