Principles of Accounting Asst Prof Dr Panchat Akarak

Principles of Accounting Asst. Prof. Dr. Panchat Akarak p. thipnew 1@hotmail. com School of Accounting Chaingrai Rajabhat University Accounting I 1

Exercises 5 Vocabulary Matching True-False questions Multiple choice questions Demonstration Problem

Vocabulary Put your explain in the appropriate column. Items Income Statement Balance sheet Work sheet Income Summary Profit and Loss summary Reversing Net Income Financial Position Statement Comprehensive Income Retain Earning Meaning in Thai

Vocabulary • Put (/) in the appropriate column. Items Accumulated depreciation Depreciation Prepaid advertising Prepaid insurance Prepaid rent Unearned consulting fees Nominal Real Account

Vocabulary • Put (/) in the appropriate column. Items Unearned revenue Prepaid Expense Advertising revenue Office Supplies on hand Doubtful accounts Nominal Real Account

Vocabulary • Put (/) in the appropriate column. Real Account Items Allowance for doubtful accounts Bad debt Office supplies expense Accrued Expense Accrued Revenue Unearned Revenue Deferred Income Nominal Account

Vocabulary • Put (/) in the appropriate column. Items Real Account Nominal Account Interest expense Accrued interest payable Bad debts Expense Accounts Receivable Accounts Payable Doubtful debt Unexpired insurance

Vocabulary • Put (/) in the appropriate column. Items Payroll Expense Miscellaneous Expenses Salaries and wages expense Accrued salaries and wages payable Note Receivable Real Account Nominal Account

Matching • Referring to the terms listed in the left and right column, place the appropriate letter next to the corresponding description. A. Owner’s equity account G. Closing entries B. Profit & loss summary account H. Income Statement C. D. E. F. Assets Accrued expenses Contra account Adjusting entries I. J. K. L. Statement of Owner’s Equity Prepaid expense Work sheet Accrued Liability

Matching 1. Classifications of accounts remaining open after the accounting records are closed. 2. Is the account to which commissions earned is closed. 3. Expense incurred before they are paid for. 4. Amount owed for expenses incurred but not yet billed or due to be paid. 5. Used to record the cost of prepaid insurance that has expired.

Matching 6. Account subtracted from plant and equipment to arrive at book value. 7. The owner’s drawing account is closed to this account. 8. Entries required at the end of the accounting period to clear out the temporary accounts. 9. Accumulated depreciation. 10. Unpaid and recorded amounts for which payment is not due.

Matching 11. A statement showing changes in owner’s equity. 12. After these entries are posted, revenue and expense account have no balance. 13. A form that provides a convenient way for summarizing information needed for preparing financial statement 14. The account’s balance is subtracted from the balance of an associated account to show the appropriate balance. 15. Used to record the cost of office supplies used from Inventory.

Solutions-Matching 1 2 3 4 5 6 7 8 9 10 11 12

True-False Questions • Indicate whether the following statements are true or false by inserting in the blank space provided a capital “T” for True or “F” for false. 1. The profit and loss summary account appears on the income Statement along with Owner’s Equity. 2. Mortgage Note Payable due in 8 years would be classified as part of owner’s equity on a classified Balance Sheet.

True-False Questions 3. One of the purpose of closing entries is to prepare revenue and expense accounts for the recording of the next period’s revenue and expense. 4. The company has earned an income for the period if a credit is needed to close the Profit and Loss summary account.

True-False Questions 5. If a company reports a net income for the current year, this amount will be shown on the work sheet in the debit Income Statement column and credit Balance Sheet column. 6. Owner’s drawing are an expense because they reduce Owner’s equity.

True-False Questions 7. An expense account is normally closed by crediting it. 8. The Profit and loss Summary account reveals that an operating loss of $800 has been incurred. Before closing entries are posted, the owner’s drawing account shows a balance of $460. The entry to close the profit and loss summary account is a debit of $340 to Profit and loss summary.

True-False Questions 9. The adjusted trial balance contains only revenue and expense accounts. 10. It is not necessary to close the accounts each time financial statements are prepared.

True-False Questions 11. Entering the adjustments in the adjustments columns of a work sheet makes it unnecessary to record and post adjusting entries. 12. The post-closing trial balance is prepared immediately after all adjustments have been journalized and posted.

True-False Questions 13. If a firm’s expenses are greater than its revenue, the owner’s equity is increased. 14. An adjusting entry in needed to transfer the information in the individual revenue and expense accounts to the profit and loss summary account.

True-False Questions 15. The purpose of the profit and loss summary account is to summarize all expense and revenue of the period in one account. 16. Following the adjustment and closing process, the revenue and expense accounts are the only accounts remaining open.

True-False Questions 17. The important role of the work sheet is to aid the accountant by bringing together all the data needed for preparing the financial statement. 18. In a properly classified balance sheet net income for the period would be included in the total of current assets.

True-False Questions 19. Work sheets furnish in a convenient from the information required for the periodic financial statement. 20. When a work sheet’s Income Statement debit column total exceeds the Income Statement credit column total a loss is indicated.

True-False Questions 21. The post closing trial balance contains assets, Liability and owner’s equity. 22. If the balance in Profit and Loss summary is a credit balance, this means that the organization has earned a net income of this amount.

True-False Questions 23. The Profit and loss summary account allows for the adjustment of any revenues and expense that have not been previously recorded. 24. On a properly classified balance sheet. Wages Payable should be classified as a current Liability.

True-False Questions 25. The account “Accounts Receivable” is closed to Profit and loss summary account in the closing procedure.

Solutions-True-False Questions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Multiple Choice Questions For each of the following questions, indicate the single, best answer by circling the appropriate letter. 1. The depreciating expense on office equipment was recorded by a debit to depreciating expense and a credit to office equipment. If statements are now prepared: a. Net income and owner’s equity are correct. b. The total dollar amount of total assets is correct but the details shown on the balance sheet are in error. c. Total liabilities are correct. d. All of the above. e. A and c, but not B.

Multiple Choice Questions 2. Which of the following is true regarding the work sheet? a. It is a form which the accountant uses for his/her own aid and convenience. b. It assists in the orderly preparation of the adjustments and financial statements at the end of accounting periods. c. It can substitute for journals and ledgers. d. All the above are true. e. Only A and B are true.

Multiple Choice Questions 3. Malee Sporting Goods began business on January 1, 2016, with owner’s capital of $15, 000. At December 31, 2016, assets amounted to $25. 000 and Liabilities were $6, 000. Revenue from service during the year amounted to $30, 000 and malee took $8, 000 from the business to pay his living expenses, The expenses of Malee Sporting Goods for 2016 amounted to: a. $10, 000. b. $18, 000. c. $26, 000. d. $19, 000. e. Some other amount.

Multiple Choice Questions 4. The Trial Balance columns of a work sheet total $62, 000. The Adjustments columns contain the following: -Depreciation expense of $3, 500. -Rent expense of $500. -Accrued salaries of $2, 500. -Insurance expense of $1, 200. -Supplies expense of $600. The total of the Adjusted Trial Balance columns is:

Multiple Choice Questions 4. The total of the Adjusted Trial Balance columns is: a. $69, 800. b. $68, 000. c. $65, 000. d. $63, 800. e. $54, 200.

Multiple Choice Questions 5. Supplies on hand are shown as $315 in the Trial balance columns of the work sheet. The Adjustments columns show that $290 of these supplies were used during the month. The amount shown as supplies on hand in the Balance Sheet columns is: a. $25 debit. b. $315 debit. c. $290 debit. d. $25 credit. e. $290 credit.

Multiple Choice Questions 6. The Trial balance columns of the work sheet show store fixtures of $4, 000. Estimated depreciation for the period is $400. The store fixtures amount in the Balance Sheet columns of the work sheet will be: a. $3, 600 debit. b. $3, 600 credit. c. $4, 400 debit. d. $4, 000 debit. e. $4, 000 credit.

Multiple Choice Questions 7. If the subtotal of the income statement debit column is $250, 000, the subtotal of the income statement credit column is $300, 000 and the subtotal of the balance sheet debit column is $475, 000 what is the subtotal of the balance sheet credit column? a. $425, 000. b. $250. 000. c. $525, 000. d. $300, 000. e. None of the above.

Multiple Choice Questions 8. Salary expense before adjustment at September 30, the end of the fiscal year, has a balance of $140, 000. The amount accrued is $3, 100. The Adjusting entry would be: a. Salaries Expense 3, 100 Salaries Payable 3, 100 b. Salaries Payable 3, 100 Salaries Expense 3, 100 c. Profit and Loss summary account 3, 100 Salaries Expense 3, 100 d. Profit and Loss summary account 143, 100 Salaries Expense 143, 100 e. None of these.

Multiple Choice Questions 9. The closing entry for Salary Expense in the previous problem would be: a. Salaries Expense 3, 100 Salaries Payable 3, 100 b. Salaries Payable 3, 100 Salaries Expense 3, 100 c. Profit and Loss summary account 3, 100 Salaries Expense 3, 100 d. Profit and loss summary account 143, 000 Salaries Expense 143, 000

Multiple Choice Questions 10. In adjusting and closing the books of Sawat at the end of the fiscal year no provision was made for accrued sales salary expense of $600. The effect of this omission was as follows: a. The assets on the balance sheet were the same regardless of the omission. b. The owner’s equity on the balance sheet is understated by $600. c. The liabilities reported on the balance sheet are overstated by $600. d. The profit for the year was understated by $600. e. None of the preceding answers is correct.

Multiple Choice Questions 10. Office Supplies on Hand shows up on the work sheet in the following columns assuming office supplies expense must be deducted from the prepaid amount. a. Trial Balance, Adjustments, Adjusted Trial balance, Balance Sheet b. Income Statement and Adjustments c. Balance Sheet and Adjustments only

Multiple Choice Questions 11. If at the end of a period there is a debit balance in the Profit and Loss summary account, this means that: a. Total assets have decreased during the period. b. The business has suffered a net loss during the period. c. Revenues have exceeded expenses. d. the owner has drawn out more than the income for the period.

Multiple Choice Questions 12. On a properly classified balance sheet, Taxes Payable should be classified as: a. Current Asset. b. Plant and Equipment. c. Current Liability. d. Long-term Liability e. Owner’s equity

Multiple Choice Questions 14. If the debit subtotal of the Income Statement on the work sheet is $159, 000 and the credit subtotal is $147, 000, there is a. net income of $12, 000. b. net loss of $12, 000. c. net loss of $159, 000. d. net income of $147, 000.

Multiple Choice Questions 15. Which of the following statements is incorrect? a. The work sheet eliminates the need for adjusting and closing Journal entries. b. The work sheet serves as the basis for preparing the Income Statement. c. The work sheet serves as the basis for preparing the Balance Sheet. d. The work sheet serves as the basis for journalizing the adjusting entries. e. None of these.

SOLUTIONS • Multiple Choice Questions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Demonstration Problem 1. The trial balance of the Brown Company at December 31, 2016, contains the following account balance (the accounts are listed in alphabetical order to increase your skill in sorting amounts to the proper work sheet columns.

Demonstration Problem Brown Company Trial Balance Account Balance December 31, 2016 Account Titles Accounts payable Accounts receivable Accumulated depreciation-building Accumulated depreciation-equipment Building Brown, Capital Brown, Drawing Amount $ 12, 000 40, 800 13, 700 7, 500 65, 000 40, 100 10, 000

Demonstration Problem Cash Commissions revenue Equipment Land Payroll expense Store supplies on hand Unexpired insurance Utilities expense 16, 900 232, 400 20, 000 90, 000 55, 000 3, 500 2, 400 2, 100

Demonstration Problem a. Using the account balance given above and the additional information presented below, prepare a work sheet for the Brown Company Additional data: 1. Store supplies on hand at December 31, have a cost of $800. 2. The balance in the Unexpired Insurance account represents the Cost of a twenty-month insurance policy beginning January 1, 2016.

Demonstration Problem 3. Depreciation for the building is $370 and for the equipment, $1, 200. b. Prepare the adjusting and closing journal entries. (Solutions Net Income=168, 590)

Demonstration Problem 2. The following account balance. Service revenue Utilities expense Accumulated depreciation Salaries and wages expense Depreciation expense 92, 000 Rent revenue 3, 000 5, 500 Advertising expense 10, 000 30, 000 Miscellaneous expense 2, 000 72, 000 Accrued salaries and wages payable 5, 000 Mr. Lee, Capital 4, 000 20, 000 Prepare one entry to close the revenue accounts, prepare one entry to close out the balance in the Profit and Loss summary account. (Solutions Net Income=2, 500)

Demonstration Problem 3. The following account balances appeared in the Income Statement columns of the work sheet prepared for the Papaya Company for the year ended December 31, 2015. Commissions earned Painting revenue Advertising expense Payroll expense Utilities expense Insurance expense Rent expense 150, 000 280, 000 1, 800 200, 000 3, 000 1, 800 8, 100

Demonstration Problem Office supplies expense Depreciation expense-building Interest expense Rent revenue 3, 500 5, 800 600 1, 500 Prepare the Work sheet 6 columns, closing journal entries, Assume Papaya Company, Drawing account has a balance of $34, 000 on December 31, 2015. (Solutions Net Income=206, 900)

The End