Accounting 2010- Exam 2 with
Accurate Solutions
All journal entries adjustments have what 2 things? - ANS-1) balance sheet account
2) income statement
True or False?
A cash account is always in an adjusting entry - ANS-False, a cash account is NEVER
in an adjusting entry
What is a petty cash fund? - ANS-a system used to reimburse employees for things
they have done for the organization. Controlled by the petty cash custodian. This fund
removes cash from a company's general bank account and is held in a locked cash box.
Usually these expenses are small amounts.
What are the 3 step involved in a petty cash system? - ANS-1) putting money into petty
cash to establish a fund
2) paying money out to reimburse others
3) putting money back into petty cash to replenish the fund
Journal entry question:
How would you record step #1 in the petty cash system (putting money into the fund)? -
ANS-Debit-Petty cash
Credit- cash
True or False?
Petty cash transactions are recorded in the accounting system ONLY when the fund is
replenished - ANS-True
True or False?
At any point,
petty cash receipts + funds in the cash box = fund's total when established - ANS-True
Journal entry question:
How would you record step #2 in the petty cash system (pay money out of the fund)? -
ANS-No journal entry required
Journal entry question:
, How would you record step #3 in the petty cash system (replenishing the fund)? - ANS-
Debit- various items that were paid (ex- supplies, travel expenses, a dozen donuts aka
an office expense)
Credit- Cash
CHAPTER 6 - ANS-
What does inventory report? - ANS-reports the merchandiser's total COST of acquiring
goods that is has not sold yet
What do sales revenue/cost of goods sold report? - ANS-reports the total SELLING
PRICE and COST of all goods that the merchandiser did sell to customers during the
period.
What does gross profit represent? - ANS-represents the profit earned before taking into
account other expenses such as salaries, wages, deprecation, etc. Sales revenue-
COGS= gross profit. Remember: always ignore the selling and administrative
expenses... they are not a part of COGS!
Gross profit example:
Determine the gross profit when the selling price of a gallon of paint is $20, the selling
price (COGS) is $13, selling expense is $1/gallon, and the admin expense is
$.50/gallon. - ANS-Gross profit= Sales revenue- COGS
$20-$13= $7
What is beginning inventory (BI)? - ANS-a stock of inventory that is started at the
beginning of each accounting period
What are goods available for sale? - ANS-BI + purchases (P)= goods available for sale
Can either be sold during period (COGS on income statement) OR will remain on hand
(EI on balance sheet)
True of False?
Ending inventory for one accounting period becomes beginning inventory for the next
period. - ANS-True
What are the 2 cost of goods sold (COGS) equations? - ANS-express the relationship
b/w inventory on hand, purchased, and sold.
1) Periodic inventory equation: BI+P-EI=CGS
2) Perpetual inventory equation: BI+P-CGS=EI
What is a Periodic Inventory System? - ANS-When inventory records are updated at the
end of the accounting period. To determine how much merchandise has been sold,
inventory must be physically counted at the end of the period.
Accurate Solutions
All journal entries adjustments have what 2 things? - ANS-1) balance sheet account
2) income statement
True or False?
A cash account is always in an adjusting entry - ANS-False, a cash account is NEVER
in an adjusting entry
What is a petty cash fund? - ANS-a system used to reimburse employees for things
they have done for the organization. Controlled by the petty cash custodian. This fund
removes cash from a company's general bank account and is held in a locked cash box.
Usually these expenses are small amounts.
What are the 3 step involved in a petty cash system? - ANS-1) putting money into petty
cash to establish a fund
2) paying money out to reimburse others
3) putting money back into petty cash to replenish the fund
Journal entry question:
How would you record step #1 in the petty cash system (putting money into the fund)? -
ANS-Debit-Petty cash
Credit- cash
True or False?
Petty cash transactions are recorded in the accounting system ONLY when the fund is
replenished - ANS-True
True or False?
At any point,
petty cash receipts + funds in the cash box = fund's total when established - ANS-True
Journal entry question:
How would you record step #2 in the petty cash system (pay money out of the fund)? -
ANS-No journal entry required
Journal entry question:
, How would you record step #3 in the petty cash system (replenishing the fund)? - ANS-
Debit- various items that were paid (ex- supplies, travel expenses, a dozen donuts aka
an office expense)
Credit- Cash
CHAPTER 6 - ANS-
What does inventory report? - ANS-reports the merchandiser's total COST of acquiring
goods that is has not sold yet
What do sales revenue/cost of goods sold report? - ANS-reports the total SELLING
PRICE and COST of all goods that the merchandiser did sell to customers during the
period.
What does gross profit represent? - ANS-represents the profit earned before taking into
account other expenses such as salaries, wages, deprecation, etc. Sales revenue-
COGS= gross profit. Remember: always ignore the selling and administrative
expenses... they are not a part of COGS!
Gross profit example:
Determine the gross profit when the selling price of a gallon of paint is $20, the selling
price (COGS) is $13, selling expense is $1/gallon, and the admin expense is
$.50/gallon. - ANS-Gross profit= Sales revenue- COGS
$20-$13= $7
What is beginning inventory (BI)? - ANS-a stock of inventory that is started at the
beginning of each accounting period
What are goods available for sale? - ANS-BI + purchases (P)= goods available for sale
Can either be sold during period (COGS on income statement) OR will remain on hand
(EI on balance sheet)
True of False?
Ending inventory for one accounting period becomes beginning inventory for the next
period. - ANS-True
What are the 2 cost of goods sold (COGS) equations? - ANS-express the relationship
b/w inventory on hand, purchased, and sold.
1) Periodic inventory equation: BI+P-EI=CGS
2) Perpetual inventory equation: BI+P-CGS=EI
What is a Periodic Inventory System? - ANS-When inventory records are updated at the
end of the accounting period. To determine how much merchandise has been sold,
inventory must be physically counted at the end of the period.
