ACCY 201 Final exam STEWART || WITH 100%
CORRECT ANSWERS!!
Effect on accounting equation when a company receives cash payment from a client for
services provided (what increases or decreases (assets, liabilities or equity) Example: If a
company receives $12,200 from a client for services provided, the effect on the accounting
equation would be: correct answers Increase in Cash(asset), increase in Revenue(equity) EX
answer: Asset increase by $ 12,200 and Equity increase by $ 12,200
What does a credit increase and what does a credit decrease? correct answers Decreases-
assets and expense accounts
Increases- liabilities, revenue, or equity account
Use the accounting equation to compute the missing financial statement accounts
Assets: 75,000
Liabilities: ?
Equity: 40,000 correct answers 75,000= x + 40,000
L= 35,000
On April 1, a company paid the $3,000 premium on a three-year insurance policy with
benefits beginning on that date. What amount of insurance expense will be reported on the
annual income statement for the first year ended December 31? correct answers 3,000/3=
1,000 per year
1,000 x 9/12= $750 insurance expense
define accounts receivable correct answers Money owed by customers to a business (business
is waiting to get money)
define accounts payable correct answers Money a business owes for purchases
What is the principle that requires expenses be reported in the same period as the revenues
that were recognized as a result of those expenses? correct answers Matching principle/
Expense recognition principle
Define Cash Basis Accounting correct answers records revenues when cash is received and
records expenses when cash is paid
Define accrual basis accounting correct answers revenues are recognized when earned and
expenses are recognized when incurred
The primary difference between accrual-basis and cash-basis accounting is: correct answers
The timing of when revenues and expenses are recorded is the primary difference between
accrual and cash basis of accounting.
OR
Under accrual basis of accounting , an attempt is made to record the economic events as they
occur regardless of when cash is received or paid.
Effect on accounting equation when a company pays off its accounts payable in cash. correct
answers Cash(asset) decreases/ Accounts Payable(liabilities) decreases
, What is a trial balance? correct answers a list of accounts and their balances at a given time
What is a T-account? correct answers represents a ledger account and is a tool used to
understand the effects of one or more transactions
Know the difference between financial accounting and managerial accounting correct
answers Financial Accounting: concerned with financial statements, focuses on the needs of
external users
Managerial Accounting: how to price items in factory settings, focuses one the needs of
internal users. managerial accounting is used in planning and control decisions and financial
accounting is used in making investment and credit decisions
Know the difference between a journal and a ledger correct answers Journal: a complete
record of transactions in one place, point of entry into the accounting system
Ledger: is a record of all accounts and their balances
What are adjusting entries? Do adjusting entries affect balance sheet accounts? Do adjusting
entries affect income statement accounts? correct answers An adjusting journal entry is an
entry in a company's general ledger that occurs at the end of an accounting period to record
any unrecognized income or expenses for the period.
Every adjusting entry affects at least one income statement account and one balance sheet
account. NEVER INVOLVES CASH
What account is debited and what account is credited when a utilities bill is paid in cash?
correct answers Utilities Expense XX (debit)
CASH XX (credit)
Calculate the balance in the cash account when given the beginning balance in cash and the
amount of debits and credits to the cash account throughout the period. correct answers Beg
Balance: 1,000
Debits: 10,000
Credits: 2,000
1,000 + 10,000 - 2,000 = 9,000
Assets correct answers resources owned by a business
Liabilities correct answers what a company owes
Equity correct answers the owner's claims to the assets of the business
Who are the users of financial accounting? correct answers External: Investors, creditors,
government, customers, employees
Who are the users of managerial accounting? correct answers internal
CORRECT ANSWERS!!
Effect on accounting equation when a company receives cash payment from a client for
services provided (what increases or decreases (assets, liabilities or equity) Example: If a
company receives $12,200 from a client for services provided, the effect on the accounting
equation would be: correct answers Increase in Cash(asset), increase in Revenue(equity) EX
answer: Asset increase by $ 12,200 and Equity increase by $ 12,200
What does a credit increase and what does a credit decrease? correct answers Decreases-
assets and expense accounts
Increases- liabilities, revenue, or equity account
Use the accounting equation to compute the missing financial statement accounts
Assets: 75,000
Liabilities: ?
Equity: 40,000 correct answers 75,000= x + 40,000
L= 35,000
On April 1, a company paid the $3,000 premium on a three-year insurance policy with
benefits beginning on that date. What amount of insurance expense will be reported on the
annual income statement for the first year ended December 31? correct answers 3,000/3=
1,000 per year
1,000 x 9/12= $750 insurance expense
define accounts receivable correct answers Money owed by customers to a business (business
is waiting to get money)
define accounts payable correct answers Money a business owes for purchases
What is the principle that requires expenses be reported in the same period as the revenues
that were recognized as a result of those expenses? correct answers Matching principle/
Expense recognition principle
Define Cash Basis Accounting correct answers records revenues when cash is received and
records expenses when cash is paid
Define accrual basis accounting correct answers revenues are recognized when earned and
expenses are recognized when incurred
The primary difference between accrual-basis and cash-basis accounting is: correct answers
The timing of when revenues and expenses are recorded is the primary difference between
accrual and cash basis of accounting.
OR
Under accrual basis of accounting , an attempt is made to record the economic events as they
occur regardless of when cash is received or paid.
Effect on accounting equation when a company pays off its accounts payable in cash. correct
answers Cash(asset) decreases/ Accounts Payable(liabilities) decreases
, What is a trial balance? correct answers a list of accounts and their balances at a given time
What is a T-account? correct answers represents a ledger account and is a tool used to
understand the effects of one or more transactions
Know the difference between financial accounting and managerial accounting correct
answers Financial Accounting: concerned with financial statements, focuses on the needs of
external users
Managerial Accounting: how to price items in factory settings, focuses one the needs of
internal users. managerial accounting is used in planning and control decisions and financial
accounting is used in making investment and credit decisions
Know the difference between a journal and a ledger correct answers Journal: a complete
record of transactions in one place, point of entry into the accounting system
Ledger: is a record of all accounts and their balances
What are adjusting entries? Do adjusting entries affect balance sheet accounts? Do adjusting
entries affect income statement accounts? correct answers An adjusting journal entry is an
entry in a company's general ledger that occurs at the end of an accounting period to record
any unrecognized income or expenses for the period.
Every adjusting entry affects at least one income statement account and one balance sheet
account. NEVER INVOLVES CASH
What account is debited and what account is credited when a utilities bill is paid in cash?
correct answers Utilities Expense XX (debit)
CASH XX (credit)
Calculate the balance in the cash account when given the beginning balance in cash and the
amount of debits and credits to the cash account throughout the period. correct answers Beg
Balance: 1,000
Debits: 10,000
Credits: 2,000
1,000 + 10,000 - 2,000 = 9,000
Assets correct answers resources owned by a business
Liabilities correct answers what a company owes
Equity correct answers the owner's claims to the assets of the business
Who are the users of financial accounting? correct answers External: Investors, creditors,
government, customers, employees
Who are the users of managerial accounting? correct answers internal
