ACCOUNTING 201 EXAM WITH COMPLETE
SOLUTIONS ALREADY PASSED
What is a collection of accounts used to keep track of increases and decreases in
financial position elements? - Answer-General Ledger
A chronological record of all economic events affecting a company is called - Answer-
Journal
The process of transferring information from a journal entry to the specific accounts
affected is referred to as? - Answer-Posting
An account used generally for analysis - Answer-t-account
To increase the dividend account, one would what? - Answer-debit dividends
Which are stockholder equity accounts? - Answer-Retained earnings and common
stock
A revenue account is increased with a - Answer-credit
A trial balance may not be free of errors because a trial balance - Answer-Only
determines that debit equals credits
The two components for calculating net income are - Answer-revenue and expenses
The effect of dividends on the expanded balance sheet equation is to - Answer-
Decrease retained earnings
Recognize accounts receivable. - Answer-Companies record an asset (accounts
receivable) and revenue when they sell products and services to their customers on
account, expecting payment in the future.
Other types of receivable are nontrade receivables and notes receivable.
Calculate net revenues using discounts, returns, and allowances. - Answer-Sales
discounts, returns, and allowances are contra revenue accounts. We subtract the
balances in these accounts from total revenues when calculating net revenues.
Trade discounts are not recorded in the accounting records.
, Record an allowance for future uncollectible accounts. - Answer-We recognize accounts
receivable as assets in the balance sheet and record them at their net realizable values,
that is, the amount of cash we expect to collect.
Under the allowance method, companies are required to estimate future uncollectible
accounts and record those estimates in the current year. Estimated uncollectible
accounts reduce assets and increase expenses.
Adjusting for estimates of future uncollectible accounts matches expenses (bad debts)
in the same period as the revenues (credit sales) they help to generate.
Recording an allowance for uncollectible accounts correctly reports accounts receivable
at their net realizable value.
Apply the procedure to write off accounts receivable as uncollectible. - Answer-Writing
off a customer's account as uncollectible reduces the balance of accounts receivable
but also reduces the contra asset—allowance for uncollectible accounts. The net effect
is that there is no change in the net receivable (accounts receivable less the allowance)
or in total assets. We recorded the decrease to assets as a result of the bad debt when
we established the allowance for uncollectible accounts in a prior year.
The Allowance for doubtful accounts account must always carry a credit balance at the
end of the accounting period after adjustment. A debit balance prior to adjustment
means last year's estimate of uncollectible accounts was too low. A credit balance prior
to adjustment means last year's estimate of uncollectible accounts was too high.
Use the aging method to estimate future uncollectible accounts. - Answer-Using the
aging method to estimate uncollectible accounts is more accurate than applying a single
percentage to all accounts receivable. The aging method recognizes that the longer
accounts are past due, the less likely they are to be collected.
Accounts receivable is always shown net of the Allowance for uncollectible accounts on
the face of the balance sheet.
Contrast the allowance method and direct write-off method when accounting for
uncollectible accounts. - Answer-The direct write-off method reduces accounts
receivable and records bad debt expense at the time the account receivable proves
uncollectible. If the credit sale occurs in a prior reporting period, bad debt expense is not
properly matched with revenues (credit sales). Also, accounts receivable will be
overstated in the prior period.
The direct write-off method typically is not acceptable for financial reporting.
Apply the procedure to account for notes receivable, including interest calculation. -
Answer-Notes receivable are similar to accounts receivable except that notes receivable
are more formal credit arrangements made with a written debt instrument, or note.
SOLUTIONS ALREADY PASSED
What is a collection of accounts used to keep track of increases and decreases in
financial position elements? - Answer-General Ledger
A chronological record of all economic events affecting a company is called - Answer-
Journal
The process of transferring information from a journal entry to the specific accounts
affected is referred to as? - Answer-Posting
An account used generally for analysis - Answer-t-account
To increase the dividend account, one would what? - Answer-debit dividends
Which are stockholder equity accounts? - Answer-Retained earnings and common
stock
A revenue account is increased with a - Answer-credit
A trial balance may not be free of errors because a trial balance - Answer-Only
determines that debit equals credits
The two components for calculating net income are - Answer-revenue and expenses
The effect of dividends on the expanded balance sheet equation is to - Answer-
Decrease retained earnings
Recognize accounts receivable. - Answer-Companies record an asset (accounts
receivable) and revenue when they sell products and services to their customers on
account, expecting payment in the future.
Other types of receivable are nontrade receivables and notes receivable.
Calculate net revenues using discounts, returns, and allowances. - Answer-Sales
discounts, returns, and allowances are contra revenue accounts. We subtract the
balances in these accounts from total revenues when calculating net revenues.
Trade discounts are not recorded in the accounting records.
, Record an allowance for future uncollectible accounts. - Answer-We recognize accounts
receivable as assets in the balance sheet and record them at their net realizable values,
that is, the amount of cash we expect to collect.
Under the allowance method, companies are required to estimate future uncollectible
accounts and record those estimates in the current year. Estimated uncollectible
accounts reduce assets and increase expenses.
Adjusting for estimates of future uncollectible accounts matches expenses (bad debts)
in the same period as the revenues (credit sales) they help to generate.
Recording an allowance for uncollectible accounts correctly reports accounts receivable
at their net realizable value.
Apply the procedure to write off accounts receivable as uncollectible. - Answer-Writing
off a customer's account as uncollectible reduces the balance of accounts receivable
but also reduces the contra asset—allowance for uncollectible accounts. The net effect
is that there is no change in the net receivable (accounts receivable less the allowance)
or in total assets. We recorded the decrease to assets as a result of the bad debt when
we established the allowance for uncollectible accounts in a prior year.
The Allowance for doubtful accounts account must always carry a credit balance at the
end of the accounting period after adjustment. A debit balance prior to adjustment
means last year's estimate of uncollectible accounts was too low. A credit balance prior
to adjustment means last year's estimate of uncollectible accounts was too high.
Use the aging method to estimate future uncollectible accounts. - Answer-Using the
aging method to estimate uncollectible accounts is more accurate than applying a single
percentage to all accounts receivable. The aging method recognizes that the longer
accounts are past due, the less likely they are to be collected.
Accounts receivable is always shown net of the Allowance for uncollectible accounts on
the face of the balance sheet.
Contrast the allowance method and direct write-off method when accounting for
uncollectible accounts. - Answer-The direct write-off method reduces accounts
receivable and records bad debt expense at the time the account receivable proves
uncollectible. If the credit sale occurs in a prior reporting period, bad debt expense is not
properly matched with revenues (credit sales). Also, accounts receivable will be
overstated in the prior period.
The direct write-off method typically is not acceptable for financial reporting.
Apply the procedure to account for notes receivable, including interest calculation. -
Answer-Notes receivable are similar to accounts receivable except that notes receivable
are more formal credit arrangements made with a written debt instrument, or note.
