Accounting FBLA Study set

What is the purpose of journalizing in accounting?

To record business transactions in chronological order

Which of the following is considered an asset?

Building

What does the accounting equation represent?

Assets = Liabilities + Owner’s Equity

Which financial statement shows a company’s revenues and expenses?

Income Statement

What is the main purpose of a balance sheet?

To report the financial position of a business at a point in time

Which type of account is 'Accounts Receivable'?

Asset

In double-entry accounting, every transaction affects how many accounts?

Two or more

Which of the following would be found in the credit column of a trial balance?

Capital

What is the result of posting entries to the ledger?

Summarized account balances

Which account is increased with a debit?

Equipment

What is the purpose of a worksheet in accounting?

To organize data for financial statements

Which document is used to compare a company’s checkbook with its bank statement?

Bank Reconciliation

What is a payroll register?

A record of employee pay details

What is a sole proprietorship?

A business owned by one person

What does depreciation represent in accounting?

The expense of using long-term assets

Which of these is an intangible asset?

Trademark

How is net income calculated?

Revenue − Expenses

What does the term 'liability' refer to?

Amounts owed to others

What does GAAP stand for?

Generally Accepted Accounting Principles

Which of these is not a financial statement?

Trial Balance

What type of account is 'Unearned Revenue'?

Liability

What is the primary purpose of adjusting entries?

To update account balances before financial statements

What is a trial balance used for?

To ensure debits equal credits

What does the matching principle in accounting require?

Matching expenses with revenues in the same period

What is the correct order of the accounting cycle?

Analyzing → Journalizing → Posting → Trial Balance → Adjusting Entries → Financial Statements

What is a petty cash fund used for?

Small, routine business expenses

How are expenses recorded in the accounting equation?

They decrease owner’s equity

What is the purpose of closing entries?

To prepare permanent accounts for the next period

What does 'accrued expense' mean?

A recorded liability not yet paid

Which of the following is considered an operating activity in the statement of cash flows?

Selling products

Which of the following best describes internal controls in accounting?

Procedures to ensure accuracy and prevent fraud

What is a contra asset account?

An account that offsets an asset account

What does the term 'fiscal year' refer to?

A 12-month period used for financial reporting

What type of account is 'Sales Returns and Allowances'?

Contra revenue

How are prepaid expenses recorded on the balance sheet?

Assets

What is a common depreciation method used in accounting?

Straight-line method

What is the primary purpose of a post-closing trial balance?

To check balances after closing entries are made

Which of the following is a temporary account?

Rent Expense

What is the effect of an adjusting entry for accrued revenue?

Increase an asset and increase revenue

Which document provides a record of all business transactions in chronological order?

Journal

What is the purpose of the income summary account?

To transfer net income or loss to capital

When preparing a bank reconciliation, which item would be subtracted from the book balance?

Bank service charges

Which financial statement includes the heading 'For the Year Ended'?

Income Statement

Which principle requires businesses to record expenses in the same period as the revenues they help generate?

Matching principle

What is the result of underestimating depreciation expense?

Understated expenses and overstated net income

In accounting, what does the term 'posting' refer to?

Transferring data from the journal to the ledger

What is the accounting treatment of owner withdrawals?

Debit to drawing

Which of the following would not appear on an income statement?

Accounts Receivable

What is the effect of a credit to an expense account?

It decreases the expense

Which financial statement shows a company's financial position at a specific point in time?

Balance Sheet

What does the income statement report?

Revenue and expenses over a period of time

What does the statement of owner’s equity show?

Changes in capital during the period

How does the statement of cash flows categorize cash?

Operating, investing, and financing activities

What is another name for the balance sheet?

Statement of financial position

What is gross profit?

Sales − Cost of goods sold

What is net sales?

Sales − Sales returns and allowances − Sales discounts

Which inventory method values inventory at the most recent costs?

FIFO

Which method assigns earliest costs to COGS?

FIFO

Which inventory method reduces taxes during inflation?

LIFO

The lower of cost or market rule applies to what?

Inventory valuation

What type of account is accumulated depreciation?

Contra asset

What type of account reduces owner’s equity through withdrawals?

Drawing account

On which side do liabilities increase?

Credit

Which accounts normally carry debit balances?

Assets and expenses

Which accounts normally carry credit balances?

Liabilities, equity, revenue

Which account increases with a credit?

Service Revenue

Unearned revenue increases what type of account?

Liability

Supplies Expense increases with which side?

Debit

What is the normal balance of a contra revenue account?

Debit

What happens when cash is received on account?

Increase cash; decrease accounts receivable

What is a source document?

Evidence of a transaction

What is an invoice used for?

Billing customers

What does a receipt represent?

Proof of payment received

What is a check stub?

Record kept when issuing a check

What does journalizing require?

Date, accounts, amounts, explanation

What does the ledger organize?

Accounts

How many accounts does a compound entry affect?

More than two

What is cross-referencing?

Marking journal and ledger with posting references

What is the last step in journalizing?

Writing an explanation

What is the effect of failing to post a debit?

Trial balance will not balance

What is the adjusting entry for expired insurance?

Debit Insurance Expense; credit Prepaid Insurance

What is the adjusting entry for supplies used?

Debit Supplies Expense; credit Supplies

Accrued revenue requires what adjustment?

Debit asset; credit revenue

Accrued expense requires what adjustment?

Debit expense; credit liability

What does depreciation adjust?

Asset value and expense recognition

What is the purpose of a contra asset for depreciation?

Track accumulated depreciation separately

Deferrals include what?

Prepaid expenses and unearned revenue

Accruals include what?

Accrued revenues and accrued expenses

Adjusting entries always affect what?

One income statement and one balance sheet account

Which account is never adjusted?

Cash

What type of accounts are closed?

Temporary accounts

Revenue accounts close to what?

Income Summary

Expense accounts close to what?

Income Summary

Income Summary closes to what?

Capital

Withdrawals close to what?

Capital

Permanent accounts include what?

Assets, liabilities, capital

Temporary accounts include what?

Revenues, expenses, drawing

What is the purpose of closing entries?

Reset temporary accounts to zero

What is listed on the post-closing trial balance?

Only permanent accounts

What does NOT appear on the post-closing trial balance?

Revenues and expenses