ACT: midterm

What is the basic accounting equation?

Assets = Liabilities + Owner's Equity

What accounts normally has a debit balance?

Equipment

When cash is received from customers for services provided, the journal entry is:

Debit Cash, Credit Service Revenue

Which financial statement shows a company's performance over a period of time?

Income Statement

What is the matching principle?

Revenues and expenses should be recorded in the same period.

Rent is classified as:

Expense

What is not an asset?

Salaries Payable

If the owner invests cash into the business, what is the effect?

Increase Assets and Increase Owner's Equity

The trial balance is prepared to?

Verify that debits equal credits

What is Depreciation?

Allocation of cost of an asset over its useful life

Starline Services purchased office supplies worth $1,000 on credit. What is the correct journal entry?

Debit Office Supplies $1,000; Credit Accounts Payable $1,000

what does Revenue increases?

Owner's equity

What does the accounting cycle begins with?

The purpose of adjusting entries is to:
Journalizing transactions

What is the purpose of adjusting entries?

Ensure revenues and expenses are recorded in the correct period

what is an example of an expense?

Salaries owed but not yet paid

what does the balance sheet shows?

Assets, Liabilities, and Owner's Equity at a point in time

If Supplies Expense is $800 and beginning Supplies were $1,200, and ending Supplies $400, how much supplies were used?

$800

What is true about double-entry accounting?

Every transaction affects at least two accounts.

what does a debit to an expense account means?

Expense increases

When preparing financial statements, which statement is prepared first?

Income Statement