Mind the Business
Cash Money Records pays $2,000 cash to purchase equipment. What happens to total assets?
Total assets stay the same.
An asset increases. Debit or credit?
Debit
Supplies has $2,000 before adjustment; $1,500 remains. How much Supplies Expense is recognized?
$500.
Which comes first: Income Statement, Statement of Retained Earnings, or Balance Sheet?
Income Statement.
A company performs $5,000 of services on account. Name the two accounts affected and whether each increases or decreases.
Accounts Receivable increases $5,000; Service Revenue increases $5,000.
Revenue increases. Debit or credit?
Credit
$3,000 was recorded as Unearned Revenue; $1,000 has now been earned. Give the adjusting entry.
Dr Unearned Revenue $1,000; Cr Service Revenue $1,000.
Temporary or permanent: Service Revenue?
Temporary.
A customer pays $4,000 that was already owed. A teammate says, “Cash went up, so revenue went up.” Correct or incorrect?
Incorrect. Cash increases and Accounts Receivable decreases; no new revenue is earned.
Purchase $900 of Supplies on account. Give the complete entry.
Dr Supplies $900; Cr Accounts Payable $900.
Employees have earned $2,500 that has not been recorded or paid. Give the adjusting entry.
Dr Salaries Expense $2,500; Cr Salaries Payable $2,500.
Beginning Retained Earnings is $8,000, Net Income $7,000, Dividends $2,000. What Ending Retained Earnings flows to the Balance Sheet?
$13,000.
A $1,500 utility bill has been incurred but will be paid next month. What happens to Assets, Liabilities, and Equity?
Assets: no effect; Liabilities: +$1,500; Equity: −$1,500.
You find: Dr Cash $6,000; Cr Unearned Revenue $6,000. What happened economically?
Cash was received in advance for services not yet earned.
Supplies were used but the adjustment was omitted. Supplies is too ___; Supplies Expense is too ___; Net Income is too ___.
High; low; high.
After closing, which of these should have a zero balance: Cash, Service Revenue, Accounts Payable, Retained Earnings?
Service Revenue
A manager says, “The statements balance, so every transaction must have been recorded correctly.” Defend or reject.
Reject.
Purchase $12,000 equipment by paying $2,000 cash and signing a note for the rest. Give the complete entry.
Dr Equipment $12,000; Cr Cash $2,000; Cr Notes Payable $10,000.
A company omits $4,000 depreciation and $1,500 accrued salaries. The trial balance still balances. By how much is Net Income misstated, and in which direction?
Net Income is overstated by $5,500.
A post-closing trial balance contains Salaries Expense with a $3,000 debit balance. What does that tell you?
The closing process is incomplete or incorrect.