Accounting Systems
Under cash-basis accounting, when are revenues and expenses recorded?
Revenue is recorded only when cash is received, and expenses only when paid.
What two inventory values are compared to calculate the year-end change?
Beginning of year and End of year
What is debited and what is credited when an owner contributes personal cash to the farm?
When the farm buys an asset with cash, which account is debited and which is credited?
Debit the appropriate asset account; credit Cash.
What accounts are debited and credited when the farm receives cash from selling crops?
Debit Cash; credit the appropriate revenue account, such as Cash Crop Sales.
Under accrual-basis accounting, when are revenues and expenses recorded?
Revenue is recorded when earned, whether or not cash is received.
Feed inventory rises from $100,000 to $120,000. What is the change?
20,000
A 5 year loan payment on land has a principal portion and an interest portion. Which account is debited for each, and which account is credited?
Debit Notes Payable, Noncurrent for the principal and Interest Expense for the interest;
Credit Cash for the total payment.
What does “book value” mean, and how is it calculated?
Book value is an asset’s original cost minus accumulated depreciation.
The farm pays an employee $1,000 gross wages, withholds $200 for taxes, and pays $800 net wages. What accounts are debited and credited?
Debit Wages Expense for $1,000; credit Taxes Payable for $200; credit Cash for $800.
Which accounting approach uses cash-basis recording during the year, then makes accrual adjustments before financial statements?
Accrual Adjusted Approach
Purchased feed inventory rises by $20,000. What two accounts are adjusted, and in which directions?
Change in Purchased Feed for Use (Decrease)
The farm borrows money on a seven-year loan for land. Name the debit and credit accounts.
Debit Cash; credit Real Estate Notes Payable Noncurrent.
An asset with a $5,000 book value sells for $8,000. What is the gain, and is the gain account debited or credited?
The gain is $3,000. Credit Gains/Losses on Sale of Farm Capital Assets.
The farm pays $200 of employee tax withholdings to tax agencies. Name the debit and credit accounts.
Debit Taxes Payable for $200; credit Cash for $200.
Victor orders feed on December 27 and pays for it January 5. Under cash-basis accounting, when is the expense recorded?
January 5th
Accounts Payable increases from $10,000 to $13,000. What is the adjusting entry?
Change in Accounts Payable (Debit)
Accounts Payable (Credit)
A $3,300 loan payment includes $2,700 principal and $600 interest. Give the journal entry.
An old asset has a $4,000 book value and a $6,000 trade-in allowance. What is the gain?
Gross wages are $1,000, withholdings are $200, and net pay is $800. Give the journal entry.
What accounting system do we use in AGBS 31? Why?
Accrual adjusted approach
What is an example of accrued revenue?
Accounts Recievable
The farm makes a $3,300 payment on a long-term equipment loan: $2,700 principal and $600 interest. Explain the effect on liabilities, expenses, and assets.
Liabilities decrease by $2,700 because the principal is repaid. Interest Expense increases by $600. Cash decreases by $3,300.