Bad Debts
Maisy Inc. uses the direct write-off method. On November 30th, they determine that they cannot collect their accounts receivable of $1,000 from Quartz Company. This is the journal entry for November 30th.
What is debit Bad Debts Expense $1,000 and credit Accounts Receivable – Quartz Company $1,000?
Notes receivable are due and payment must be received in full on this date.
What is the maturity date?
XYZ Company establishes a Petty Cash fund for $55. This is the journal entry to establish the fund.
What is debit Petty Cash $55 and credit Cash $55?
When technology is used in company processes, it helps reduce _____________ ____________.
What are processing errors?
The journal entry to decrease a petty cash fund involves a credit to this account.
What is Petty Cash?
Maisy Inc. uses the allowance method. On November 30th, they determine that they cannot collect their accounts receivable of $1,000 from Quartz Company. This is the journal entry for November 30th.
What is debit Allowance for doubtful accounts $1,000 and credit Accounts Receivable – Quartz Company $1,000?
Failure by a customer to pay a note receivable is called this.
What is dishonoring a note?
XYZ Company decides to increase their petty cash fund from $55 to $70. This is the journal entry to increase the fund.
What is debit Petty Cash $15 and credit Cash $15?
This principle requires that an accounting information system conform with a company's activities, personnel, and structure?
What is the Compatibility Principle?
Legally, internal control systems are required by this for publicly traded companies.
What is the Sarbanes-Oxley (SOX) Act?
Maisy Inc. uses the allowance method. On November 30th, they determined that they could not collect their accounts receivable of $1,000 from Quartz Company, so they recorded the necessary journal entry. These are the journal entries to record recovery of bad debt if they unexpectedly receive full payment from Quartz Company on December 30th.
What are:
An accounts receivable ledger stores transaction data on these.
What are customers?
XYZ Company makes two purchases during the month of April in their petty cash fund:
2 boxes of pens (Office Supplies) $10
Shipping for one customer order $6
The petty cashier's drawer is also short by $4.
This is the journal entry to reimburse the petty cash fund.
What is:
debit Office Expenses $10
debit Shipping Expenses $6
debit Cash Over and Short $4
credit Cash $20
?
This principle prescribes that an accounting system be able to adapt to changes in the company, including the nature of the business and technological advances.
What is the Flexibility Principle?
This is a list of individual accounts with a common characteristic. An example is an accounts receivable ledger.
What is a Subsidiary Ledger?
Collins & Sons Company uses the percent of accounts receivable method. This is their December 31 year-end adjusting entry based on the following information: Outstanding accounts receivable is $125,000, the company estimates that 3% will be uncollectible, and the Allowance for Doubtful Accounts has a $3,000 credit balance before the adjustment.
What is debit bad debts expense $750 and credit allowance for doubtful accounts $750?
Estimated balance: $125,000 x 3% = $3,750
Estimated Balance – Unadjusted Balance = $3,750-$3,000=$750
On December 1, Sylvester Company accepted a 90-day, $8,000, 6% note from their customer Jackie Smith at her request for a time extension on her past-due accounts receivable. This is the journal entry for the interest accrual on December 30th.
What is debit Interest Receivable $40 and credit Interest Revenue $80
$8,000 x 6% x 30/360 = $40
Gems Inc. received their bank statement for the month of May.
-On April 30, the company’s Cash account has a $20,070 debit balance, but its May bank statement shows a $18,500 cash balance.
-Check Numbers 121 for $200 and 122 for $250 are outstanding checks as of May 31.
-Check Number 123 for May insurance was correctly written and cashed for $600 but was entered in the accounting records as $590 in error.
-The May statement shows the bank collected $5,000 cash on a note on behalf of the company.
- The May statement shows that a customer's $500 check for payment on their account was returned non-sufficient funds (NSF).
-The May statement shows a $10 bank service charge that has not been recorded in expenses yet.
-The cash collected for May 31 sales in the amount of $6,500 were put in the bank's deposit box after they closed for the day, so the deposit is not on the bank statement.
This is the adjusted book balance.
What is $24,550?
Book Balance $20,070
+ Proceeds from Note $5,000
- Check Amount Error $10 ($600-$590)
- NSF Returned Check $500
- Bank Service Fee $10
Adjusted Book Balance $24,550
This principle prescribes that an accounting information system have internal controls and allows managers to monitor business activities.
What is the Control Principle?
Brick and Steel Inc. is a large company with multiple departments. They have a purchasing department who makes approved purchases, a receiving department who checks in and records deliveries received, and an accounting department who pays invoices based on approved purchases and documented items received. This is the internal control principle (1 of 7) that the company followed.
What is Divide Responsibility for Related Transactions?
Collins & Sons Company uses the percent of accounts receivable method. This is their December 31 year-end adjusting entry based on the following information: Outstanding accounts receivable is $125,000, the company estimates that 3% will be uncollectible, and the Allowance for Doubtful Accounts has a $2,000 debit balance before the adjustment.
What is debit bad debts expense $5,750 and credit allowance for doubtful accounts $5,750?
Estimated balance: $125,000 x 3% = $3,750
Estimated Balance – Unadjusted Balance = $3,750 - -$2,000=$5,750 *remember, if it’s a debit balance, subtract a negative (add)
On December 1, Sylvester Company accepted a 90-day, $8,000, 6% note from their customer Jackie Smith at her request for a time extension on her past-due accounts receivable. This is the journal entry when Ms. Smith pays in full on the 90th day.
What is debit Cash $8,120, credit Notes Receivable $8,000, credit Interest Receivable $40, and credit Interest Revenue $80
$8,000 x 6% x 60/360 = $80
When reconciling a bank statement, out of the list below these are the items that require a journal entry and these are what the journal entries look like:
1) Deposit was dropped off overnight and is not on the bank statement
2) The bank statement shows an $8 bank service charge that has not been recorded in expenses yet.
3) Check Number 22 for insurance was correctly written and cashed for $285 but was entered in the accounting records as $300 in error.
4) There are three outstanding checks totaling $500
What are:
2) Debit Miscellaneous Expense $8, Credit Cash $8
3) Debit Cash $15, Credit Insurance Expense $15
?
Note:
1) and 4) no entry needed - adjustment to the bank balance, NOT the book balance
This principle requires that an accounting information system be able to report useful, understandable, and timely information for decision making.
What is the Relevance Principle?
Green Valley Landscaping provides residential landscaping services. Below are the details from their financial records for the year ending December 31:
This is the company's Accounts Receivable Turnover. (rounded to 1 decimal place)
What is 8.9?
Accounts Receivable Turnover = Net Sales/Average Accounts Receivable
Average Accounts Receivable = ($62,000+$68,000)/2 = $65,000
Accounts Receivable Turnover = $580,000/$65,000 = 8.9