Question 1

The account numbers from the ledger are recorded in the Posting Reference column of the general journal:

Accepted Answer

The Posting Reference column in the general journal is used to record the account numbers from the ledger after each amount is posted, ensuring that each transaction is accurately tracked and linked to its corresponding ledger account.

Question 2

Listed below in random order are the steps in the accounting cycle.

(1)	prepare the financial statements
(2)	post the journal entries to the ledger
(3)	record journal entries
(4)	prepare a trial balance

What is the proper order of these steps?

Accepted Answer

The correct order is to first record transactions as journal entries (3), then post these entries to the ledger accounts (2), prepare a trial balance to ensure debits equal credits (4), and finally prepare the financial statements (1).

Question 3

On December 1, the Accounts Receivable account had a $22,000 debit balance. During December the business earned $10,500 in revenue on account and collected $13,200 from its charge-account customers. After posting these transaction, the balance in the Accounts Receivable account on December 31 is:

Accepted Answer

The answer of On December 1, the Accounts Receivable account...

Question 4

If a journal entry that contains an error has already been posted,

Accepted Answer

When an error is found in a journal entry that has already been posted, the best practice is to journalize and post a correcting entry. This ensures that the accounts are properly adjusted and that the financial statements reflect accurate information. Simply crossing out or erasing the incorrect data is not sufficient, as it can leave confusion and errors in the accounting records.

Question 5

On December 1, the Accounts Receivable account had a $5,000 balance. The business received
$400 during the month from its charge-account customer. After posting this transaction, the new balance in the Accounts Receivable account is:

Accepted Answer

The initial balance of $5,000 in Accounts Receivable is a debit balance. Receiving $400 from a customer reduces the Accounts Receivable by $400, resulting in a new debit balance of $4,600.

Question 6

The Posting Reference column of a journal is used to:

Accepted Answer

The Posting Reference column in a journal is used to record the number of the ledger account to which the information is posted, facilitating the tracking of transactions from the journal to the respective ledger accounts.

Question 7

The general ledger accounts are usually arranged in the following order:

Accepted Answer

The most common and recommended order for arranging general ledger accounts is to list the balance sheet accounts first and then the income statement accounts. This order helps to provide a clear picture of a company's financial position and performance. The balance sheet accounts reflect a company's assets, liabilities, and equity, while the income statement accounts show the company's revenue and expenses. By listing the balance sheet accounts first, a company can quickly understand its assets and liabilities before analyzing its income and expenses.

Question 8

On December 10, Yummy Catering purchased a new oven costing $10,000. They issued a check a check for $2,000 and promised to pay the balance in 30 days. The journal entry to record this transaction is:

Accepted Answer

Since Yummy Catering issued a check for $2,000, this means that they paid $2,000 in cash, reducing the amount owed to $8,000. The transaction involves the purchase of equipment worth $10,000, for which the company owes the supplier $8,000. Therefore, the entry should debit Equipment for its value of $10,000 and credit Cash for the amount paid, $2,000, and Accounts Payable for the remaining balance, $8,000. Choice D is the only option that records these transactions accurately.

Question 9

A firm purchased telephone equipment for cash. By mistake, the accountant debited Utilities Expense instead of Office Equipment. The error was discovered after the data posted. The correcting entry should contain:

Accepted Answer

The correct entry to correct the mistake involves debiting Office Equipment (to increase its balance and correctly reflect the asset on the books) and crediting Utilities Expense (to decrease its balance, correcting the initial erroneous entry).

Question 10

ABC Co. performed $5,000 of consulting work. Their customer paid them $3,500 right away and agreed to pay the balance in 30 days. Select the correct journal entry from the options below to record the transaction:

Accepted Answer

- A debit to Cash for $3,500 reflects the amount received right away.
- A debit to Accounts Receivable for $1,500 represents the amount owed by the customer that will be received later.
- A credit to Fees Income for $5,000 represents the amount of consulting work performed by the company.

Question 11

On September 1, Lazy A, Inc. paid $2,200 for a one year insurance policy. The journal entry to record this transaction is:

Accepted Answer

The journal entry to record the purchase of a one year insurance policy should debit Prepaid Insurance and credit Cash for the amount paid, as the payment represents a prepayment of future insurance coverage. Therefore, option C is the correct choice. Option A would be correct if the payment was made to record payment for an insurance policy that had already been used, and option B would be incorrect as it would be recording an expense before it has been incurred. Option D would be incorrect as it would be recording the expense immediately, rather than deferring it to future periods through Prepaid Insurance.

Question 12

On December 5, Honor Consulting Services issued a check to purchase $1,800 of office equipment. The journal entry to record this transaction is:

Accepted Answer

The answer of On December 5, Honor Consulting Services issued...

Question 13

On June 1, XYZ Inc. paid $400 to its landlord for rent for the current month. The journal entry to record this transaction is:

Accepted Answer

The transaction relates to the payment of rent expense for the current month. The payment is made in cash, therefore, Option C is incorrect. The payment is not for prepaid rent, therefore, Option B is incorrect. Since the payment relates to rent expense for the current period, the journal entry should be a debit to Rent Expense and a credit to Cash, as in Option D. Option A correctly identifies the accounts affected but the debit and credit are reversed.

Question 14

The Accounts Payable account has a $3,000 credit balance. An entry for the payment of $1,000 on the amount owed is recorded and posted. The new balance of the Accounts Payable account is:

Accepted Answer

When a payment of $1,000 is made on an account with a $3,000 credit balance, the payment reduces the credit balance. Therefore, the new balance is a $2,000 credit balance.

Question 15

The Cash account has a $15,000 debit balance. A $5,000 credit entry and a $7,000 debit entry are posted to the account. The final balance of the Cash account is:

Accepted Answer

The initial balance is a $15,000 debit. Adding a $7,000 debit increases the balance to $22,000. Subtracting a $5,000 credit reduces it to a $17,000 debit balance.

Question 16

The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of $400 due in 30 days would include:

Accepted Answer

The correct journal entry to record the purchase of equipment with a part cash payment and the balance on credit involves debiting the Equipment account for the total purchase amount ($500) to reflect the increase in assets. Then, credit Cash for the amount paid ($100) to reflect the decrease in cash, and credit Accounts Payable for the remaining balance ($400) to show the increase in liabilities.

Question 17

The accounts on the Trial Balance are always listed in the following order:

Accepted Answer

The correct order for listing accounts on the Trial Balance is Assets, Liabilities, Equity, Revenue, Expense. This order reflects the logical flow from what the company owns and owes, to the owner's stake, and finally to the company's operational results.

Question 18

Which of the following statements is CORRECT?

Accepted Answer

The general ledger contains the accounts that are used to prepare the financial statements. The general ledger serves as the main accounting record for a company and contains all accounts used for financial reporting purposes. The general journal is used to record transactions that cannot be recorded in a specialized journal, such as the sales journal, cash receipts journal, or purchases journal. When entries are posted from the general journal to the general ledger, the account number is written in the Posting Reference column in the general journal. Some companies may use a general ledger instead of a general journal, but it is not common practice. The page number is not typically written in the Posting Reference column in either the general journal or the general ledger.

Question 19

When recording a business transaction into the general ledger, certain steps are followed. Identify the statement below that is NOT CORRECT regarding this process.

Accepted Answer

The statement "All transactions are recorded first in the general ledger and then they are transferred to the journal" is not correct. Transactions are first recorded in the journal and then transferred to the general ledger through the process of posting. Therefore, option D is the incorrect statement.

Question 20

A company purchased equipment costing $15,000. They paid $1,000 right away and agreed to pay the balance in 30 days, the journal entry to record the purchase of equipment would include:

Accepted Answer

The total cost of the equipment is $15,000. The company paid $1,000 in cash, leaving a balance of $14,000, which they agreed to pay in 30 days. Therefore, the journal entry should include a debit to Equipment for $15,000, a credit to Cash for the amount paid upfront ($1,000), and a credit to Accounts Payable for the balance due ($14,000).

Quiz 4: The General Journal and the General Ledger