Correct answer: Current liability; Balance Sheet
Accounts payable is a temporary obligation. As a result, it is recorded as a current liability on the Balance Sheet.
Correct answer: Amounts owed to a business by its debtors
Accounts receivable are funds owed to a company by its debtors. When a company sells goods on credit, it creates a current asset called accounts receivable and records the revenue. The asset is reversed when the cash is received.
Correct answer: Accounts receivable
Working capital is made up of both current assets and current liabilities.
Correct answer: Purchase order
Purchase order is a document created by the buyer that authorizes the purchase transaction. When the seller accepts the terms and conditions specified in the purchase order, it becomes a binding agreement between the seller and the buyer.
Correct answer: Cash
Net income or loss is transferred to Retained Earnings, which is an equity account.
Correct answer: $114,000
Net sales revenue is the amount that remains after deducting sales discounts, returns, and allowances from gross sales revenue. Gross profit is calculated by subtracting the cost of goods sold from the net sales revenue.
Gross Sales Revenue – Sales Discounts – Sales Returns and Allowances
$150,000 – $12,000 – $24,000 = $114,000.
Correct answer: Posting
We journalize an entry from the source and post it to the ledger.
Correct answer: Debit
Expenses decrease the capital.
Correct answer: Classified
A balance sheet with classifications such as current assets, property plant and equipment, current liabilities, long term liabilities, etc.
Correct answer: subtract current assets from current liabilities
The Current Ratio indicates how well your company is able to cover its current debts (the ones payable in the next twelve months). It is widely assumed that if your company has a Current Ratio of two or more, it is doing well.
Correct answer: Bookkeeping, auditing, consulting, etc.
Bookkeeping is only a minor component of the accounting process.
Correct answer: Accrual basis of accounting
Other type of accounting is the cash basis, in which revenue is recorded only when cash is received and expenses are recorded only when cash is paid.
Correct answer: Economic entity assumption
The economic entity assumption states that a corporation exists independently of its owner(s) or shareholders.
Correct answer: Latin, debere and credere
Accounting has existed for a long time.
Correct answer: accrued revenue
The transaction would not be recorded in the cash basis of accounting until the next period, when the cash is received.
Correct answer: Accounts Receivable
Current assets are items that the company owns that are liquid (can be turned into ready cash within one year).
Correct answer: Capital Lease Obligation
Long-term liabilities are debts that have a life of more than a year, such as bank loans, capital lease obligations, and money owed to related parties.
Correct answer: $2700 gain
Van sale $19,500 - (cost of van $28,000 - accumulated depreciation $11,200) = $2,700 gain.
Correct answer: Debit
To the owner's equity, it's a contra account.
Correct answer: Credit
Wages Payable are an ongoing liability for your employees.
Correct answer: False
Because you hold the money in trust for the Canada Revenue Agency, GST collected is a payable.
Correct answer: False
A typical bank balance is a debit. Your bank account has a credit balance when it is overdrawn.
Correct answer: Yes
To keep your accounts in balance, debits and credits should always equal each other.
Correct answer: Refers to items that are owned
Assets are resources that a company owns and that have future economic value.
Correct answer: Credited
Revenues increase the owner's equity. Revenues must be recorded as a credit because the normal balance for owner's equity is a credit balance.
