Bookkeeping and Accounting Flashcards

Which type of account is closed at the end of an accounting period?

Answer: Revenue and expense accounts

Revenue and expense accounts (temporary accounts) are closed to Retained Earnings or Owner's Capital at period end to reset their balances.

The straight-line depreciation method allocates cost:

Answer: In equal amounts each year

Straight-line depreciation divides the depreciable cost equally across each year of the asset's useful life.

A credit to Accounts Payable indicates:

Answer: A purchase made on credit, increasing the amount owed

Crediting Accounts Payable increases this liability account, reflecting an amount owed to suppliers for credit purchases.

What is a contra account?

Answer: An account with a balance that is opposite to its related account's normal balance

A contra account carries a balance opposite to its paired account (e.g., Accumulated Depreciation offsets the asset Equipment).

Which document is the source for recording a cash sale?

Answer: Sales invoice or cash register receipt

A sales invoice or cash register receipt is the source document evidencing a cash sale transaction.

If a trial balance is in balance, it means:

Answer: Total debits equal total credits in the ledger

A balanced trial balance only confirms that total debits equal total credits; it does not guarantee the absence of all errors.

Under the cash basis of accounting, expenses are recognized when:

Answer: Cash is paid

Cash basis accounting records expenses only when the actual cash payment is made.