Accounting

Answer: Bank a/c

Purchases will be debited.

Answer: $3000

This is a simple problem that helps to understand opportunity cost.

Answer: Business Transactions

All transactions affect the accounting equation. Some transactions are internal and do not involve any outside parties.

Answer: No entry is required in January

When using the cash accounting method, transactions are not recorded until cash is exchanged. Virtually all business use the accrual method in which expenses are booked in the period in which goods or services received and revenues are booked in the period when goods or services are provided.

Answer: divide current assets by current liabilities

The Current Ratio tells you how well your business is able to cover its current debts (the ones payable in the next twelve months). It is generally accepted that if your business has a Current Ratio of two or more, you're doing well.

Answer: $450

Revenue is the receipt of economic benefits from 'ordinary activities'. Simon's 'ordinary activity' is his role as an apprentice mechanic, hence his wage from Joe's Mechanical Workshop is his personal revenue. Additionally, the wages will increase Simon's personal equity, the receipt of his wages is probable and it can be reliably measured.

The purchase of the CD is a personal expense and is not revenue. The gift is interesting. Certainly it increases Simon's personal equity, however, it is not Simon's 'ordinary activity', nor can he rely on receiving it on a regular basis or be able to reliably measure what he is likely to receive.

Answer: cash disbursements journal

The normal posting sources for accounts payable in the general ledger are the cash disbursements journal for cash payments that reduce the Accounts Payable balance and the purchases journal for inventory purchases which increase the accounts payable balance. The entry from the cash disbursements journal would be a debit to Accounts Payable. (Note: a debit or credit memo entry from the general journal might also be posted to accounts payable. )

Answer: Backflush costing system

Proponents of backflush costing claim that it leaves a more accurate Cost of Goods Sold for the income statement, but it always seemed to me that it was just a good way to be lazy at the first of the month and then work like mad at the end of the month. However, backflush costing can be very handy where ongoing inventory tracking is particularly difficult, such as with liquids, or where the same materials might go into several products that are made to order, such as certain oilfield chemicals.

Answer: Capital a/c

Capital is the initial investment in a business. It can be in the form of money, machinery or other equipment.

Answer: For every Debit there is an equal Credit

This is a list where you sort out transactions.

Answer: Classify normal operating expenses as assets on the balance sheet

Classifying normal operating expenses as assets on the balance sheet is a common method of "cooking the books" to artificially reduce reported expenses. In 2002, WorldCom financial managers were arrested for misclassifying over $3.8 billion in normal operating expenses. Reclassifying intangible assets as fixed assets would have no effect on income and the other two actions would decrease income.

Answer: Analyze, journalize, post, adjust, prepare statements, close

First, the information is analyzed, then it is journalized in a general journal. Next, the journal entries are posted to the corresponding accounts. Then, any adjustments for the period are made before the financial statements are prepared. The last step is to close all temporary account at/after the end of the period.

Answer: future date

A postdated check is a check that has a future date on it. Many banks will not accept a check that is postdated.

Answer: $20,000

Sales plus the 7% sales tax equals total sales. Let "S" stand for sales, then:
S + .07S = $21,400
1.07S = $21,400
S = $21,400 / 1.07
S = $20,000

Answer: $64

$ 25 Beginning balance in owner's equity
$106 + Net Income
$131 = Subtotal
$ 64 - Withdrawals
$ 67 = Ending balance in owner's equity

In general terms the concept may be stated:
Beginning balance + Additions - Reductions = Ending balance

Answer: Return

ROCE stand for return on capital employed. This ratio is used by businesses to try and calculate how efficiently its assets are gaining profit for the company. It can also be called ROACE, which is Return on Average Capital Employed.

Answer: Facility-level cost

In ABC, a unit-level cost can be traced to a specific unit of the product. Batch-level costs can be traced to a lot of the product, and product-level costs can be traced to an individual product (ketchup or barbecue sauce, for example). Costs that apply to the plant, such as insurance and administration, can't be traced to any one product and so must be allocated to all products in some fashion. These are the facility-level costs.

Answer: D Michael Loan a/c

Cash is debited as the business is receiving it.

Answer: carry down

Similarly, balance "B/D" stands for brought down.

Answer: Debit Cash for $240,000, Credit Revenue for $240,000

Recognizing the full amount of the sale in the month the sale is made would show the maximum revenue but would grossly overstate earnings since only 1/24 of the revenue was actually earned in January.

Answer: Apportioning costs between two or more periods

Amortization, also known as Depreciation, is the process of allocating the cost of a capital asset (Property, Plant, and Equipment) to expense over their useful life (service) in a rational and systematic manner. Amortization is a process of cost allocation, not a process of asset valuation. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 419).

Answer: All of bookkeeping, auditing, consulting, and more.

Bookkeeping is only a very small part of the accounting process.

Answer: Variable Approach

Variable costing approach presents controllable margin by showing sales (or revenue) less variable cost of sales (or revenue). The resulting amount is the contribution margin which is deducted to fixed costs in order to arrive at the company's net income.