ACC/290 Principles of Accounting I
(8 questions 100 word answers)
1. What are some examples of transactions that would need to be recorded or journalized? Can you provide an example of a transaction and the journal entry? Can you think of any events that where no entry would be recorded?
2. Are the following events recorded in the accounting records? Explain your answer in each case. (a) A major stockholder of the company dies. (b) Supplies are purchased on account. (c) An employee is fired. (d) The company pays a cash dividend to its stockholders.
3. What are the basic steps in the recording process? (a) When entering a transaction in the journal, should the debit or credit be written first? (b) Which should be indented, the debit or the credit? (c) Should accounting transaction debits and credits be recorded directly in the ledger accounts? (d) What are the advantages of first recording transactions in the journal and then posting to the ledger?
4. Accrual accounting is required under U.S. GAAP. One of the main principles of accrual accounting is the Matching Principle, also known as the Revenue Recognition Principle and the Expense Recognition Principle. Pick one of these and describe it. Why is it important?
5. How would you describe the difference between cash basis accounting and accrual basis accounting? What types of companies are required to use accrual basis of accounting? Are there any companies that can use cash basis accounting?
6. Every time a company prepares financial statements, adjusting entries are required. Generally, financial statements are prepared at the end of each month, the end of each quarter and at the end of each year.
There are two categories of adjusting entries: Accruals and Deferrals. Pick one of the adjusting entries (Prepaid expenses, unearned revenues, accrued revenues or accrued expenses), indicate whether it is an accrual or deferral, explain why it is important and provide an example.
7. Explain the differences between depreciation expense and accumulated depreciation.
8. Explain the terms earnings management and quality of earnings. Give examples of how companies manage earnings.