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CHAPTER 6 REVIEW
Accounting
Vocabulary
Adjustment: Changes recorded on a work sheet to update general ledger accounts at the
end of a fiscal period.
Work Sheet: A columnar accounting form used to summarize the general ledger
information needed to prepare financial statements.
Fiscal Period: The length of time for which a business summarizes and reports financial
information.
Trial Balance: a proof of the quality of debits and credits in a general ledger.
Income Statement: A financial statement showing the revenue and expenses for a fiscal
period.
Net Loss: The difference between total revenue and total expenses when total expenses is
greater.
Net Income: The difference between total revenue and total expenses when total revenue
is greater.
Analyzing Worksheet
1.
Financial information may be reported any time a business needs it.
2.
Making adjustments to general ledger accounts is an application of the Matching
Expenses with Revenue accounting concept.
3.
If there is an error in the work sheet’s Trial Balance columns, it might be because
not all general ledger account balances were copied in the Trial Balance column
correctly.
4.
The balance of the supplies account minus the value of the supplies on hand
equals the up-to-date balance of the supplies account.
5.
If the difference between the total Debit and Credit columns on a work sheet can
be evenly divided by 9, then the error is most likely a transposed number such as
54 written 45.
6.
If an amount is written in an incorrect column on a work sheet, the error should be
erased and the amount should be written in the correct column.
7.
Net income on a work sheet is calculated by subtracting the Income Statement
Debit column total form the Income Statement Credit column total.
8.
If the Trial Balance columns are not equal and the difference is $50.00, the error
most likely is a $25.00 amount written in the wrong column. The totals can be
divided evenly by 2.
9.
Two financial statements are prepared from the information on the worksheet.
10.
The accounting concept Consistent Reporting is being applied when a word
processing service business reports revenue per page every year and does not
change it to revenue per hour the next year.
11.
Journals, ledgers and work sheets are not considered permanent records.
12.
Two accounts affected by the adjustment for insurance are Prepaid Insurance and
Insurance Expense.
13.
Two accounts affected by the adjustment for supplies are Supplies and Supplies
Expense.
Analyzing Accounting Procedures
1.
If the Trial Balance columns are not equal and the difference is 1, the error often
is addition.
2.
3.
4.
5.
6.
7.
8.
A net loss is entered into the work sheet as a Credit to Income Statement and a
Debit to the Balance Sheet.
Matching Expenses with Revenue Concept: Recording revenue from business
activities and expenses associated with earning that revenue in the same
accounting period.
On a worksheet, the balance of an expense account is extended to the Income
Statement Debit column.
Consistent Reporting: Following the same accounting procedures in the same
way in each accounting period.
If a pair of work sheet columns do not balance and the difference between the
totals is an amount that appears elsewhere on the work sheet, the error is probably
an amount that has not been extended.
On the trial balance, all general ledger account titles are listed.
Accounting Period Cycle: Reporting changes in financial information for a
specific period of tie in the form of financial statements is an application of the
accounting cycle.