EXAM REVIEW

PART A: Multiple Choice

(20 Questions)

1. Types of accounts that make up the equity section of the balance sheet
- 4 Type of Equity Section
Revenue Earning from selling CR
Expense Cost for make earning DR
Capital Owner’s Capital CR
Drawing Personal drawing DR

2. What is the double entry system?

Double-Entry System a method of recording transactions as a debit or credit

3. What is the purpose of a balance sheet? What is the purpose of an income statement?
Purpose
Balance sheet a statement showing the financial position of a person, business, or other organization.
Income Statement A financial report shows a business' revenue, subtracts its expenses, and reveals the profit
made for a given period.

4. Given the transaction details, state how it will be recorded in the accounting books E.g., sold goods plus HST
Debit Credit
Assets Liabilities
Drawing Capital
Expense Revenue

5. GAAP - L2.4
GAAP
Generally Accepted Accounting Principles (GAAPs) are a set of rules or standards followed by accountants.
Type Definition Mean

The business's owner should not place any personal

assets
Business Entity
z
Concept The balance sheet must reflect the financial position of
the business alone.
Any personal expenditures of the owner are charged to
the owner.

Continuing
that a business will continue to
Concern Concept It is assumed that the business will continue to operate
operate unless it is known that it will
(going concern for an indefinite time.
not
concept)
 Consequently, the assets of the company will continue to
be used for their intended purpose and would be valued
at their original cost.
When a company is going out of business, the value of
assets would usually suffer because they must be sold
under unfavorable circumstances.
Balance sheets are not concerned with market prices
requires accountants to record the because market prices change constantly and are
Cost Principle value of assets at their historical cost therefore not reliable.
price. The original cost is used in the balance sheet because it
is known and reliable.

Different people looking at the same evidence will arrive

The objectivity That accounting will be recorded
at the same values for the transaction.
Principle based on objective evidence.
Transactions are recorded in fact, not opinion.

Revenue is recorded when the bill is sent to the

Revenue must be recorded in the
Revenue customer.
accounts (i.e., recognized) when the
Recorgnition
transaction is completed. For a cash transaction, revenue is recorded when the sale
is complete, and the cash is received.
that accounting will take place over
Time Period Companies must use fiscal periods of equal length when
specific time periods known as
Concept measuring financial progress.
fiscal periods.

that each expense item related to Expenses must be recorded in the period in which the
revenue earned must be recorded in revenue is recognized.
Matching Principle
the same period as the revenue it
To do this, accountants make several mathematical
helped to earn.
adjustments in the accounts at the end of a fiscal year.

6. Given Revenue and expense accounts, calculate Net Income or Net Loss
Formula: Net Income/Loss = Revenue – Expense account
Revenue > Expense Net Income
Expense > Revenue Net Loss

7. What is a control account? (Pg 252) P.476

Control account A general ledger account, the balance of which represents the sum of the balances in
the accounts contained in a subsidiary ledger. (476)

8. What transactions effect the balance sheet? What transactions effect the income statement?
Transaction effect to financial statement
Balance sheet include those related to assets, liabilities, and equity. For
example, buying equipment (an asset) with a loan (liability)
affects the balance sheet.
Income statement involve revenues and expenses, influencing net income. Sales,
operating expenses, and other revenue or cost-related activities
impact the income statement.
9. Definition of auditor and their role in the business? P.4
Auditor
(Definition)
An audit is the examination and testing of the books, records, and procedures of a business to express an opinion about
its financial statements.

10. 10. Steps in the accounting cycle 11. 11. What is a fiscal period?
Fiscal periods Accounting activities are
performed in relation to equal
periods of time.

12. 12. Fundamental accounting equation

13. 13. Three forms of business ownership 14. Users of Financial Statements
Forms of business ownership - Owner, manage
Sole Proprietorship One own - Bank, leaders
- Investor
Partnership More than one owner
- Government
Corporation Own by shareholders
15. What is accounting? (Pg 1)
Accountin a system of dealing with financial data that provides information for decision making.

16. Trial balance out of balance (Page 220-222)

Trial Out of Balance
A trial balance that is out of balance is a certain sign of at least one error in the accounts.
Step 1 Re - add the trial balance.
Check the figures from the ledger against those of the trial balance. Make sure that none are missing, none are on
Step 2
the wrong side, and none are for the wrong amount.
Step 3 Recalculate the account balances.
Step 4 Check that there is a balanced accounting entry in the accounts for each transaction.

17. Trial balance out of balance as a result of given entry then which side of Trial Balance is great than which side?
- If Debits Are Greater: out of balance on the debit side.
- If Credits Are Greater: out of balance on the credit side.
18. Definition of Net Income/Net Loss
 PART A: Multiple Choice

Name Type Mean Side Debit Credit

Revenue Earning from selling CR Assets Liabilities

Expense Cost for make earning DR Drawing Capital

4 Type of
Equity Section Capital Owner’s Capital CR Revenue Expense

Drawing Personal drawing DR

Sole Proprietorship One own Fundamental
Forms of
Partnership More than one owner accounting equation
business ownership
Corporation Own by shareholders
Owner, manage
Bank, leaders
Users of Investor
Financial Statements
Government

Trial Out of Balance

A trial balance that is out of balance is a certain sign of at least one error in the accounts.
Step 1 Re - add the trial balance.
Check the figures from the ledger against those of the trial balance. Make sure that none are missing,
Step 2
none are on the wrong side, and none are for the wrong amount.
Step 3 Recalculate the account balances.
Step 4 Check that there is a balanced accounting entry in the accounts for each transaction.
- If Debits Are Greater: out of balance on the debit side.
- If Credits Are Greater: out of balance on the credit side.

Formula: Net Income/Loss = Revenue – Expense account

Net Income/Loss Revenue > Expense Net Income
Expense > Revenue Net Loss
 Type Definition

The process of gathering and preparing

financial information about a business or
Accounting other organization in a form that
provides accurate and useful records and
enables decisions to be made.

An audit is the examination and testing of the books,

Auditor records, and procedures of a business to express an
opinion about its financial statements.

a statement showing the financial include those related to assets, liabilities, and equity.
Balance
position of a person, business, or other For example, buying equipment (an asset) with a loan
sheet
organization. (liability) affects the balance sheet.
A general ledger account, the balance of
Control which represents the sum of the balances
account in the accounts contained in a subsidiary
ledger.
A financial report shows a business'
involve revenues and expenses, influencing net
Income revenue, subtracts its expenses, and
income. Sales, operating expenses, and other revenue
Statement reveals the profit made for a given
or cost-related activities impact the income statement.
period.
Double-
a method of recording transactions as a
Entry
debit or credit
System
Fiscal Accounting activities are performed in -
periods relation to equal periods of time.

Accounting cycle
 GAAP
Generally Accepted Accounting Principles (GAAPs) are a set of rules or standards followed by accountants.
Type Definition Mean
The business's owner should not place any personal
the accounting for a business assets
organization must be kept separate
Business Entity The balance sheet must reflect the financial position
from the personal affairs of its
Concept of the business alone.
owner, or from any other business
or organization. Any personal expenditures of the owner are charged
to the owner.
It is assumed that the business will continue to
operate for an indefinite time.
Continuing Consequently, the assets of the company will
Concern Concept that a business will continue to continue to be used for their intended purpose and
(going concern operate unless it is known that it would be valued at their original cost.
concept) will not When a company is going out of business, the value
of assets would usually suffer because they must be
sold under unfavorable circumstances.
Balance sheets are not concerned with market prices
requires accountants to record the because market prices change constantly and are
Cost Principle value of assets at their historical therefore not reliable.
cost price. The original cost is used in the balance sheet
because it is known and reliable.
Different people looking at the same evidence will
The objectivity That accounting will be recorded
arrive at the same values for the transaction.
Principle based on objective evidence.
Transactions are recorded in fact, not opinion.
Revenue must be recorded in the Revenue is recorded when the bill is sent to the
Revenue accounts (i.e., recognized) when customer.
Recorgnition the For a cash transaction, revenue is recorded when the
transaction is completed. sale is complete, and the cash is received.
that accounting will take place over
Time Period Companies must use fiscal periods of equal length
specific time periods known as
Concept when measuring financial progress.
fiscal periods.
Expenses must be recorded in the period in which
that each expense item related to
the revenue is recognized.
revenue earned must be recorded in
Matching Principle To do this, accountants make several mathematical
the same period as the revenue it
adjustments in the accounts at the end of a fiscal
helped to earn.
year.
 PART B: Complete missing figures in a table
(similar to Section 5.3 Page 140 Exercise 1)
(12 MARKS)

𝑬𝒏𝒅𝒊𝒏𝒈 = 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 + 𝑵𝑰(−𝑵𝑳) − 𝑫𝑹

𝑶𝒑𝒆𝒏𝒊𝒏𝒈 = 𝑬𝒏𝒅𝒊𝒏𝒈 − 𝑵𝑰(+𝑵𝑳) + 𝑫𝑹
𝑵𝑰 = 𝑬𝒏𝒅𝒊𝒏𝒈 − 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 + 𝑫𝑹
𝑵𝑳 = 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 − 𝑬𝒏𝒅𝒊𝒏𝒈 − 𝑫𝑹
𝑫𝑹 = 𝑶𝒑𝒆𝒏𝒊𝒏𝒈 + 𝑵𝑰(−𝑵𝑳) − 𝑬𝒏𝒅𝒊𝒏𝒈

PART C: Write transaction given the accounts

that are impacted by the transaction
(14 MARKS)
Some Examples are listed below:
Question: Debit Supplies, debit HST Recoverable, Credit Accounts Payable
Answer: Company bought supplies on credit (or on Pcount) and paid HST on the purchase.
Question: Debit Supplies, debit HST Recoverable, Credit Bank
Answer: Company bought supplies for Cash and paid HST on the purchase.
Question: Debit Bank, credit Revenue, Credit HST Payable
Answer: Company provided services for cash and collected HST on the transaction
Question: Debit Accounts Receivable, credit Revenue, Credit HST Payable
Answer: Company provided services on credit (or on account) and collected HST on the transaction
 PART D: JOURNAL ENTRIES
(24 MARKS)

Given transaction descriptions, record journal entries in the general journal. Remember chart of accounts will be provided
so you must use that.
 PART E: WORKSHEET
(Similar to Page 360 Exercise 6)
(22 Marks)
Given the worksheet and additional information for adjustments, complete the 10 Column worksheet.
Must know how to make adjustments for the following:
 PART A: Multiple Choice – 20 Questions

1. Types of accounts that make up the 6. GAAP stands for:

equity section of the balance sheet: a. Generally Accepted Accounting
a. Assets Principles
b. Liabilities b. Global Accounting and Auditing
c. Common Stock Practices
d. Revenue c. General Asset Allocation Policy
2. What is the double-entry system? d. Generally Acknowledged Accounting
a. A method of counting inventory Procedures
b. A system for recording financial 7. Calculate Net Income or Net Loss:
transactions a. Net Income = Revenue - Expenses
c. A depreciation calculation method b. Net Loss = Revenue - Expenses
d. A budgeting technique c. Net Income = Expenses - Revenue
3. Purpose of a balance sheet: d. Net Loss = Expenses - Revenue
a. To show the company's profit or loss 8. Definition of a control account :
b. To provide a snapshot of the company's a. A summary account in the general ledger
financial position b. A restricted bank account
c. To detail the company's expenses c. An account for controlling expenses
d. To outline the company's marketing d. A special account for tax purposes
strategy 9. Transactions affecting the balance
4. Purpose of an income statement: sheet:
a. To display the company's assets and a. Revenue and expense transactions
liabilities b. Asset, liability, and equity transactions
b. To report financial performance over a c. Only equity transactions
specific period d. Only liability transactions
c. To list all revenue sources 10. Transactions affecting the income
d. To outline the company's organizational statement:
structure a. Asset and liability transactions
5. Recording a transaction - sold goods b. Revenue and expense transactions
plus HST: c. Equity transactions only
a. Debit Goods, Credit HST Recoverable d. Liability transactions only
b. Debit Cash, Credit Revenue
c. Debit Accounts Payable, Credit HST
Payable
d. Debit Sales, Credit HST Payable
 16. Users of Financial Statements:
11. Definition of an auditor and their role a. Only company employees
in the business: b. Creditors, Investors, Management,
a. An internal financial analyst Analysts
b. An external professional who verifies c. Government agencies only
financial statements d. Shareholders and customers only
c. A tax consultant 17. What is accounting? (Pg 1):
d. A marketing specialist a. The art of money management
12. Steps in the accounting cycle: b. The systematic process of recording,
a. Analysis, Planning, Implementation analyzing, and interpreting financial
b. Journalizing, Budgeting, Auditing information
c. Analyzing, Summarizing, Reporting c. A branch of mathematics
d. Analyzing, Journalizing, Posting d. The process of marketing goods and
13. What is a fiscal period? services
a. A month, quarter, or year for which 18. Trial balance out of balance (Page
financial statements are prepared 220-222):
b. A tax filing period a. Indicates a perfectly balanced set of
c. A payroll processing period books
d. A depreciation period b. Suggests errors in the accounting records
14. Fundamental accounting equation: c. Is a common and acceptable occurrence
a. Assets = Liabilities - Equity d. Requires no further action
b. Assets = Equity - Liabilities 19. Trial balance out of balance as a
c. Assets = Liabilities + Equity result of a given entry then which side of
d. Assets - Liabilities = Equity T/B is greater than which side?
15. Three forms of business ownership: a. Debit side is greater
a. Sole Proprietorship, Partnership, b. Credit side is greater
Corporation c. Both sides are equal
b. Public, Private, Government d. Cannot determine without additional
c. Limited Liability Company, Cooperative, information
Trust 20. Definition of Net Income/Net Loss:
d. LLC, LLP, Inc. a. Net Income is revenue minus expenses
b. Net Loss is expenses minus revenue
c. Net Income is revenue plus expenses
d. Net Loss is revenue plus expenses

PART B: Complete missing figures in a table

 PART C: Write transaction given the accounts that are impacted by the transaction
1. Debit Equipment, Credit Accounts Payable

2. Debit Cash, Credit Sales, Credit HST Payable

3. Debit Rent Expense, Credit Cash

4. Debit Accounts Receivable, Credit Service Revenue

5. Debit Utilities Expense, Credit Accounts Payable

6. Debit Bank Loan, Credit Cash

7. Debit Prepaid Insurance, Credit Cash

8. Debit Wages Expense, Credit Cash

9. Debit Accounts Payable, Credit Inventory

10. Debit Accumulated Depreciation, Credit Equipment

11. Debit Dividends, Credit Retained Earnings

12. Debit Repairs and Maintenance Expense, Credit Cash

+
 13. Debit Unearned Revenue, Credit Service Revenue

14. Debit Interest Expense, Credit Bank

PART D: JOURNAL ENTRIES (24 MARKS)

Oct. 5. Sold merchandise on account, $562.22 plus HST.
Oct. 7. To L. Pero for services sold for $3000 plus HST.
Oct. 11. Purchased merchandise on account, $4 102.88 HST.
Oct. 15.From Transport Trucking for charges on incoming merchandise, $155.00 plus HST.
Oct. 19. To Investcorp for the rent for the month, $2600 plus HST.
Oct. 23. Received payment from A. Johnson for merchandise sold on account, $562.22 plus HST.
Oct. 28. Issued an invoice to R. Smith for consulting services provided, $4,500 plus HST.
Nov. 2. Acquired office supplies on account from Stationery Depot, $800.50 plus HST.
Nov. 8. Paid utility bill to PowerCo for electricity usage, $350.75 plus HST.
Nov. 12. To J. Turner for maintenance services rendered, $1,200 plus HST.
Nov. 17. Sold equipment on account to XYZ Corporation, $6,800 plus HST.
Nov. 22. Paid rent to Landlord Associates for office space, $3,000 plus HST.
Nov. 25. Purchased raw materials on account from Global Suppliers, $5,500.25 plus HST.
Dec. 1. Received a refund from IT Solutions for overpaid software licensing fees, $300 plus HST
Dec. 7. To M. Rodriguez for graphic design services, $1,500 plus HST.
Dec. 12. Issued a credit note to S. Chen for returned merchandise, $200 plus HST.

PART E: WORKSHEET (22 Marks)

a. Additional Information
1. Purchase invoices received in July, 2014, pertaining to goods and services received in June 2014, are for the
following:
Miscellaneous Expense 50.00
Utilities Expense 301.30
2. The supplies inventory taken on June 30, 2014, amounted to $825.00.
3. The Prepaid Licences account showed that the value of unexpired licences on June 30, 2014, amounted to
$513.00.
4. The prepaid insurance schedule as of June 30, 2014, showed a total of $317 in unexpired insurance.

b. Prepare the four closing entries for Cherry Courier Service as of June 30, 2014.