D102 Financial Accounting - Set 2 - Part 1

Correct Answer: Debit salaries expense, credit cash

Salaries are recorded as an expense, which increases with a debit, and the cash account is credited because it decreases when payment is made.

Correct Answer: Decreases assets, decreases liabilities

Borrowing cash increases both the cash account (an asset) and the note payable (a liability).

Correct Answer: As a debit

Revenues increase equity and are recorded as credits because equity increases with credits.

Correct Answer: Debit cash, credit unearned revenue

The company needs to adjust for services rendered, transferring a portion of unearned revenue to service revenue.

Correct Answer: Accounts payable

Bonds payable typically have repayment terms of several years, making them a long-term liability.

Correct Answer: FIFO

Under FIFO (First In, First Out), the oldest inventory items are sold first, leaving newer items in ending inventory.

Correct Answer: Expense account

Accumulated depreciation is a contra-asset account that offsets the asset account, reducing its book value over time.

Correct Answer: Debit dividends, credit cash

When dividends are declared, they are recorded as a liability (dividends payable) until they are paid.

Correct Answer: Income statement

The balance sheet reports a company's assets, liabilities, and equity as of a specific date.

Correct Answer: Units of production

The straight-line method allocates an equal amount of depreciation to each year of the asset's useful life.

Correct Answer: Tangible asset

A patent is an intangible asset because it represents a legal right without physical substance.

Correct Answer: Revenues - Expenses

Net income is calculated by subtracting total expenses from total revenues.

Correct Answer: Revenue recognition principle

The matching principle ensures that expenses are reported in the same period as the revenues they help generate.

Correct Answer: Equipment

Revenue accounts are temporary accounts that are closed at the end of the accounting period to retained earnings.

Correct Answer: Debit wages expense, credit wages payable

The company records an expense for the wages and a liability (wages payable) until payment is made.

Correct Answer: Expensed when incurred

R&D costs are generally expensed as incurred because of the uncertainty of future economic benefits.

Correct Answer: An increase

Asset accounts increase with debits and decrease with credits.

Correct Answer: Sales

The cost of purchasing inventory is recorded in the Cost of Goods Sold account when the inventory is sold.

Correct Answer: After closing the books

A trial balance is prepared before financial statements to ensure that debits equal credits.

Correct Answer: Paying for utilities

Financing activities involve obtaining or repaying funds, such as issuing stock or borrowing money.