Chapter 10, TEST 10B

10-2

Chapter 10, TEST 10B

Name ______

Date ______

SCORING RECORD

Section / Total Possible / Deductions / Student
Score
A / 30
B / 30
C / 10
D / 30
Total / 100

Section A

DIRECTIONS: Each of the following statements is true or false. Indicate your choice by writing in the Answers column T for a true answer or F for a false answer. (2 points for each correct answer)

For

Answers Scoring

1. Under the accrual basis of accounting, a certain

expense may be incurred in one period but not

entered until the following period. ______

2. Although other methods of accounting exist,

companies must always use the accrual method. ______

3. The amount of net income will be the same

regardless of whether the cash or accrual basis

of accounting is used. ______

4. The modified cash basis of accounting combines

aspects of the cash method of accounting and the

accrual method of accounting. ______

5. The cash method of accounting best matches

revenues with expenses. ______

6. All small professional service businesses use the

cash basis of accounting. ______

7. A journal with Debit and Credit columns for Cash,

as well as General Debit and General Credit columns,

is called a general journal. ______

8. Frequently used accounts are entered in the

General Debit column and General Credit column

of a special journal. ______

9. Businesses set up special columns for every account

in the combination journal. ______

10. The combination journal is used only to record

transactions affecting cash. ______

11. Amounts in the special columns of the combination

journal are posted as totals. ______

12. The debits and credits to Cash are not posted until

the end of the accounting period. ______

13. The description column of the combination journal

must be completed for every line. ______

14. Adjusting entries are not made in the combination

journal. ______

15. Check marks are used to indicate just the totals

of the General Debit & Credit columns have been

posted for the general ledger accounts. ______

Section B

Directions: Complete each of the following statements by writing in the Answers column the letter of the word or words that correctly completes each statement. (3 points each)

For

Answers Scoring

1. The method of accounting that only recognizes

expenses when cash is paid for expenses incurred is

called: (A) accrual-basis accounting; (B) revenue

and expense accounting; (C) cash-basis accounting;

(D) merchandise-basis accounting; (E) commercial-

basis accounting. ______

2. If a business records revenue when cash is received

and records the purchase of a building as an asset

and makes adjustments to allocate the cost of the

building over many accounting periods, the business

accounting system is: (A) an accrual basis of

accounting; (B) an adjustment basis of accounting;

basis of accounting; (E) a commercial basis of

accounting. ______

3. A type of business in which the principal source of

revenue is compensation for services rendered to

a business firm or to a person is a: (A) merchandising

enterprise; (B) retail enterprise; (C) service

enterprise; (D) manufacturing enterprise;

(E) wholesale. ______

4. To record wages earned but not paid under the

modified cash accounting method: (A) debit Wages

Payable and credit Wages Expense; (B) debit Cash

and credit Wages Expense; (C) debit Wages Expense

and credit Wages Payable; (D) debit Prepaid Wages

and credit Wages Payable; (E) no entry is required. ______

5. Special columns in a combination journal may be made

for (A) Service Fees; (B) Wages Expense;

6. The description column of the combination journal

is used to: (A) enter general account titles;

(B) identify specific creditors; (C) identify

amounts forwarded to the next page; (D) all of these;

(E) none of these. ______

7. The accounts in the general column of the combination

journal should be posted: (A) daily; (B) weekly;

there is time; (E) never. ______

8. A cash balance may be computed: (A) daily; (B) weekly;

desired; (E) any of these. ______

9. End-of-period work sheet is used to facilitate:

(A) preparing financial statements; (B) making

corrections; (C) closing permanent accounts;

(D) analyzing transactions; (E) comparing entries. ______

10.End-of-period activities do not include: (A) preparing

a trial balance; (B)journalizing transactions;

(C)preparing financial statements; (D)determining

net income; (E)making closing entries. ______

Section C

DIRECTIONS: For each of the following transactions indicate with a check mark if the entry is required for each of the methods shown. If an entry is not required leave the space blank. (10 points total)

Cash / Accrual / Modified
Provide services on account
Paid wages
Purchase supplies for cash
Received cash for services performed
Purchase of supplies on account

Section D

DIRECTIONS: Sheila Babitt is opening a tanning salon. Record the following entries for her business in a combination journal using the modified cash basis of accounting. Total, rule, and prove the combination journal. (30 points total)

May 1 Sheila Babitt invested $6,000 in her business.

2 Received $1,500 cash from customers for tanning services.

7 Bought tanning supplies for $800 cash.

10 Paid part-time receptionist $420.

11 Paid advertising bill of $280.

15 Paid telephone bill of $500

23 Purchased new tanning bed for $4,000. She paid $1,200 in cash and put the rest on account.

24 Billed customers for services performed on account, $1,800.

30 Received $700 from customers for services performed

previously.

31 Paid $750 owed on the May 23 purchase of the tanning bed.

10-2

COMBINATION JOURNAL

/ DATE / CASH / DESCRIPTION / POST
REF. / GENERAL / SERVICE
FEES / WAGES
EXPENSE /
DEBIT / CREDIT / DEBIT / CREDIT / CREDIT / DEBIT
1
2
3
4
5
6
7
8
9
10

Proof: