DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

Exercise 1
In the journal provided, prepare journal entries for the following transactions. Write no entry if none is needed. a. b. c. d. e. Received a aed7,000 bill for the last months rent. Payment wont be made right away. Paid aed10,000 in insurance premiums to cover the next six months. The owner, Mhel Aguilar, took aed3,000 in cash out of the business for personal use. The rent of a above is paid. Purchased land for aed180,000. The company paid half in cash, and issued promissory note for the other half. Account Titles and Explanation Post Ref Debit Credit

Date

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

Exercise 2
In the journal provided, prepare journal entries (in good form) for the following transactions. If no entry is required, write no entry. Nov. 1 Kai Venice opened a dance school called BH Dance Studio, by depositing aed120,000 into a business bank account 2 Paid six months rent in advance, aed20,000 4 Hired an assistant, to be paid aed2,200 per week 6 Purchased sound equipment for aed15,000. Paid aed3,000 in cash, the remainder to be paid in installments of aed6,000 every two weeks 8 Signed up ten students, who will begin lessons on November 10, at aed500 per week per student 17 Received the first weeks tuition from nine students; the tenth student will remit payment in three days 17 Paid the assistant her first weeks wages 20 Received payment from the tenth student 21 Paid the next installment on the sound equipment purchased on November 6 23 Received an electric bill of aed400, to be paid on December 1 Date Account Titles and Explanations Post Ref Debit Credit

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

Exercise 3
Shin Consulting Service engaged in the following transactions during March 2007, its first month of operations: March 1 2 4 6 9 17 23 31 Required: Record the preceding transactions in the journal of Shin Consulting Service. Key transactions by date and include an explanation for each entry. Use the following accounts Cash; Accounts Receivable; Office Supplies; Building; Accounts Payable; Anne Shin, Capital; Service Revenue; Salary Expense; Rent Expense. Anne Shin invested aed590,000 of cash to start the business. She purchased office supplies of aed2,000 on account. She paid aed400,000 cash for a building to use as future office. She performed service for customers and received cash, aed20,000. She paid aed1,000 on accounts payable. She performed service for customers on account, aed16,000. She received aed12,000 cash from a customer on account. She paid the following expenses: salary aed12,000; rent aed5,000.

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

Multiple Choice Questions
1. Accrual-basis accounting a. Omits adjusting entries at the end of the period. b. Is not acceptable. c. Results in higher income than cash-basis accounting. d. Leads to the reporting of more complete information than cash-basis accounting. 2. Under the revenue principle, revenue is recorded a. After it has been earned, but not before. b. At the end of the accounting period. c. At the earliest acceptable time. d. At the latest acceptable time. 3. The matching principle provides guidance in accounting for a. Assets b. Liabilities c. Expenses d. Owners equity 4. Adjusting entries a. Bring asset and liability accounts to correct balances. b. Assign revenues to the period in which they are earned. c. Help to properly measure the periods net income or net loss. d. All of the above. 5. A law firm began in November with office supplies of aed1,600. During the month, the firm purchased supplies of aed2,900. At November 30, supplies on hand total is aed2,100. Supplies expense for the period is a. Aed4,500 b. Aed2,900 c. Aed2,400 d. Aed2,100 6. A building that cost aed120,000 has accumulated depreciation of aed50,000. The book value of the building is a. Aed170,000 b. Aed120,000 c. Aed70,000 d. Aed50,000 7. The adjusting entry to accrue salary expense a. Debit Salary Payable and credit Cash. b. Debit Salary Expense and credit Salary Payable. c. Debit Salary Expense and credit Cash. d. Debit Salary Payable and credit Salary Expense.

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

8. A business received cash of aed3,000 in advance for services that will be provided later. The cash receipt entry debited Cash and credited Unearned Revenue of aed3,000. At the end of the period, aed1,100 is still unearned. The adjusting entry for this situation will be a. Debit Revenue and credit Unearned Revenue for aed1,900. b. Debit Revenue and credit Unearned Revenue for aed1,100. c. Debit Unearned Revenue and credit Revenue for aed1,900. d. Debit Unearned Revenue and credit Revenue for aed1,100. 9. The links between the financial statements are a. Ending capital from the statement of owners equity to the balance sheet. b. Net income from the income statement to the statement of owners equity. c. Both A and B d. None of the above. 10. Accumulated Depreciation is reported on the a. Statement of owners equity b. Balance sheet c. Income statement d. Both A and B

Use the following information to answer questions 11 through 15. The trial balance for LSCG Company appears as follows: LSCG Company Trial Balance December 31, 2007 Cash Accounts Receivable Prepaid Insurance Supplies Office Equipment Accumulated Depreciation-Office Equipment Accounts Payable Gian Lee, Capital Service Revenue Earned Salaries Expense Rent Expense 20,000 50,000 10,000 10,000 30,000 10,000 30,000 60,000 60,000 20,000 20,000 160,000

160,000

11. If on December 31, 2007, supplies on hand were aed1,000, the adjusting entry would contain a a. Debit to Supplies Expense for aed1,000 b. Credit to Supplies Expense for aed1,000 c. Debit to Supplies Expense for aed9,000 d. Credit to Supplies Expense for aed9,000

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

12. If, on December 31, 2007, the trial balance showed insurance still unexpired amounting to aed2,000, the adjusting entry would contain a a. Debit to Prepaid Insurance for aed8,000 b. Credit to Prepaid Insurance for aed8,000 c. Debit to Insurance Expense for aed2,000 d. Credit to Prepaid Insurance for aed2,000 13. If the estimated depreciation for office equipment were aed10,000, the adjusting entry would contain a. A credit to Accumulated Depreciation for aed10,000 b. A credit to Depreciation Expense for aed10,000 c. A debit to Accumulated Depreciation for aed10,000 d. A credit to Office Equipment for aed10,000 14. If, as of December 31, the rent of aed5,500 for December had not been recorded or paid, the adjusting entry would include a. A credit to Accumulated Rent for aed5,500 b. A debit to Rent Payable for aed5,500 c. A debit to Rent Expense for aed5,500 d. A credit to Cash for aed5,500 15. If services totaling aed10,000 had been performed but not billed, the adjusting entry to record this would include a a. Debit to Service Revenue Earned for aed10,000 b. Credit to Unearned Service Revenue for aed10,000 c. Credit to Service Revenue Earned for aed70,000 d. Credit to Service Revenue Earned for aed10,000 16. If you had purchased aed500 of office supplies during the month and at the end of the month you had aed300 on hand, the adjustment for Supplies would be: a. Aed300 b. Aed500 c. Aed200 d. Aed100 17. The adjustment to record supplies used during the period would be: a. Debit Supplies, credit Supplies Expense b. Debit Supplies Expense, credit Cash c. Debit Supplies Expense, credit Supplies d. Debit Supplies, credit Cash 18. If the adjustment for Supplies used during the period was not made: a. Expense would be too low b. Asset Office Supplies would be too low c. Expenses would be too high d. Revenue would be too high

DIGERATI - TERM 14 ACCOUNTING FOR NON ACCOUNTANT

19. If Prepaid Rent for the period is not adjusted: a. Assets will be overstated and expenses will be overstated b. Assets will be overstated and expenses will be understated c. Assets will be understated and expenses will be overstated d. Assets will be understated and expenses will be understated 20. After the adjustment for depreciation has been made, the original cost of the equipment: a. Increases with a credit b. Decreases with a debit c. Remains the same d. None of these answers is correct 21. JH Antiques showed store supplies available during the year of aed4,000. A count of supplies on hand as of May 31 is aed1,500. The adjusting entry for Store Supplies would include: a. A debit to Store Supplies Expense for aed2,500 b. A credit to Store Supplies Expense for aed2,500 c. A debit to Store Supplies for aed1,500 d. A credit to Store Supplies Expense for aed1,500 22. Sun Coffee estimated depreciation for office equipment as aed1,000. The adjusting entry would include: a. A credit to Accumulated Depreciation for aed1,000 b. A credit to Depreciation Expense for aed1,000 c. A debit to Accumulated Depreciation for aed1,000 d. A credit to Office Equipment for aed1,000