USE THE GENERAL JOURNALS TO RECORD YOUR ANSWERS
1. It is the end of Kellco’s fiscal year. You have been given the following
adjusted ledger balances. The ledger account balances are the normal
balances for each account.
Cash $125,000
Accounts Rec. 300,000
Inventory 75,000
Pre-paid expense 38,000
Land 100,000
Equipment 350,000
Accum. Depreciation 80,000
S.T. Notes Payable 150,000
Accounts Payable 125,000
Kelly Capital 175,000
Kelly Drawing 80,000
Income Summary 0
Sales 958,000
Wage Expense 250,000
Fuel Expense 35,000
Insurance Expense 35,000
Utilities Expense 85,000
Depreciation Expense 15,000
Required:
Make all the required closing entries. You do not have to prepare a Trial
Balance to complete the problem just the closing journal entries. Use the
journal paper on the next page to make your journal entries.
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DATE ACCOUNT DR CR
2. Dominic Bueno started a delivery business as a sole proprietorship on
7/1/XX. During the month of July the company had the following
transactions:
7/1 The owner invested $100,000 in cash into the business checking
account.
7/1 Rented a garage with office space for $5,000 per month and paid
the first month’s rent by check.
7/2 A new 2 ton delivery truck was purchased by the company. The
total purchase price including taxes, license and fees was
$115,000. The company paid $15,000 by check as a down
payment and signed a long-term note for five years at an interest
rate of 9% per year for the balance that was owed.
7/6 The company purchased a desktop computer and a printer for a
total price of $1,150 and paid by check for the computer equipment.
7/8 Picked up and delivered machinery for a client. Billed $350 for the
delivery service with terms “due on receipt”.
7/10 Received a bill for legal services in the amount of $1,200.
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7/12 Entered into a $125,000 one year contract with a client to provide
delivery services.
7/14 Received the amount owed from the 7/8 transaction.
7/15 Picked up and delivered furniture for a client and billed the client
$565 with terms of “due on receipt”.
7/15 Wrote a check to Mr. Bueno for personal use in the amount of
$2,000.
7/18 Purchased diesel fuel from a bulk fuel distributor on credit. The total
amount owed for the fuel was $579 which the company will receive
a bill for at the end of the month.
7/21 Delivered machinery under the terms of the contract signed on
7/12. The contract terms required that any amounts owed for
delivery services will be billed for at the end of each month with
terms of net 30 days.
7/31 Received the bill for the purchase of diesel fuel on 7/18 with terms
of net 30 days.
7/31 Received a utility Bill in the amount of $475 and paid the bill
immediately by check.
7/31 Billed the client for the delivery service provided on 7/21 in the
amount of $2,100.
Required:
Make the necessary journal entries from the information given. Some
dates do not require a journal entry. On dates that do not require an entry
say “no entry required”. Omit the journal descriptions. Use the journal
paper on the next page to make your journal entries.
Date. Account Dr Cr
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3. You have been given an unadjusted Trial Balance at the end of
Alico Inc. FY (12/31/XX): In reviewing the unadjusted Trial Balance,
the following information has come to your attention:
a. Alico Inc. entered into a six-month contract on 11/1/XX to provide
maintenance service for six apartment houses owned by a Real
Estate Investment Trust. The total value the contract was $185,000
and required a $20,000 prepayment. On 11/1/XX the bookkeeper
debited cash and credited Maintenance Revenue for the $20,000
prepayment. On 12/31/XX 20% of the contracted services had been
completed.
b. On 8/1/XX a one year fire insurance policy was purchased for
$36,000. The bookkeeper debited Prepaid Insurance Expense and
credited Cash to record the transaction. No other journal entries
had been made for this transaction.
c. Wages in the amount of $95,000 had been earned by Alico Inc.’
employees but will not be paid until next year. No entry had been
made to record this fact.
d. On 11/1/XX Alico Inc. lent $50,000 to one of its clients and the
client signed a 90 day note receivable on this date with interest and
principal due and payable on January 31 of the next year. The
interest rate was at 14% per year. At the end of the current year
Alico Inc.had earned $1,167 in interest on the note. This amount
had not yet been recorded.
.
e. Depreciation in the amount of $15,000 had not yet been recorded.
Required: Make the required adjusting entries on 12/31/XX from the
information given above. As a journal description, indicate what
accounting principle that would have been violated if the adjusting entry
had not been made. Use the journal paper on the next page to make your
journal entries.

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Date Account Dr Cr
ANSWER THE FOLLOWING QUESTIONS ON THE TEST PAPER:
4. Give the assumption or principle that would have been violated if the
following entries or information had not been given:
a. An Adjustment is made for payroll expense at the EFY eventhough it had not been paid:
b. A company was required to revalue all of its assets liabilities and
owners equities at the end of the accounting year because it was
going to file for bankruptcy and go out of business within a year.
c. Changing the method of recognizing depreciation is not allowed
from one accounting period to another.
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d. An international corporation must record all of its foreign
transactions in dollars for United States financial reporting
purposes.
e. A company records a fixed asset for not only the invoice price but
all of the costs that it takes to put that asset into use.
HIGHLIGHT THE CORRECT ANSWER IN YELLOW OR CIRCLE IT.
(Chose the most correct answer)
5. GAAP requires the use of the accrual accounting system when:
a. The IRS requires it if a business is dealing in inventory.
b. When a company is publicly owned.
c. When a company borrows money for a financial institution.
d. none of the abouve
6. A Deferred Revenue is:
a. A revenue that has been received and earned.
b. An revenue that will be collected in the future.
c. An revenue that has been received, but is a liability until earned.
d. A future revenue that is listed as an asset.
7. What kinds of accounts are closed at the end of a fiscal year?
a. Assets, Liabilities, Owner Equity, Revenue and Expenses.
b. Revenue and Expense accounts and temporary Balance Sheet
accounts
c. All accounts.
d. Temporay and perminate Balance Sheet accounts.
8. There are four basic financial statements required by GAAP. They are:
a. Balance Sheet, Income Statement, Cash Flow Statement and
a Trial Balance.
b. Balance Sheet, Income Statement, Cash Flow Statement and
a Work Sheet.
c. Balance Sheet, Income Statement, Cash Flow Statement and
a Statement of Change to Retained Earnings.
d. Balance Sheet, Income Statement, Cash Flow Statement and
a Post Close Trial Balance.
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9. The Historical Cost Principle states that:
a. All financial information must be stated at what the company can
realize in value if it sold all of the asset the company owned.
b. A revenue is recorded for the amount you paid for it.
c. Assets must be recorded at the cost they are acquired for and must
be kept at that cost in the accounting system until they are
disposed off.
d. All of the above.
10 The normal balance of an account for an Owners Equity account would
be:
a. A debit.
b. The same as an Asset Account.
c. The amount that was invested by the companies owner.
d. A credit.
11. The Industrial Practices Principle states that:
a. A company must follow the same rules as other companies.
b. If all the companies in an industry violate the same principle then a
company in that industry can violate the same principle.
c. Require a company to ahear to the priciples even if other
companies within the industry are not.
d. Allows a company to change the way they are recording a
transaction.
12. What is a Current Asset?
a. An asset that is about to be sold.
b. A fixed asset that has a long life.
c. Any asset that has an economic life of over a year.
d. An asset the will be consumed within a 12 month period.
13. In Finacial Accounting, cost is divided into 3 major catigories:
a. Depreciable assets, Liabilities and Owners Equity.
b. Period Costs, Long Term Cost and Short Term Cost.
c. Cost of Goods Sold, Cost of Items Purchased and Cost of
Inventory.
d. Inventoriable Cost, Capital Cost and Period Cost.
14 The Cash basis of accounting can be used:
a. in an accrual accounting system.
b. by a company that sells merchandise.
c. to conform to GAAP
d. none of the above.
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15. Define the Cost principle:
16. What is an Accured Revenue?
17. Define the Expense Recognition (Matching) principle:
18. What two accounting principles are most responsible for making adjusting
entries
19. List the external users of Financial Statements:
20. Why is accounting important to the business world?
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FINANCIAL ACCOUNTING
CHART OF ACCOUNTS
Prof. R.S. Claire
NORMAL
BALANCE SHEET ACCOUNTS BALANCE
ASSETS
Current Assets
Cash/Checking Debit
S.T. Investments Debit
Avaliable for sale Investments Debit
Fair Market Value Adjustment Debit/Credit
S.T. Notes Rec. Debit
Interest Rec. Debit
Accounts Receivable Debit
Less: Allowance for Bad Debts Credit
Inventory Debit
Pre-paid expense (Insr., Rent,) Debit
Assets Under Consructions Debit
Deposits (Security, Equipment, Rent etc.) Debit
Operating Assets (Plant & Equip.-Fixed Assets)
Land Debit
Buildings Debit
Less: Accumulated Depreciation-Build. Credit
Plant & Equipment Debit
Less: Accumulated Depreciation-Plant & Equipment Credit
Funiture & Fixtures Debit
Less: Accumulated Depreciation-F&F Credit
Office Equipment Debit
Less: Accumulated Depreciation-Office Equipment Credit
Communicaition Systems (Phone, Fax, etc. Debit
Less: Accumulated Depreciation-Communication Systems Credit
Computer Systems Debit
Less: Accumulated Depreciation-Computer Systems Credit
Transportation Equip. Debit
Less: Accumulated Depreciation-Transp. Equip. Credit
Leasehold improvements Debit
Other Assets (Intangiable Assets)
Goodwill Debit
Patends Debit
Copyrights Debit
Trademarks Debit
Water Rights Debit
Natural Resourses
Mineral Rights Debit
Timber Rights Debit
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Oil Rights Debit
LIABILITIES
Current Liabilities
S.T. Notes Payable Credit
Accounts Payable Credit
Credit Card Payable Credit
Accured Payables Credit
Payroll Payable Credit
Interest Payable Credit
Un-earned Revenue Credit
Cash Dividend Payable Credit
Common Stock Dividends to be Distributed Credit
Current Por. Of L.T. Debt Credit
Long Term Liabilities
L.T. Notes Payable Credit
Bond Payable Credit
Less:Bond Discount Debit
Add: Bond Premium Credit
OWNERS EQUITY
Sole Proprietorship
Capital Credit
Less: Drawing Debit
Partnership/LLP/LLC
Capital (for each partner) Credit
Less: Drawing (for each partner) Debit
Corporation (“C” Corp. & “S” Corp.)
Stockholders Equity
Preferred Stock Credit
Paid in excess of Par-Pref. Stock Credit
Common Stock Credit
Paid in exess of Par-Common Stock Credit
Retained Earnings Credit
Cash Dividend Debit
Stock Dividend Debit
Treasury Stock Debit
Paid in capital from T. S. Transaction Credit
Accumulated Other Comprehensive Income
Unrealized Holding gain/loss on S.T. Investments Debit/Credit
Foreign currency translation gains or losses Debit/Credit
Pension plan gains or losses Debit/Credit
Non-controlling Interest Debit
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INCOME STATEMENT STATEMENT, (P&L STATEMENT)
NORMAL NORMAL
SERVICE INDUSTRY BALANCE MERCHANDISING INDUSTRY BALANCE
REVENUE REVENUE
Maint. Service Rev. Credit Sales Credit
Contracting Serv. Rev. Credit Less: Sales Returns & Allow. Debit
Software Devel. Rev Credit Cash (Sales) Discounts Debit
Consulting Rev. Credit Quantity Discounts Debit
Interest Revenue Credit
Repair Reveneue Credit
EXPENSES COST OF GOODS SOLD
Advertising Debit PERIODIC INVENTORY SYSTEM
Auto expense Debit Purchases Debit
Bad Debt Expense Debit
Less: Purchase Returns ans
Allow. Credit
Bank charges Debit Purchase Discounts Credit
Counsulting Debit PERPETUAL INVENTORY SYSTEM Debit
Depreciation exp. Debit Cost of Goods Sold
Dues & Subscriptions Debit EXPENSES
Frieght in Debit Advertising Debit
Fuel exp. Debit Bad Debt Expense Debit
Insr. exp. Debit Bank charges Debit
Interest exp. Debit Counsulting Debit
Bond Interest exp. Debit Depreciation exp. Debit
IT-Computer Exp. Debit Dues & Subscriptions Debit
Licenses and Fees Debit Frieght in Debit
Maint. exp Debit Fuel exp. Debit
Marketing exp. Debit Insr. exp. Debit
Meals exp. Debit Interest exp. Debit
Misc. exp. Debit Bond Interest exp. Debit
Office supplies exp. Debit IT-Computer exp. Debit
Phone exp. Debit Licenses and Fees
Payroll exp. Debit Maint. exp Debit
Gross Payroll Exp. Debit Marketing exp. Debit
Payroll Tax exp. Debit Meals exp. Debit
Professional Services Debit Misc. exp. Debit
Rent exp. Debit Office supplies exp. Debit
Repair parts Debit Payroll exp.
Shipping exp Debit Gross Payroll exp.
Software exp Debit Payroll Tax exp. Debit
Tax exp. Debit Phone exp. Debit
Travel exp Debit Professional Services Debit
Uniforms Debit Rent exp. Debit
Utilities Debit Repair parts Debit
Shipping exp Debit
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Tax exp. Debit
Travel exp Debit
Uniforms Debit
Utilities Debit
OTHER REVENUE/GAINS
Realized Gains from sale of
Investments Credit
Unrealized Holding Gains on S.T.
Investments Credit
Interest Income. Credit
Invetstment Income Credit
Gain on the Disposal of Assets Credit
OTHER EXPENSES/LOSSES
Unrealized Holding Loss from sale
of investments Debit
Loss on Disposal of Assets Debit
FINANCIAL ACCOUNTING
CHART OF ACCOUNTS