Question

Please explain why the correct answer is correct

A bank reconciliation reconciles the bank statement with the company's:

Correct Answer: B. Cash account in the balance sheet.

A corporation received $2,000 for interest earned on a note for a loan made to an employee in the current year. How would this transaction be recorded and what type of activity would this be classified under?

Selected Answer: C. Debit Accounts Receivable $2,000, credit Interest Revenue $2,000; Financing Correct Answer: A. Debit Cash $2,000, credit Interest Revenue $2,000; Operating

Callahan Corporation provides services to customers on account, $900. How would this transaction be recorded?

Selected Answer: B. Debit Service Revenue $900, credit Accounts Payable $900. Correct Answer: C. Debit Accounts Receivable $900, credit Service Revenue $900.

The primary purpose of closing entries is to:

Selected Answer: B. Prove the equality of the debit and credit entries in the general journal. Correct Answer: A. To bring the Balance Sheet Equation into Balance and prepare the temporary accounts for accumulating the results of the following year's operations and payment of dividends.

Consider the following transactions. Based on the Accrual-Basis of Accounting place an X in the column that each transaction would record as Revenue or Expense or Neither. Then enter the totals below Accrual-Basis Transaction Revenue Expense Neither 1. Record employees' salaries incurred in current month but not yet paid, $800. 2. Paid for advertising placed in local newspaper last month $700. 3. Received bill for utilities used the current month that will not be paid until next month, $750. 4. Receive cash from customers in advance, $1,500. 5. Purchase office supplies on account, $400. 6. Paid dividends to stockholders, $200. 7. Used up supplies previously purchased on account, $400. 8. Used up on month of insurance on one-year policy that cost $3,600. 9. Receive cash from customers for services performed in the current period, $1,800. 10. Provide services to customers on account, $2,100. Choose the number of the transactions correctly recorded as Revenue, Expense or Neither?

Correct Answer: A. Revenue Expense Neither 2 4 4

A deposit outstanding will cause the bank's cash balance to be higher than the company's cash balance.

Correct Answer: False

Answer 1

1. Bank reconciliation reconcile the bank statement with the company's bank/ cash account in balance sheet. As, at the year end, it is done to check whether balance shown in bank account is matching with whatever cash available at bank in balance sheet.

2.Entry should be : Cash A/c Debit $2000

To interest revenue $2000

Because, we received cash in current year for current period interest. Cash to be debited by following the rule"debit what comes in" and interest income to be credited as "credit all the income"

3 correct answer is correct because we provided services to customers on account means we have not received cash in exchange of services provided but we are liable to receive, so we use Accounts receivable account because it is an asset for us. And as we provided services, we will book sales against accounts receivable.

4. Closing entries are to be passed to close expense, income account. So that balance sheet includes all entries and show correct position of company.

5. Only 2 are revenue =9,10

As we performed services, we are authorized to receive our amount. It can be in both ways, cash or credit. In credit sale, we will create asset named account receivable.

Only 4 are expense =1,2,3,5

As all expense incurred in current year for business purposes are booked in profit & loss account

Even if we paid in cash or not paid, lying as outstanding amount, they all are expense such as salary, advertisement, office supplies, utility bill.

6. Deposit and cash available at bank both are asset.. But, cash is in liquid form, can use anytime. But deposit are kept it for specified time. Generally exceeds 1 year. This in terms of fixed deposit lying in bank. So, deposit outstanding will not cause cash balance in the bank.

One interpretation can be deposit outstanding means pending deposit which are due to be paid but they are lying, so it will not affect cash balance in bank.