Practice questions Financial accounting

• An expense accrual if accounted for would have the following effect on income statement

  A: increase net profit

  B: decrease net profit

  C: increase gross profit

  D: nil effect

  B: decrease net profit
• The owner of a car wash provides their company with an initial investment of $1000 is the entry to the cash account debit or credit? 


  Debit
• what is DEALER?

  Dividends + expenses + assets = liabilities + (owners) equity + revenue
• what is the entry to owner’s equity

  Credit
• in double entry bookkeeping there is ..

  an equal and opposite action
• the car was pays a supplier $200 in cash which account is debited?

  accounts payable
• a customer gets their car washed for $10, they pay on account with 30 day credit terms which account is credited?

  revenue is credited

  accounts receivable is debited
• revenue recognition principle states we must recognise an income once incurred.
• the following month the car was received $10 from the customer, which account is credited?

  accounts recievable
• what is the accounting equation?

  assets = liabilities + equity
• debits and credits reflect the duality or double sided nature of financial transactions
• What is double entry accounting?

  a book keeping system which says that every accounting entry must have an opposite corresponding entry in a different account
• Balance carried down is the balance you take forward to the next period, it is called balance carried foward.
• balance carried down = balance brought down + credit sales - cash received from customers - goods returned from customers
• During the most recent financial year Danby Co recorded an annual depreciation charge of 14,000 how should it be recognised?


  Dr Depreciation expense

  credit acummulated expense