Full Download Financial Accounting Canadian 2nd Edition Waybright Solutions Manual
Full Download Financial Accounting Canadian 2nd Edition Waybright Solutions Manual
Full Download Financial Accounting Canadian 2nd Edition Waybright Solutions Manual
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ACCOUNTING PRACTICE
Discussion Questions: Key Points
1. Assets are listed in order of liquidity, or closeness to cash.
2. When the company pays for something in advance that won’t be used up in this accounting
period, it would record a prepaid asset. In a sense, plant assets are a type of prepaid asset,
although it would not be classified as such. All prepaid assets would be used up, eventually.
That is, they all become expenses over time or with use. An example would be Prepaid Rent,
Prepaid Insurance, etc.
3. Revenue increases retained earnings. By definition, when revenue is increased as assets are
acquired (or liabilities reduced) as a result of activities relating to the company’s line of
business, the owners have a claim on those assets that are acquired. This ownership interest is
reflected in the Retained Earnings account.
4. Not all events are transactions. A transaction is an event that has a financial impact on a
company. In other words a transaction affects at least two accounts in the accounting
equation. If no accounts are affected then it is an event, not a transaction. Journal entries are
recorded for all transactions.
5. The normal balance of an account is the side that increases the account.
a. Debit
b. Debit
c. Credit
d. Credit
e. Debit
6. The bank is keeping its own books, not yours. When you give the bank cash or deposit your
paycheque, the bank needs to keep track of its liability to you. It is increasing its liability
account with a credit (the debit that it makes is to its own cash account).
7. A credit balance in the Cash account would indicate a negative cash balance. Negative cash
does not make sense. If a company overdraws its Cash account, it now has a liability to the
bank. Rather than showing a credit balance in its Cash account, it should show a credit
balance in a liability account. Sometimes, a negative “credit” cash balance is acceptable in
case the company had signed an overdraft agreement with its bank. Interest is usually
charged in such case on the amount overdrawn.
8. Journalizing is the process of recording a transaction in the journal. Posting is the process of
transferring the information from the journal to the appropriate amounts in the ledger or to t-
accounts.
9. False. A balanced trial balance is a necessary but not sufficient condition for accurate
financial statements. If a debit to Supplies is improperly recorded as a debit to Supplies
Expense, for example, the trial balance will balance but the financial statements will be
inaccurate.
10. The financial statement numbers generally come from the trial balance. However, the
numbers on the trial balance come from the general ledger. So, the numbers on the trial
balance really come from the general ledger.
2. c
3. e
4. g
5. d
6. f
7. a
1. Accounts Payable L
2. Cash A
3. Service Revenue R
4. Prepaid Rent A
5. Rent Expense E
6. Common Shares SE
1. R, 4
2. SE, 3
3. A, 1
4. E, 5
5. L, 2
6. SE, 3
7. E, 5
CR 2. Accounts Payable
CR 3. Service Revenue
DR 4. Office Furniture
CR 5. Common Shares
DR 6. Land
DR 7. Dividends
H. Brooke.
A true copy from the original deposited in the office of the General
Assembly.
H. Brooke, C.S.
A true copy from the original, deposited in the office of the General Assembly.
John Stewart, Keeper of Rolls.
Answers of the several State Legislatures.
J. T. Gilman, Governor.
A true copy.
Edmund Bullock, S. H. R.
John Campbell, S. P. T.
Attest, B. Thurston, C. S.
By the Governor,