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Accounting Funeral Service Compend

Created by jessie_parker 242 terms
Basic account ing t heory is based on
double entry

The group of account s which you debit when increased are

assets and expenses

The group of account s which you credit t o increase are

liabilities and capital

When a f uneral direct or buys a casket coach on credit he would,

debit casket coach and credit accounts payable

The payment of rent by cash is recorded

debit rent expense and credit cash

Purchase of of f ice supplies on credit is recorded by

debit of f ice supplies and credit accounts payable

A ledger is a book of
accounts

An ent ry on t he debit side of a liabilit y account indicat es t he account has been

decreased

An ent ry made on t he debit side of t he propriet orship account indicat es t hat t he account has been
decreased

An ent ry made on t he debit side of an expense account indicat es t hat t he account has been
increased

The beginning balance in t he supplies account is $600. During t he mont h an addit ional $800 wort h of supplies were purchased. At t he end of t he mont h an invent ory of supplies f ound t hat only $300 remained on hand. What would be t he amount of t he adjust ing ent ry f or t he supplies account
$1100

An ent ry made on t he debit side of an asset account indicat es t hat t he account has been
increased

The t hings of value owned by a business are

assets

An account ing year ending on some ot her dat e t han 12/31 is called
Fiscal Year

A person t o whom a debt is owed is called a

creditor

A plant asset was purchased by t he f uneral home cost ing $8000. It has a usef ul lif e of 3 yrs and a salvage value of $2000. Using t he st raight line met hod of depreciat ion, what would t he yearly amount of depreciat ion be?
$2,000

What does not appear on t he balance sheet ?

Expenses

Liabilit ies are all t hings a f uneral direct or

Owes

A prof it and loss st at ement can be prepared

at any time

An ent ry on t he credit side of a revenue account indicat es t he account has been

increased

When cash is spent in t he acquisit ion of an asset t he net wort h of a business is

not af f ected

The process of recording inf ormat ion in t he ledger is called

posting

Account s Receivable is a/an

Asset Account

Anot her t erm f or prof it and loss st at ement is

Income Statement

The amount of revenue f rom t he sale of f uneral services would be shown on t he

Prof it and Loss Statement

The right side of a st andard account is called t he

credit side

The t ot aling of a column in a journal or ledger account is called

f ooting

Advert ising expense would be ref lect ed on t he

Income Statement

The account s payable account would be shown on t he

Balance Sheet

A group of account s const it ut es a

ledger

If t he t ot al of t he operat ing expense sect ion of t he income st at ement is smaller t han t he t ot al of t he income sect ion t he dif f erence
is net prof it

Expense means a/an

decrease in the owners equity

Which of t he f ollowing account s would be used t o assist t he account ant in an adjust ing ent ry?
Accumulated Depreciation

The dif f erence bet ween t he t wo sides of an account is called

account balance

The t it le of an account which would normally have a credit balance is

accounts payable

An increase in propriet orship as t he result of a business t ransact ion is a/an

Income

A list of account s t hat shows t he arrangement of t he account s in t he ledger is called

Chart of accounts

Double ent ry bookkeeping means an ent ry is made

as a debit and a credit

The propriet orship of a business may be increased by

Net income and investment of assets in the business by the owner

The propriet orship of a business may be decreased by

expenses and withdrawals of assets in the business by the owner

To est ablish a pet t y cash f und one would

debit petty cash and credit cash

The abbreviat ion f or debit is

Dr

The abbreviat ion f or credit is

Cr

A person who signs a check or draf t ordering payment t o be made is called t he

Drawer

A person or concern, usually a bank, t hat has been ordered t o make payment on a check or draf t is called t he
Drawee

A person or company who will receive payment on a promissory not e, check, draf t , or money order is called t he
Payee

F.I.C.A ref ers t o

Social Security

Propert y of a relat ively permanent nat ure used in t he operat ion of t he business and not int ended f or resale is called
Fixed Asset

Debt s t hat are not due and payable wit hin a year are called
Fixed Liabilities

The dif f erence bet ween cost of goods sold and t heir selling price is called
Gross Prof it

The excess of current asset s over current liabilit ies is called

Working Capital

A writ t en promise of a cust omer t o pay t he business a sum of money at a f ut ure dat e is called
Note Receivable

Which of t hese does not qualif y as a current asset ?

Land

A synonym f or f air wear and t ear of a durable asset is

Depreciation

A language of business employed t o communicat e f inancial inf ormat ion based upon t he recording, classif icat ion, summarizat ion, and int erpret at ion of f inancial dat a is called
Accounting

Asset s= Liabilit ies + Owners Equit y is t he

Accounting Equation

The increase in net wort h due t o t he excess of income over cost s and expenses is called
Prof it

Money paid f or t he use of money is called

Interest

The dif f erence bet ween net sales and cost of goods sold is
Gross Margin

Goods purchased f or resale at a prof it is

Merchandise

A disbursement is a
Payment

What would be t he closing ent ry t o close t he revenue account ?

Debit revenue, credit expense, and revenue summary

Income received but not yet earned is

Def erred income

A paper showing quant it y, descript ion, prices of it ems, t ot al amount of purchase, and t erms of payment is a/an
Invoice

One who has made a sale is called a/an

Vendor

An est imat e of revenue and probable expense f or a given period of t ime is a

Budget

The person or business concern t o whom a shipment is made is a

Consignee

A dist ribut ion of prof it s of a corporat ion t o it s st ockholders as declared by t he board of direct or is
Dividend

The person who orders t he bank t o make payment of a f inancial inst rument is properly t ermed a/an
Drawer

The sole owner of a business is a

Proprietor

A f und of currency and coin est ablished f or t he payment of small amount s of money is
Petty Cash

The dif f erence bet ween t ot al sales and sales ret urns and allowances is
Net Sales

The amount added t o t he cost of an art icle t o det ermine t he selling price of t he art icle is t he
Markup

A t ot al, writ t en in small pencil f igures, under t he last ent ry in a column is t he

Footing

A double line under t he last ent ry on a T-account means

T he entry is complete

Increases in t he owners equit y result ing f rom business operat ions is known as
Income

That port ion of a plant asset s original cost t hat cannot be depreciat ed is called
Scrap Value

A decrease in net wort h due t o excess cost s and expenses over income is
Loss

The merchandise t hat a business keeps on hand f or t he sale is t he

Inventory

Which of t he f ollowing represent s t he dif f erence bet ween t he t ot al asset s and t he t ot al liabilit ies?
Owners Equity, Net worth, and Capital, not net income

The holder or person owning st ock in a corporat ion is t he

Stockholder

At t he end of t he mont h a f uneral home's asset s t ot aled $50,000, liabilit ies t ot aled $20,000, revenue f or t he mont h t ot aled $6,000 and t he t ot al of t he expenses amount ed t o $4,000. Which st at ement s are t rue?
Owners Equity= $30,000 and Net Income= $2,000

The basic account ing t heory is based on

Double Entry

The acronym REID is used when

Closing temporary accounts

The period of t ime required t o purchase goods and services and t urn t hem back int o cash is called

Normal operating cycle

A ledger is a book of
Accounts

An ent ry on t he debit side of t he owners equit y indicat es t hat t he account has been
decreased

An ent ry on t he credit side of an expense account indicat es t he account has been

Closed

The book of original ent ry is in

Chronological Order

The debt one owes are

Liabilities

The t hing one owns are

Assets

Sales minus cost of goods sold equal

Gross Prof it

The amount of depreciat ion t aken during t he current f iscal year is properly t ermed
Depreciation expense

The decrease in t he value of a f ixed asset is called

Depreciation

The process of recording inf ormat ion t o t he ledger is called

Posting

The primary purpose of a business is

Prof it

The only t ime debit side of t he revenue account is used is when you make
Closing Entries

When cash is spent in t he acquisit ion of an asset t he impact on t he account ing equat ion is
T he asset cash is credited

An ent ry on t he credit side of a liabilit y account indicat es t hat t he account has been
Increased

Account s payable is a/an

Liability account

Goodwill is classif ied as a/an

Intangible asset

Anot her name f or Prof it and Loss St at ement is

Income Statement

The amount of income f rom t he sale of f uneral services would be shown on which f ormal f inancial st at ement ?
Prof it and Loss Statement

The lef t side of a st andard account is called

Debit Side

Income earned but not received is called

Accrued Income

The t ot aling of a column of a journal or ledger is called

Footing

The cost of operat ing a business is called

Overhead

Working capit al is a measure of

Liquidity

The debit side of t he T-account is t he

Lef t Side

A book in which t he daily t ransact ions of a business are f irst writ t en is t he

Journal

The credit side of t he T-account is t he

Right side

A decrease in owners equit y result ing f rom a business t ransact ion is a/an
Expense

An increase t o which t he account s will increase owners equit y?

Client Fees

A t erm which is used synonymously wit h operat ing expenses is

Overhead

Account s receivables are examples of

Assets

Checks ret urned t o t he deposit or t hat have been paid by t he bank are
Canceled checks

A check t hat has been issued but not present ed f or payment t o a bank is called an
Outstanding check

Account s receivable which are uncollect able are

Bad debts

A Ledger must cont ain

All Accounts

A loan f rom a bank secured by propert y is

A mortgage payable

Salary expense is considered t o be

An operating expense

Post ing is a/an

Transf er of f igures f rom the journal to the ledger

When delivery revenue is earned on account which account s increase and decrease?
Accounts Receivable increases and revenues increase

A special f und t o use in disbursing small sums of money is call a/an

Petty cash f und

A journal designed f or recording a part icular t ype of t ransact ion is known as a/an
Special journal

If a f uneral home sells a f uneral service on a 30day account t he ent ry t o record t he t ransact ion would be t o
Debit accounts receivable and credit sales

If a f uneral direct or receives a payment f rom a client who had purchased a service on a 30day account he would make which of t he f ollowing ent ries in his journal
debit cash, credit accounts receivable

If a f uneral direct or purchases casket s f rom a casket manuf act urer on a 30day account he would record t he t ransact ion as f ollows
Debit purchases and credit account payable

A f uneral car is purchased by a f uneral home f or $30,000. The vehicle will be used f or 5 yrs and t hen replaced. If t he est imat ed salvage value will be $5,000 what will be t he amount of yearly depreciat ion using t he st raight line met hod of depreciat ion f or comput at ion
$5,000

David O'Dell is an employee of Mid Cit ies Embalming Services and is paid a salary of $1850 per mont h. He is also paid t ime and a half f or all hours worked in excess of 40hrs per week. If he worked 62 hrs last week his gross earnings f or t he period would be
$779.14

John Smit h is employed at a local f uneral home and is paid on an hourly rat e of $5.00 per hr. He is also paid t ime and a half f or any hrs worked in excess of 40 hrs per week. For t he current pay period he worked a t ot al of 60 hrs. If his FICA t ax is 6% and his wit hholding t ax is 10%, what is his t ake home pay f or t he week
$294.00

Liabilit y account s are ident if ied by t he account t it le f ollowed by t he word

Payable

Expenses are list ed on which of t he f ollowing report s?

Prof it and loss statement and Income statement

The report t hat shows t he f inancial condit ion of t he business at a point in t ime is called t he
Statement of Financial condition and balance sheet

The account ing equat ion may be st at ed as

Assets= Liabilities and Owners Equity and Assets - Liabilities =Owners Equity

When you recognize revenue when it is earned and expenses when t hey are incurred you are operat ing under t he
Accrual basis of accounting

The account t hat provides a current or f ut ure benef it t o t he business is properly t ermed
Asset account

Met hods of depreciat ion t hat allow t he business t o recover t he cost early in t he lif e of t he asset include
Double declining balance and sum of the years digits

Account s Payable are exact ly t he same as not es payable

False because accounts payable are less f ormal while notes payable require a written agreement

Asset s are all t hings a f uneral direct or owes

False because assets are all things a f uneral director owns

The f uneral direct ors original invest ment is recorded by debit ing t he capit al account and credit ing t he cash account
False because you would credit capital account and debit cash

A prof it and loss st at ement is a report t hat shows income,expenses, and t he net wort h of a business
False because although it shows the income and expenses it does not show net worth. It can show net prof it or net loss but net worth is shown on a later document

If t he income of a business is less t han expenses, t he result is a net loss

True

A t rial balance is a report t hat shows t he f inancial condit ion of a business

False, a trial balance is prepared to check the balancing of the accounts. It is not an actual accounting report

The debit s and credit s in any journal must always be equal

True

Expenses f or an account ing period will appear on t he income st at ement

True

The t wo ways in which owners equit y can be increased are by revenue and invest ment s
True

Account s payable will normally have a credit balance

True

An income st at ement shows net income or loss f or a given period of t ime

True

Any act ivit y of an ent erprise which involves t he exchange of values is ref erred t o as a t ransact ion
true

If t he asset s of a business t ot al $60,000 and liabilit ies t ot al $30,000, t he owners equit y would t ot al $90,000
False, the equation is assets- liabilities= owners equity, so the right answer would be $30,000. T he equation could also be assets= Liabilities+ owners equity so $60,000= $30,000+ $30,000

The amount of wages paid t o employees is shown on t he balance sheet

False, this would be an expense so it would be shown on the income statement (Prof it and Loss Statement)

A ledger is a book of original ent ry

False, a ledger is a book of accounts

A person t o whom a debt is owed is called a debt or

False, they are called creditor

Transf erring inf ormat ion f rom t he journal t o t he ledger is called f oot ing
False, f ooting is totaling a column. Transf erring inf ormation f rom the journal to the ledger is called posting

All revenue account s will normally have a credit balance

True

The capit al account will normally have a credit balance

True

The book of original ent ry in account ing is called t he journal

True

The t ot aling of a column in a journal or ledger account is called post ing

False,totaling the columns in a journal or ledger is called f ooting. Posting is when you transf er inf ormation f rom the journal to the ledger.

Expense means a decrease in owners equit y

True

The lef t side of a st andard account is called t he credit side

False, the lef t side is the debit while the right side is the credit

When cash is spent in t he acquisit ion of an asset , t he net wort h is not af f ect ed
True

Anot her t erm f or balance sheet is Prof it and Loss st at ement

False, another term f or balance sheet would be statement of f inancial condition. T he prof it and loss statement is also known as the Income statement

Account s Receivable of a business represent s all t hose people t o whom t he business owes money
False, that would be accounts payable. Accounts receivable represents all the people whom owe the business money

A cash purchase is recorded in t he purchases journal

False, purchases that occur f requently are recorded in the purchases journal

The decrease in t he value of f ixed asset s due t o normal wear and t ear is called depreciat ion
True

Account s payable represent s all t hose people t hat owe your business money
False, accounts payable is money that the business owes people. Accounts receivable is where people owe the business money

The st at ement of f inancial condit ion is a report t hat shows asset s, liabilit ies, and net wort h of a business
True

Bookkeeping and account ing are synonymous t erms

False, bookkeeping is the recording of f inancial inf ormation while accounting involves analyzing, measuring, interpreting, and reporting inf ormation

Transact ions in t he journal are recorded in chronological order

True

The net wort h of a business is t he dif f erence bet ween t he asset s and t he liabilit ies
True

An ent ry on t he debit side of an asset account records an increase in t he asset

True

Cash paid t ransact ions are recorded in t he cash receipt s journal

False, only transactions where cash is paid out

Account s wit h credit ors are called account s receivable

False, this would be accounts payable since accounts receivables the business is the creditors

When a worksheet is prepared, it is not necessary f or t he business t o prepare a prof it and loss st at ement or balance sheet

False, it is necessary to prepare both always

A person or concern, usually a bank, t hat has been ordered t o make payment on a check or draf t is called t he drawee
True

A person who signs a check or draf t ordering payment t o be made is called t he drawer
True

The signat ure of t he payee or ot her holder place on t he back of a check or ot her negot iable paper is called t he endorsement
True

Any consecut ive t welve mont h period is called a physical year

False, although any consecutive 12 month period is called a f iscal year

Anot her t erm f or a f ixed liabilit y is current liabilit y

False, a f ixed liability is one that will be around f or longer than a year such as a mortgage while a current liability is one that would be paid within a year

The dif f erence bet ween gross sales and sales ret urns and allowances is called net sale
True

Anot her t erm f or owners equit y is net wort h

True

A writ t en promise of a cust omer t o pay t he business a sum of money at a f ut ure dat e is called an account s receivable
False, a written promise would be notes receivable

A writ t en promise t o pay a credit or a cert ain amount in t he f ut ure is called an account payable
False, a written promise would be notes payable

Prepaid expenses (such as insurance) are classif ied as asset account s

True

One who has made a sale is called a vendor

True

One t o whom a sale has been made is called vendee

True

When a f uneral direct or makes a payment on a f uneral coach which was purchased on credit , he would debit account s payable and credit cash
True

Anot her t erm f or Prof it and Loss st at ement is income st at ement

True

The cash basis of account ing is used primarily by a personal service ent erprise
True

Recording expenses when t hey are paid and income when it is received describes t he cash basis of account ing
True

The dif f erence bet ween t he t wo sides of an account is called t he account number
False, the two sides should be balanced with no dif f erence

All expense and revenue account s are summarized and closed at t he end of an account ing period
True

The chart of account s is usually f ound at t he beginning of t he ledger

True

The process of det ermining whet her t he amount of cash (on hand and in t he bank) is t he amount t hat should be t here according t o t he records is called t he proving cash
True

The main purpose of est ablishing a pet t y cash f und is t o eliminat e t he necessit y of writ ing checks f or small amount s
True

To est ablish a pet t y cash f und you would debit cash and credit pet t y cash
False, you would credit cash and debit petty cash

A check t hat a bank ref uses t o pay is described as a dishonored check

True

The most common reason f or checks being ret urned unpaid is not suf f icient f unds
True

Cancelled checks are of no value and should be t hrown away

False, checks should be kept f or record keeping purposes

In a personal service ent erprise t he chief source of revenue is dervied f rom services rendered
True

Accumulat ed depreciat ion is an example of a cont ra asset account

True

A post closing t rial balance is made just prior t o post ing t he closing ent ries
False, it is made just af ter posting the closing entries

Bookkeeping is t he recording phase of t he account ing process

True

Propriet orship, net wort h, and capit al are all synonymous t erms f or owners equit y
True

If t he liabilit ies of a business t ot al $30,000 and t he owners equit y t ot als $40,000 t he asset s would t ot al $10,000
False, the accounting equation is assets=liabilities+ owners equity so the assets would be $70,000

The most import ant f ormal f inancial st at ement s are t he income st at ement and t he t rial balance
False, the most important f ormal statements are Balance sheet, income statement, and statement of cash f lows

To increase a liabilit y account you would debit t hat account

False, you would credit to show an increase

To increase an asset account you would debit t hat account

True

When an expense is incurred,eit her t he asset s are reduced or t he liabilit ies are increased
True

Transact ions involving revenue and expenses always cause a change in t he owners equit y element of an ent erprise
True

Revenue and expense account s are act ually t emporary owners equit y account s
True

If t he f oot ings of an account are n amount t he account is said t o be balanced

True

An account is a device f or recording t he changes in t he f undament al account ing element s

True

The t ransf eral of dat a f rom t he journal t o t he ledger is called post ing
True

The t erms overhead and income are synonymous

False, overhead is the cost to run a business while income is what is lef t over af ter paying liabilities

Net wort h has t he same meaning as owners equit y

True

The abbreviat ion f or t he word debit is Dt

False the abbreviation is Dr

Def er means t o delay unt il a lat er dat e

True

The process of recording business t ransact ions in a journal is called f oot ing
False, totaling the columns is called f ooting. Recording business transactions in a journal is called posting

Negot iable inst rument s ref er t o not es, checks, and ot her business papers t hat may be t ransf erred by endorsement
True

The amount of pay af t er deduct ions have been subt ract ed is called gross pay
False, gross pay is the total a person is paid bef ore deductions have been made

FOB is t he abbreviat ion f or f oot ing on balance

False, FOB mean f ree on board and is a term used with shipping products

The one t o whom a sale has been made is called drawee

False, the drawee is the party on which an order f or the payment of money is drawn. T he person to whom a sale has been made is the vendee

The t erms unearned income and def erred income are synonymous
True

A part nership is a business t hat is owned by t wo or more individuals

True

A f iscal year is any consecut ive 12 mont h period ending on t he last day of any mont h except December
True

EOM is t he abbreviat ion f or end of mont h

True

Cost is t he amount a f ixed asset will sell f or af t er it no longer has any use in t he business
False, cost is the amount a business pays f or its goods. T he term f or a f ixed asset it will sell af ter is no longer has any use in the business is salvage value

Book value is t he cost of f orms and records needed f or recording t ransact ions
False, book value is the price an item is going f or

A bill is a st at ement indicat ing changes f or goods or services rendered

True

A debt or is a business or individual t hat owes a debt

True

The person or company whose name is writ t en on t he back of a check is t he endorser

True

FICA is t he abbreviat ion f or f irst in credit asset s

False, FICA is the abbreviation is Federal Insurance Contributions Act

A bank draf t is a check drawn by one bank on anot her bank in which it has f unds deposit ed
True

A check drawn by a bank on it s own f unds and signed by t he cashier is known as a cashiers check
True

Propert y of a relat ively permanent nat ure used in t he operat ion of a business and not int ended f or resale are known as current asset s
False, these would be known as f ixed assets

COD is t he abbreviat ion f or collect on delivery

True

Accrued expenses ref ers t o t he expenses incurred and paid during an account ing period
False, accrued expenses are expenses not yet paid

Adjust ing ent ries are made at t he conclusion of a f iscal period t o bring account s up t o dat e
True

A cash payment s journal is a book of original ent ry in which only cash receipt s are recorded
False, cash payments journal includes any transaction in which cash is paid out

A check regist er is an expanded t rial balance f or sort ing and classif ying account balances bef ore preparing f inancial st at ement s
False, a check register may not contain all accounts. It is used to help classif y and organize payments made by checks