{"type":"doc","content":[{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q1. How do you build financial statements, including a proper title?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Financial Statement Preparation"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how to prepare the three main financial statements: Income Statement, Statement of Retained Earnings, and Balance Sheet, including the correct format and titles."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Income Statement: Shows revenues and expenses for a period, resulting in net income."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Statement of Retained Earnings: Shows changes in retained earnings, including net income and dividends."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Balance Sheet: Shows assets, liabilities, and equity at a point in time."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Proper Title Format: [Name of Company], [Name of Statement], [Date or Period]"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Start by identifying the company name, the type of statement, and the date or period covered. For example, \"ABC Corp, Income Statement, For the Year Ended December 31, 2023\"."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"For the Income Statement, list all revenues first, then all expenses, and calculate net income ("},{"type":"inlineMath","attrs":{"latex":"\\text{Net Income} = \\text{Total Revenues} - \\text{Total Expenses}"}},{"type":"text","text":")."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"For the Statement of Retained Earnings, begin with the beginning balance, add net income, subtract dividends, and find the ending balance ("},{"type":"inlineMath","attrs":{"latex":"\\text{Ending Retained Earnings} = \\text{Beginning Retained Earnings} + \\text{Net Income} - \\text{Dividends}"}},{"type":"text","text":")."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"For the Balance Sheet, list assets (current and non-current), then liabilities, then equity. Make sure total assets equal total liabilities plus equity ("},{"type":"inlineMath","attrs":{"latex":"\\text{Assets} = \\text{Liabilities} + \\text{Equity}"}},{"type":"text","text":")."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Each financial statement should have a proper title: Company Name, Statement Name, and Date/Period. For example:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Income Statement: \"ABC Corp, Income Statement, For the Year Ended December 31, 2023\""}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Statement of Retained Earnings: \"ABC Corp, Statement of Retained Earnings, For the Year Ended December 31, 2023\""}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Balance Sheet: \"ABC Corp, Balance Sheet, As of December 31, 2023\""}]}]}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Follow the structure outlined above for each statement, using the provided account balances."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q2. How do you find Net Income?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Income Statement Calculation"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate net income using revenues and expenses from the adjusted trial balance."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Net Income: The profit for the period, calculated as total revenues minus total expenses."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Formula: "},{"type":"inlineMath","attrs":{"latex":"\\text{Net Income} = \\text{Total Revenues} - \\text{Total Expenses}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify all revenue accounts (e.g., Service Revenue) and sum their balances."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify all expense accounts (e.g., Salaries Expense, Rent Expense, Depreciation Expense, Income Tax Expense) and sum their balances."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Subtract total expenses from total revenues to set up the net income calculation."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Net Income = "},{"type":"inlineMath","attrs":{"latex":"92,000"}},{"type":"text","text":" (Service Revenue) minus the sum of all expenses ("},{"type":"inlineMath","attrs":{"latex":"28,000 + 9,600 + 7,500 + 4,700"}},{"type":"text","text":"). Net Income = "},{"type":"inlineMath","attrs":{"latex":"42,200"}},{"type":"text","text":"."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This is the profit for the period, calculated from the adjusted trial balance."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q3. How do you find the ending balance of Retained Earnings?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Statement of Retained Earnings"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate the ending balance of retained earnings using the beginning balance, net income, and dividends."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings: Cumulative earnings kept in the company after dividends."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Formula: "},{"type":"inlineMath","attrs":{"latex":"\\text{Ending Retained Earnings} = \\text{Beginning Retained Earnings} + \\text{Net Income} - \\text{Dividends}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Find the beginning balance of retained earnings from the trial balance ("},{"type":"inlineMath","attrs":{"latex":"7,800"}},{"type":"text","text":")."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate net income from the previous question."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Subtract dividends paid ("},{"type":"inlineMath","attrs":{"latex":"5,000"}},{"type":"text","text":") from the sum of beginning retained earnings and net income."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ending Retained Earnings = "},{"type":"inlineMath","attrs":{"latex":"7,800 + 42,200 - 5,000 = 45,000"}},{"type":"text","text":"."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This is the amount of retained earnings at the end of the period."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q4. How do you find totals for current and total assets, liabilities, and equity?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Balance Sheet Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to classify and sum current and total assets, liabilities, and equity from the trial balance."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Current Assets: Assets expected to be converted to cash within one year (e.g., Cash, Accounts Receivable, Supplies, Prepaid Insurance)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Total Assets: Sum of current and non-current assets (e.g., Equipment minus Accumulated Depreciation)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Current Liabilities: Obligations due within one year (e.g., Accounts Payable, Unearned Revenue)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Total Liabilities: Sum of current and long-term liabilities."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equity: Common Stock + Ending Retained Earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List and sum all current asset accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Add non-current assets: Equipment minus Accumulated Depreciation."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"List and sum all current liability accounts: Accounts Payable, Unearned Revenue."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Add equity accounts: Common Stock and Ending Retained Earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Current Assets: "},{"type":"inlineMath","attrs":{"latex":"24,500 + 18,700 + 4,200 + 3,600 = 51,000"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equipment (net): "},{"type":"inlineMath","attrs":{"latex":"75,000 - 15,000 = 60,000"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Total Assets: "},{"type":"inlineMath","attrs":{"latex":"51,000 + 60,000 = 111,000"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Current Liabilities: "},{"type":"inlineMath","attrs":{"latex":"9,800 + 6,500 = 16,300"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equity: "},{"type":"inlineMath","attrs":{"latex":"40,000 + 45,000 = 85,000"}}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q5. What item flows from the income statement to the statement of retained earnings?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Financial Statement Linkages"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how financial statements are connected."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Net Income: The result from the income statement that is used in the statement of retained earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the income statement and identify the final result (net income)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that net income is added to the beginning retained earnings in the statement of retained earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Net Income flows from the income statement to the statement of retained earnings."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This links the two statements, showing how profits affect retained earnings."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q6. What item flows from the statement of retained earnings to the balance sheet?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Financial Statement Linkages"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how the ending balance of retained earnings is used in the balance sheet."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ending Retained Earnings: The final balance from the statement of retained earnings, reported in the equity section of the balance sheet."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate ending retained earnings in the statement of retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Use this amount in the equity section of the balance sheet."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ending Retained Earnings flows from the statement of retained earnings to the balance sheet."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This connects the two statements, showing the cumulative earnings retained in the company."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q7. What are the debit and credit rules for account types?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Double-Entry Accounting"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of how debits and credits affect different account types."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assets: Increase with debits, decrease with credits."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Liabilities: Increase with credits, decrease with debits."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equity: Increase with credits, decrease with debits."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenue: Increase with credits, decrease with debits."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Expenses: Increase with debits, decrease with credits."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Review the normal balance for each account type (asset, liability, equity, revenue, expense)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand how debits and credits affect each type (e.g., assets increase with debits)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply these rules when recording transactions in journal entries."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Assets and expenses increase with debits; liabilities, equity, and revenue increase with credits."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"These rules are fundamental to double-entry accounting."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q8. What is the order of the accounting cycle?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accounting Cycle"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of the steps involved in the accounting cycle."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accounting Cycle: The process of recording and processing all financial transactions."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the steps: Analyze transactions, record journal entries, post to ledger, prepare trial balance, adjust entries, prepare adjusted trial balance, prepare financial statements, close accounts."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the purpose of each step and how they flow in sequence."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The order is: Analyze transactions → Journalize → Post to ledger → Prepare trial balance → Adjust entries → Prepare adjusted trial balance → Prepare financial statements → Close accounts."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This ensures accurate and complete financial reporting."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q9. How do transactions impact the accounting equation?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accounting Equation"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to analyze how transactions affect assets, liabilities, and equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accounting Equation: "},{"type":"inlineMath","attrs":{"latex":"\\text{Assets} = \\text{Liabilities} + \\text{Equity}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"For each transaction, determine which accounts are affected (asset, liability, equity)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Decide if the account increases or decreases based on the nature of the transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply the accounting equation to see the overall effect (e.g., paying cash decreases assets, incurring a liability increases liabilities)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Transactions can increase or decrease assets, liabilities, or equity, but the accounting equation always remains balanced."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Each transaction must be analyzed for its effect on the equation."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q10. How do revenue and expenses affect equity (retained earnings specifically)?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Equity Changes"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how revenues and expenses impact retained earnings, a component of equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings: Increased by net income (revenues minus expenses), decreased by dividends."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Recognize that revenue increases net income, which increases retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand that expenses decrease net income, which decreases retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Dividends further decrease retained earnings."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenue increases retained earnings; expenses decrease retained earnings."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"These changes are reflected in the statement of retained earnings."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q11. How do you record transactions as journal entries, knowing the account and whether it’s a debit or credit?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Journal Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to record financial transactions using the correct accounts and debit/credit rules."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Journal Entry: The record of a transaction, showing accounts affected and whether they are debited or credited."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Debits are entered first in the journal entry."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the accounts affected by the transaction."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Determine which account is debited and which is credited based on the rules."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Write the journal entry, listing the debit account first, then the credit account."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Journal entries list debits first, followed by credits. For example, purchasing supplies for cash:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Debit Supplies"}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Credit Cash"}]}]}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply the debit/credit rules for each transaction."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q12. What are temporary and permanent accounts?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Account Classification"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of which accounts are closed at period end and which remain open."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Temporary Accounts: Revenue, expense, and dividend accounts; closed to retained earnings at period end."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Permanent Accounts: Asset, liability, and equity accounts; remain open."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which accounts are temporary (income statement and dividends)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify which accounts are permanent (balance sheet accounts)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the closing process for temporary accounts."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Temporary accounts are revenues, expenses, and dividends; permanent accounts are assets, liabilities, and equity."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Temporary accounts are closed at period end, permanent accounts carry forward."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q13. What is the difference between accrual and cash basis accounting?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accounting Methods"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of when revenue and expenses are recognized under each method."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrual Basis: Revenue and expenses are recognized when earned/incurred, not when cash is received/paid."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash Basis: Revenue and expenses are recognized when cash is received/paid."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Compare the timing of revenue and expense recognition under each method."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply the principles to example transactions (e.g., services performed but not yet paid)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrual basis recognizes revenue when earned and expenses when incurred; cash basis recognizes both only when cash changes hands."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This affects the timing of financial statement reporting."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q14. What are the revenue and expense recognition principles?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Recognition Principles"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of when to recognize revenue and expenses according to GAAP."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenue Recognition Principle: Revenue is recognized when earned, regardless of when cash is received."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Expense Recognition (Matching) Principle: Expenses are recognized when incurred, matched to the period of related revenue."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply the revenue recognition principle to determine when revenue should be recorded."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Apply the expense recognition principle to determine when expenses should be recorded."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Revenue is recognized when earned; expenses are recognized when incurred and matched to revenue."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"These principles ensure accurate financial reporting."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q15. What are the three types of adjusting entries?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Adjusting Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your knowledge of the types of adjustments made at period end."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued Revenues: Revenue earned but not yet received."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued Expenses: Expenses incurred but not yet paid."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Deferrals: Prepaid expenses and unearned revenues."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Identify the three types: accruals (revenues and expenses) and deferrals (prepaid expenses, unearned revenues)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Understand the purpose of each type and how they adjust account balances."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"The three types are: accrued revenues, accrued expenses, and deferrals (prepaid expenses and unearned revenues)."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"These ensure revenues and expenses are recorded in the correct period."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q16. What would the journal entry look like to record an accrued revenue of $5,000? What about when $3,000 is received?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accrued Revenue Adjusting Entries"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to record accrued revenue and subsequent cash receipt."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued Revenue: Revenue earned but not yet received."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accounts Receivable: Asset account used to record amounts owed."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"To record accrued revenue: Debit Accounts Receivable, Credit Revenue."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"When cash is received: Debit Cash, Credit Accounts Receivable."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Post these entries to the Accounts Receivable T-account to track the balance."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued revenue entry: Debit Accounts Receivable $5,000; Credit Revenue $5,000."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Cash receipt entry: Debit Cash $3,000; Credit Accounts Receivable $3,000."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ending Accounts Receivable balance: $2,000."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q17. What would the journal entry look like to record a purchase of supplies on account of $9,000? What does the payment of $4,500 look like?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Supplies and Accounts Payable"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to record purchases and payments on account."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Supplies: Asset account."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accounts Payable: Liability account."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"To record purchase: Debit Supplies, Credit Accounts Payable."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"To record payment: Debit Accounts Payable, Credit Cash."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Post these entries to the Accounts Payable T-account to track the balance."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Purchase entry: Debit Supplies $9,000; Credit Accounts Payable $9,000."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Payment entry: Debit Accounts Payable $4,500; Credit Cash $4,500."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ending Accounts Payable balance: $4,500."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q18. What is the effect on the accounting equation of an accrued salary expense in December that won’t be paid until January?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Accrued Expenses"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your understanding of how accrued expenses affect assets, liabilities, and equity."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued Salary Expense: Expense incurred but not yet paid."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Liability: Salaries Payable increases."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Equity: Retained earnings decreases."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Record the expense: Debit Salary Expense, Credit Salaries Payable."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Expense decreases equity; liability increases."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"No effect on assets until payment is made."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Accrued salary expense increases liabilities and decreases equity; assets are unaffected until payment."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This reflects the obligation to pay in the future."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q19. How do you do deferred expense adjusting entries and post to balance sheet t-account to find ending balance? (e.g., prepaid 12 months of rent for $24,000 on July 1st; now it is December 31st)"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Deferred Expenses (Prepaid Expenses)"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to adjust prepaid expenses and calculate the remaining balance."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Prepaid Rent: Asset account."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Rent Expense: Expense account."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Formula: "},{"type":"inlineMath","attrs":{"latex":"\\text{Monthly Rent} = \\frac{24,000}{12} = 2,000"}},{"type":"text","text":" per month"}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate the number of months used (July 1 to December 31 = 6 months)."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Calculate total rent expense recognized ("},{"type":"inlineMath","attrs":{"latex":"2,000 \\times 6"}},{"type":"text","text":")."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Adjust the prepaid rent account: Debit Rent Expense, Credit Prepaid Rent for the amount used."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Find the ending balance in Prepaid Rent (original amount minus amount used)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Rent Expense recognized: "},{"type":"inlineMath","attrs":{"latex":"12,000"}},{"type":"text","text":"; Prepaid Rent ending balance: $12,000$."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Half of the prepaid rent has been used by December 31st."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q20. How do you do deferred revenue adjusting entries and post to balance sheet t-account to find ending balance? (e.g., received $2,000 in advance Dec. 1st; on Dec. 31st $1,000 had been earned)"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Deferred Revenue (Unearned Revenue)"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to adjust unearned revenue and calculate the remaining balance."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Unearned Revenue: Liability account."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Service Revenue: Revenue account."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Record initial receipt: Debit Cash $2,000; Credit Unearned Revenue $2,000."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"At period end, recognize earned revenue: Debit Unearned Revenue $1,000; Credit Service Revenue $1,000."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Find the ending balance in Unearned Revenue (original amount minus amount earned)."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Unearned Revenue ending balance: "},{"type":"inlineMath","attrs":{"latex":"1,000"}},{"type":"text","text":"; Service Revenue recognized: $1,000$."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Half of the advance has been earned by December 31st."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q21. Using the trial balance provided, how do you prepare Income Statement, Statement of Retained Earnings, and Balance Sheet?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Financial Statement Preparation from Trial Balance"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to use an adjusted trial balance to prepare the three main financial statements."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Trial Balance: List of all accounts and their balances."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Income Statement: Revenues and expenses."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Statement of Retained Earnings: Beginning balance, net income, dividends."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Balance Sheet: Assets, liabilities, equity."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Use the trial balance to identify which accounts belong to each statement."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Prepare the income statement first, then the statement of retained earnings, then the balance sheet."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Ensure all balances are correctly classified and totaled."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Income Statement: Service Revenue minus all expenses = Net Income."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Statement of Retained Earnings: Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings."}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Balance Sheet: Assets = Liabilities + Equity (Common Stock + Ending Retained Earnings)."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q22. How do you find the debt ratio and what does it communicate to lenders?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Debt Ratio Analysis"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to calculate the debt ratio and interpret its meaning."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms and Formulas:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Debt Ratio: Measures the proportion of assets financed by liabilities."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Formula: "},{"type":"inlineMath","attrs":{"latex":"\\text{Debt Ratio} = \\frac{\\text{Total Liabilities}}{\\text{Total Assets}}"}}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Find total liabilities from the balance sheet."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Find total assets from the balance sheet."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Set up the debt ratio formula and prepare to calculate."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Try solving on your own before revealing the answer!"}]},{"type":"collapsible","content":[{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Final Answer:"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Debt Ratio = "},{"type":"inlineMath","attrs":{"latex":"\\frac{16,300}{111,000} \\approx 0.15"}}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This means about 15% of assets are financed by liabilities; lenders prefer lower ratios for less risk."}]}]},{"type":"heading","attrs":{"textAlign":null,"level":3},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Q23. How do you close temporary accounts to retained earnings and post to the retained earnings t-account?"}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Background"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Topic: Closing Process"}]},{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"This question tests your ability to close revenue, expense, and dividend accounts to retained earnings."}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"underline"}],"text":"Key Terms:"}]},{"type":"bulletList","content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Closing Entries: Transfer balances from temporary accounts to retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Retained Earnings T-account: Shows beginning balance, additions, and subtractions."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"content":[{"type":"text","marks":[{"type":"bold"}],"text":"Step-by-Step Guidance"}]},{"type":"orderedList","attrs":{"start":1,"type":null},"content":[{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Close revenue accounts: Debit revenue, credit retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Close expense accounts: Credit expenses, debit retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Close dividends: Credit dividends, debit retained earnings."}]}]},{"type":"listItem","content":[{"type":"paragraph","attrs":{"textAlign":null},"content":[{"type":"text","text":"Post all entries to the retained earnings t-account, including the beginning balance."}]}]}]},{"type":"heading","attrs":{"textAlign":null,"level":4},"con