When a company makes expenditure; it can either capitalize or expense the cost, depending on the nature of the expenditure. What does it mean to capitalize expenditure? What determines whether expenditure can be capitalized?

When a company makes expenditure; it can either capitalize or expense the cost, depending on the nature of the expenditure. What does it mean to capitalize expenditure? What determines whether expenditure can be capitalized?
Answer
The expenditures made by the company in a given period of time can either be expense out or capitalized in that period. Capitalization of the expenditures means that the company is deferring the charging of the amount of the expense over a period of time. The main reason behind the capitalization of the expenditure is that the benefits associated with that expenditure is expected to be obtain over a certain period of time and on the basis of the matching principle, the expenses are charged to the period over which the revenue is generated by using that asset. The most famous example of the capitalization of the expenses is fixed assets and research & development expenses

The accrual basis of accounting recognizes expenses only when they are paid. True False

The accrual basis of accounting recognizes expenses only when they are paid.

	True
	False

Answer
False

The matching principle refers to the relationship between revenues and expenses. True False

The matching principle refers to the relationship between revenues and expenses.

	True
	False

Answer
True

The left-hand side of an account is used for recording debits and the right-hand side for recording credits. True False

The left-hand side of an account is used for recording debits and the right-hand side for recording credits.

	True
	False

Answer
True

When a company uses the double-entry method, the total dollar amount of debits recorded must equal the total dollar amount of credits recorded, but the number of debit and credit entries may differ. True False

When a company uses the double-entry method, the total dollar amount of debits recorded must equal the total dollar amount of credits recorded, but the number of debit and credit entries may differ.

	True
	False

Answer
True

Oct. 1 The clinic issued 4,000 additional shares of capital stock to Doctor Soges at $50 per share. Oct. 4 The clinic purchased diagnostic equipment. The equipment cost $75,000, of which $25,000 was paid in cash; a note payable was issued for the balance. Oct. 12 Issued a check for $9,000 in full payment of an account payable to Zeller Laboratories. Oct. 19 Purchased surgical supplies for $2,600. Payment is not due until November 28. Oct. 25 Collected a $24,000 account receivable from Health One Insurance Company. Oct. 30 Declared and paid a $300,000 cash dividend to stockholders. Record the above selected transactions in general journal form for Sun Orthopedic Clinic, Inc. (Omit the "$" sign in your response.) Date General Journal Debit Credit Oct. 1 Cash 200,000 Capital stock 200,000 4 Diagnostic equipment 75,000 Cash Notes payable 12 Accounts payable 9,000 Cash 9,000 19 Surgical supplies 2,600 Accounts payable 2,600 25 Cash 24,000 Accounts receivable 24,000 30 Dividends 300,000 Cash 300,000 ________________________________________ eBook Links (3)

Oct.   1	The clinic issued 4,000 additional shares of capital stock to Doctor Soges at $50 per share.
Oct.   4	The clinic purchased diagnostic equipment. The equipment cost $75,000, of which $25,000 was paid in cash; a note payable was issued for the balance.
Oct. 12	Issued a check for $9,000 in full payment of an account payable to Zeller Laboratories.
Oct. 19	Purchased surgical supplies for $2,600. Payment is not due until November 28.
Oct. 25	Collected a $24,000 account receivable from Health One Insurance Company.
Oct. 30	Declared and paid a $300,000 cash dividend to stockholders.

  

Record the above selected transactions in general journal form for Sun Orthopedic Clinic, Inc. (Omit the "$" sign in your response.)

   

Date	General Journal	Debit	Credit
Oct. 1	Cash	200,000
	Capital stock		200,000
4	Diagnostic equipment	75,000
	Cash
	Notes payable
12	Accounts payable	9,000
	Cash		9,000
19	Surgical supplies	2,600
	Accounts payable		2,600
25	Cash	24,000
	Accounts receivable		24,000
30	Dividends	300,000
	Cash		300,000

eBook Links (3)

Identify the ways in which the information produced through the accounting cycle is used by a company's management and employees. (Select all that apply.) Evaluate the efficiency of operations. Establish accountability for assets and transactions. Preparation of financial statements. Help make business decisions. Maintain a documentary record of business activities. Make end-of-period adjustments. The Answer I highlight with Yellow. Thank YOU!

Identify the ways in which the information produced through the accounting cycle is used by a company's management and employees. (Select all that apply.)

		Evaluate the efficiency of operations.
		Establish accountability for assets and transactions.
		Preparation of financial statements.
		Help make business decisions.
		Maintain a documentary record of business activities.
		Make end-of-period adjustments.

The Answer I highlight with Yellow.

Thank YOU!