accounting 101 chapter 2

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Determine the dual effect of business events on the accounting equation

Analyze transactions

Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?

Credit note payable Debit cash

Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction?

Debit cash; credit common stock.

Record of all transactions affecting a company's

Journal

computerized system

Journal entries are instantly posted to the general ledger

Manual system

Journal entries are posted periodically to the general ledger

Posting

Transfer balances from journal to general ledger

A journal provides a

chronological record of all transactions affecting a firm.

The two components of stockholders' equity are

common stock and retained earnings

accounts payable equals

credit

common stock equal

credit

retained earnings equal

credit

service revenue equals

credit

The term debit means to place the entry on the __and side of the account, and the term credit means to place the entry on the ____ hand side of the account.

left, right

The two roles of financial accounting are to:

measure business activities of the company and communicate those measurements to external parties for decision making purposes

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as

posting

The purpose of a general ledger is to

provide in a single location the list of transactions affecting each account and the account's balance.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

Consistent with the ___recognition principle, companies record revenue at the time goods are provided to customers

revenue

Which type of account is increased with a credit?

revenue

What are the three components of retained earnings?

revenues, expenses and dividends

The type of information included in an account includes

the account title. columns for debits and credits

Which contains a list of transactions affecting each account and the account's balance?

General ledger

Trial Balance

a list of accounts and their balances at a given time

account

a summary of the effects of all transactions related to a particular item over a period of time

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

accounts receivable equal

debit

cash equals

debit

dividends equal

debit

equipment equals

debit

salaries expense equals

debit

utilities expense equal

debit

An account should have an account title, account number, a place for the date of the transaction, and two columns for

debits and credits.

Credits increase revenues, whereas debits increase

expenses and dividends.

Accounts receivable are assets which represent

the amounts owed by customers.

What are external transactions?

transactions that are separate from the business. Such as: selling products to a customer, purchasing supplies from a vendor, paying salaries to an employee, borrowing money from a bank

A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n)

trial balance


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