Accounting 2100 Chapters 1 & 2

The accounts that represent the resources of the company are called

Assets

Financial accounting deals with what/who?

1. Measuring a company's economic activity 2. Preparing financial reports 3. Communicating financial results to investors

What account represents a resource of the company?

Accounts receivable

Amounts owed to suppliers for supplies purchased on account are defined as

A liability

A _______________ summarizes all transactions related to a particular item over a period of time.

Account

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the

Accounting Cycle

The accounting process begins with

Analysis of business transactions and events

When a payment is made on an account payable, what happens?

Assets and liabilities decrease

On Sept. 30 MFP paid employees salaries of $7000 including $1000 it owed to its employees last month, What are the effects of this transaction on the accounting equation?

Assets decreased, liabilities decreased, and expenses increased

Investments by stockholders have what effect on the accounting equation?

Assets increase and stockholders' equity increases

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

Assets increase and stockholders' equity increases

When a company provides services on account, the accounting equation would be affected as follows:

Assets increase and stockholders' equity increases

Accounting Equation

Assets=Liabilities + Stockholders Equity

A company receives a $500,000 cash deposit from a customer on Oct. 15 but will not provide services until Nov 20. Which of the follow statements is true? A. The company records service revenue on Oct. 15 B. The company records cash collection on Nov 20 C. The company records deferred rev on Oct 15 D. The company records nothing

C

External events include all of the following except: A. Paying Rent B. Purchasing Equipment C. Using office equipment D. Collecting an account receivable

C

When cash payments are made to stockholders, what is the effect on the company's accounts?

Cash decreases, dividends increase

A list of all account names used to record transactions of a company is referred to as the:

Chart of Accounts

Primary purpose of financial accounting

Communicate financial results to investors and creditors

The form of business organization that is legally separate from its owners

Corporation

Which business form has the advantage of limited liability?

Corporation

Liabilities are best defined as

Debts or obligations the company owes resulting from past transactions

When the company pays stockholders a dividend, what is the effect on the accounting equation for that company?

Decrease assets and decrease stockholders equity

An expense has what effect on the account equation?

Decrease stockholders' equity

Receiving cash from customers before services are performed results in

Deferred Revenues

A disadvantage of the corporate form of business

Double taxation

Transactions of a company involving external sources of funding are referred to as

Financing activities

What are source documents? List examples.

Identify the date and nature of a transaction. Examples; sales tickets, checks, purchase orders, and bank statements

Purchasing office supplies on account will

Increase assets and increase liabilities

Providing services and receiving cash will

Increase assets and increase stockholders' equity

Receiving cash from an account receivable

Increases one asset and decreases another asset

Revenues have what effect on the accounting equation?

Increases stockholders' equity

Financial accounting provides what?

Information for external decision makers

Transactions of a company that include the purchase and sale of long-term assets are referred to as

Investing Activities

McGill purchases additional office equipment to better services to customers. This purchase is classified as what type of activity?

Investing activity

Creditors claims to a corporations resources are referred to as

Liabilities

Purchasing office equipment on account has what impact on the accounting equation?

Liabilities increase and assets increase

What is the primary purpose of financial accounting?

Measure business activities and communicate those measures to eternal users to make decisions

Purchasing supplies for cash has what effect on the accounting equation?

No effect

Pumpkin Inc. sold $500 in pumpkins to a customer on account on Jan 1. On Jan 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?

No net effect to the accounting equation

Transactions related to the primary business of the company such as selling goods and services to customers, are referred to as

Operating Activities

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits for the period?

Prepare a trial balance

Describe the accounting equation

Resources of the company equal creditors and owners claim to those resources

The assets of a company represent:

Resources that will be used to benefit the company

The stockholders interest in a corporation is called

Stockholder's Equity

Stockholders claims to the company's resources are referred to as:

Stockholder's equity

Limited Liability means

Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket

When a company pays employees' salaries for the current period, how will the basic accounting equation be affected?

Stockholders' equity decreases

If a company provides services on account, which of the following is true?

Stockholders' equity increases

Financing activities include

Transactions involving external sources of funding, issuing common stock to stockholders