Accounting Ch.2 Questions

Which of the following are external transactions

1) Borrowing money from the bank 2) Paying salaries to employees 3) Purchasing inventory from suppliers

Geo Corporation issues stock to investors for $100000. Recording this transaction will include which of the following?

1) Credit common stock 2) Debit to cash

When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account

Accounts receivable

Shannon Corporation issues common stock for $25000. Recording that transaction will include a:

Credit to common stock

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

Which type of account is increased with a debit

Expense

True or false: a ledger provides a chronological record of all transactions affecting the firm

False - Reason: A journal is what provides a chronological record of the transactions of a firm

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

General ledger

What is the effect of net income on retained earnings (increase or decrease)

Increases retained earnings

The accounting equation is: Assets = ____________ + ______________

Liability + Stockholders' Equity

Smith Company's journal shows a debit to cash and a credit to notes payable both for $15000. This indicates that Smith Company:

Paid a loan in the amount of $15000

Manual system

journal entries are posted periodically to the general ledger

An ____________ is maintained for each financial statement item, whereas a ___________ ___________ contains all of the accounts of the company

account, general ledger

An ____________ is maintained for each financial statement item, whereas a ______________ _______________ contains all of the accounts of the company

account, general ledger

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

debts and credits

Dividends paid to stockholders will cause retained earnings to (increase or decrease)

decrease

Revenues cause retained earnings to (increase or decrease)

increase

Which of the following includes the list of transactions affecting each individual account and the account's balance

ledger

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

provided goods or services to a customer

Which of the following is an external transaction

purchasing supplies from a vendor

A simplified version that is used informally for analysis instead of drawings a formal general ledger account is referred to as a

t-account

A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a ___________ ______________.

trial balance

The type of information included in an account includes

1) the account title 2) columns for debits and credits

Identify the three components of retained earnings

1) Revenues 2) Dividends 3) Expenses

True or False: The two functions of financial accounting are to measure business activities and prepare tax returns

False - Reason: The two functions of financial accounting are to measure business activities and communicate those measurements to external parties for decision-making purposes.

A chronological record of all economic events affecting a firm and recorded in a ____________

journal

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

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

revenue

Pluto Inc. borrows $3000 from Second Nationals Bank by singing a promissory note. Recording this transaction will include which of the following

1) Credit note payable 2) debit cash

Which of the following are stockholder equity accounts

1) common stock 2) retained earnings

Carnival Company issues common stock to investors for $50000. Which of the following is used to record this transaction

Debit cash, credit common stock

What is the effect of dividends on retained earnings (increase or decrease)

Decrease

Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicated that Klick

issued shares to stockholders

Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:

issued shares to stockholders

Computer system

journal entries are instantly posted to the general ledger

The two roles of financial accounting are to

1) measure business activities of the company 2) communicate information to external parties for decision making purposes

What are the three components of retained earnings

1) revenues 2) expenses 3) dividends

Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Kick

issued shares to stockholders

Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:

1) credit to notes payable 2) debit to cash

The two components of stockholders' equity are

Common stock and retained earnings

True or False: A balance sheet is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity

False - Reason: A trial balance is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity

True or false: A ledger provides a chronological record of all transactions affecting the firm

False: It is really a journal that provides a chronological record of the transactions of a firm

Tabor Company issues $20000 of common stock to investors. Recording this transaction will include a credit to:

common stock

Two components of stockholders' equity are

common stock and retained earnings

Shannon Corporation issues common stock for $25000. Recording this transaction will include a

credit to common stock

Credits increase revenues, whereas debits increase

expenses and dividends

Which of the following are components of calculating net income

expenses and revenues

What effect does revenue have on retained earnings (decrease or increase)

increase

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

left, right

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

posting

Accounts receivable are assets which represents

the amounts owned by customers