Accounting Chapter 2-3
Which of the following are external transactions?
Purchasing inventory from suppliers Paying salaries to employees Borrowing money from the bank
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account, general ledger
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account; general ledger
The two components of stockholders' equity are
common stock and retained earnings
Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?
debit cash, credit notes payable
Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following?
debit equipment, debit cash
Accounts on the left side of the accounting equation (assets) are increased with a(n) to the account, whereas accounts on the right side of the accounting equation are increased with a(n)
debit, credit
What is the effect of dividends on retained earnings?
decrease
What is the effect of expenses on retained earnings?
decrease
Which type of account is increased with a debit?
expense
Credits increase revenues, whereas debits increase
expenses and dividends
Identify the three components of retained earnings.
expenses, revenues, dividends
True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.
false
Which of the following represents a common advantage of a computerized accounting system?
journal entries are instantly posted to the ledger
A transaction is initially recorded in the journal, and then subsequently posted to the general
ledger
The process of transferring information from the journal to the 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.
Indigo Company's journal reveals that equipment was debited and notes payable was credited, both for $10,000. Indigo Company must have
purchased equipment and signed a note for the purchase price
Which of the following is an external transaction
purchasing supplies from a vendor
Which type of account is increased with a credit?
revenue
Consistent with the recognition principle, companies record revenue at the time goods are provided to customers.
revenues
The types of accounts which affect retained earnings are
revenues, expenses, and dividends
The types of accounts which affect retained earnings are
revenues, expenses, dividends
Revenues cause retained earnings to
increase
A chronological record of all economic events affecting a firm are recorded in a(n)
journal
The type of information included in an account includes
the account title, columns for debits and credits
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