Accounting Chapter 2
At January 31, 2014, the balance in Aislers Inc.'s supplies account was $250. During February, Aislers purchased supplies of $300 and used supplies of $375. At the end of February, the balance in the supplies account should be
$175 debit
During February 2014 its first month of operations, the owner of Ariel Pink Enterprises invested cash of $25,000. Ariel had cash revenues of $5,000 and paid expenses of $7,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?
$23,000 debit
In the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $600. The cash account has a(n)
$300 debit balance
During 2013, its first year of operations, Neko's Bakery had revenues of $60,000 and expenses of $33,000. The business paid dividends of $20,000. What is the amount of stockholders' equity at December 31, 2014?
$7000 credit
At January 1, 2014, Alligator Industries reported retained earnings of $130,000. During 2014, Alligator had a net loss of $30,000 and paid dividends of $15,000. At December 31, 2014, the amount of retained earnings is
$85,000.
A compound journal entry involves
3 or more accounts
An account consists of
3 parts
Management could determine the amounts due from customers by examining which ledger account?
Accounts Receivable
What is the expanded basic accounting equation?
Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues.
An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction?
Credit a different asset account for $700.
Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,000, a credit to a liability account for $600. Which of the following would be the correct way to complete the recording of the transaction?
Credit an asset account for $400.
Devendra Company pays cash dividends of $600. The entry for this transaction will include a debit of $600 to
Dividends
What is not true of the terms debit and credit?
They can be interpreted to mean increase and decrease.
The standard format of a journal would not include
a T-account
A journal provides
a chronological record of transactions.
On January 14, Edamame Industries purchased supplies of $700 on account. The entry to record the purchase will include
a debit to Supplies and a credit to Accounts Payable.
On July 7, 2014, Hidden Camera Enterprises performed cash services of $1,700. The entry to record this transaction would include
a debit to cash $1700
An account consists of
a title, debit side, and credit side
A T-account is
a way of depicting the basic form of an account.
An accounting convention is best described as
an accounting custom
A debit to an asset account indicates
an increase to the asset
The first step in the recording process is to
analyze
The usual sequence of steps in the transaction recording process is:
analyze -> journal -> ledger.
What is the correct sequence of steps in the recording process?
analyzing, journalizing, posting
Delta72 Company received a cash advance of $700 from a customer. As a result of this event,
assets increased by $700. stockholders' equity increased by $700.
The usual order of accounts in the general ledger is
assets, liabilities, common stock, retained earnings, dividends, revenues, and expenses.
Customarily, a trial balance is prepared
at the end of an accounting period
Another name for journal is
book of original entry
In recording business transactions, evidence that an accounting transaction has taken place is obtained from
business documents
The first step in designing a computerized accounting system is the creation of the
chart of accounts
Transactions in a journal are recorded in
chronological order
When three or more accounts are required in one journal entry, the entry is referred to as a
compound entry
TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and
credited a liability account for $2,100.
An account will have a credit balance if the
credits exceed debits
Deerhoof Company purchases equipment for $1,700 and supplies for $400 from Milkman Co. for $2,100 cash. The entry for this transaction will include a
debit to Equipment $1,700 and a debit to Supplies $400 for Deerhoof.
Credits decrease and increase what
decrease assets and increase liabilities
Mt. Zion Inc. pays its employees twice a month, on the 7 th and the 21 st . On June 21, Mt. Zion Inc. paid employee salaries of $5,000. This transaction would
decrease net income for the month by $5,000.
A credit balance in a liability account indicates that an error in recording has occurred.
false
A debit to an account indicates an increase in that account.
false
A new account is opened for each transaction entered into by a business firm.
false
All business transactions must be entered first in the general ledger.
false
Debit and credit can be interpreted to mean increase and decrease, respectively.
false
The chart of accounts is a special ledger used in accounting systems.
false
The double-entry system of accounting refers to the placement of a double line at the end of a column of figures.
false
The normal balance of all accounts is a debit.
false
The normal balance of an expense is a credit.
false
The number and types of accounts used by different business enterprises are the same if generally accepted accounting principles are being followed by the enterprises.
false
The recording process becomes more efficient and informative if all transactions are recorded in one account.
false
The trial balance will not balance when incorrect account titles are used in journalizing or posting.
false
Transactions are entered in the ledger accounts and then transferred to journals.
false
Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.
false
Transactions are recorded in alphabetic order in a journal.
false
Under the double-entry system, revenues must always equal expenses.
false
When the volume of transactions is large, recording them in tabular form is more efficient than using journals and ledgers.
false
The ledger should be arranged in
financial statement order
An accounting record of the balances of all assets, liabilities, and stockholders' equity accounts is called a
general ledger
A trial balance is a listing of
general ledger accounts and balances.
The double-entry system requires that each transaction must be recorded
in at least 2 different accounts
A credit to a liability account
indicates an increase in the amount owed to creditors.
When a company pays dividends
it doesn't have to be cash, it could be another asset.
If a company has overdrawn its bank balance, then
its cash account will show a credit balance.
Posting accumulates the effects of
journalized transactions in the individual accounts.
After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
ledger accounts
When journalizing, the reference column is
left blank
The steps in preparing a trial balance include
listing the account titles and their balances. totaling the debit and credit columns. proving the equality of the two columns.
A chart of accounts for a business firm
lists the accounts and account numbers that identify their location in the ledger.
On June 1, 2014 Ted Leo buys a copier machine for his business and finances this purchase with cash and a note. When journalizing this transaction, he will
make a compound entry
The procedure of transferring journal entries to the ledger accounts is called
posting
A journal is not useful for
preparing financial statements
The recording process occurs
repeatedly during the accounting period.
When two accounts are required in one journal entry, the entry is referred to as a
simple entry
An account is NOT a
source document
A number in the reference column in a general journal indicates
that the entry has been posted to a particular account.
In recording an accounting transaction in a double-entry system
the amount of the debits must equal the amount of the credits.
The left side of an account is
the debit side
A complete journal entry does not show
the new balance in the accounts affected by the transaction.
The normal balance of any account is the
the side which increases that account
Camper Van Company purchased equipment for $2,600 cash. As a result of this event,
total assets remained unchanged
The final step in the recording process is to
transfer journal information to ledger accounts.
A journal is also known as a book of original entry.
true
A simple journal entry requires only one debit to an account and one credit to an account.
true
An account is often referred to as a T-account because of the way it is constructed.
true
Business documents can provide evidence that a transaction has occurred.
true
Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.
true
If a revenue account is credited, the revenue account is increased.
true
The complete effect of a transaction on the accounts is disclosed in the journal.
true
The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction.
true
The journal provides a chronological record of transactions.
true