ch 4 smartbook

transactions ________.

- are the starting point in the accounting process that ends with the preparation of financial statements - are economic interchanges between entities - provide the raw data that ends up being analyzed in financial statements - are summarized in accounts, and accounts are further summarized in financial statements

A = L + Paid in Capital + Retained Earnings

Beginning (retained earnings) + Revenue (during the period) - Expenses (during the period)

Which of these statements accurately describe a chart of accounts?

It serves as an index to a company's ledger. It is usually sequenced with assets listed first, followed by liabilities, stockholders' equity, revenues, and expenses.

When a bank (debits/credits) your account for the interest earned during the month, what it is really communicating is that it is (increasing/decreasing) the (asset/liability) recorded in its accounting records to represent your account from its perspective.

credits increasing liability

Merchants who send you a notice that they have "charged" your account are really communicating that they have ______ your account in their accounting records to ______ your account balance, which is shown as a(n) ______ from their perspective, since you owe them money.

debited increase asset

Merchants who send you a notice that they have "charged" your account are really communicating that they have:

debited your account to increase your account balance, which is shown as an asset (accounts receivable) in their accounting records.

Although revenues and expenses are reported on the income statement, they also:

impact stockholders' equity on the balance sheet.

Transactions are:

initially recorded in a journal and then posted to a ledger.

A chart of accounts serves as an index to a company's

ledger

After transactions have been recorded in a journal, they are posted to a

ledger

In bookkeeping and accounting, debit means _____ , and credit means _____.

left right

The report format of the balance sheet ______.

presents assets above liabilities and stockholders' equity items

The account format of the balance sheet:

presents assets on the left and liabilities and stockholders' equity items on the right.

In a balance sheet, net income from the income statement is added to the beginning balance of ______.

retained earnings in the statement of changes in retained earnings

If debits equal credits, then:

the company's balance sheet equation will be in balance.