Chapter 2: Concept Videos

Select the correct reporting time period for each financial statement. a) Balance Sheet - __________ b) Statement of Cash Flows - __________ c) Income Statement - ___________ d) Statment of Retained Earnings - ___________

a) Balance Sheet - _Point in Time_ b) Statement of Cash Flows - _Period of Time_ c) Income Statement - _Period of Time_ d) Statment of Retained Earnings - _Period of Time_

On December 1, the owner of the business invests $30,000 cash in exchange for common stock.

1 - Dec. 1 Cash - Debit $30,000 Common Stock - Credit $30,000

On December 31, the company paid a $200 invoice that they received in November for electricity.

1 - Dec. 31 Accounts Payable - Debit $200 Cash - Credit $200

On December 31, the company provides consulting services and receives cash of $5,000.

1 - Dec. 31 Cash - Debit $5,000 Consulting Revenue - Credit $5,000

On December 31, the company purchases equipment for $10,000 and pays for the purchase in cash.

1 - Dec. 31 Equipment - Debit $10,000 Cash - Credit $10,000

On December 31, the company purchases supplies for $1,000 on credit.

1 - Dec. 31 Supplies - Debit $1,000 Accounts Payable - Credit $1,000

On November 31, the company received an invoice from the electric company for $200. The company will pay the invoice in December.

1 - Nov. 31 Utilties Expense - Debit $200 Accounts Payable - Credit $200

Indicate the order the financial statments are prepared. Statment of Retained Earnings - _____ Balance Sheet - _____ Income Statement - _____

Statment of Retained Earnings - _2_ Balance Sheet - _3_ Income Statement - _1_

Indicate how to increase each of the accounts listed below. a) Cash - __________ b) Accounts Payable - __________ c) Supplies - __________ d) Accounts Receivable - ________

a) Cash - _Debit_ b) Accounts Payable - _Credit_ c) Supplies - _Debit_ d) Accounts Receivable - _Debit_

Indicate how to increase each of the accounts listed below. a) Common Stock - __________ b) Professional Fees Earned - __________ c) Dividends - __________ d) Salaries Expense - __________

a) Common Stock - _Credit_ b) Professional Fees Earned - _Credit_ c) Dividends - _Debit_ d) Salaries Expense - _Debit_

Which of the following statements is true? a) The trial balance is completed to ensure that debits and credits are equal in the General Ledger. b) The trial balance is completed after the balance sheet. c) The trial balance calculates net income for the period. d) The trial balance is a financail statement distributed to owners and investors.

a) The trial balance is completed to ensure that debits and credits are equal in the General Ledger.

If a credit balance is Unearned Revenue (a liability account) is incorrectly listed as a credit balance in the Sales Revenue account (a revenue account), is the trial balance still in balance? a) Yes b) No

a) Yes

Which of the following is a true statement about debits and credits? a) A debit always increase an account balance. b) A credit is on the right side of an account. c) A debit is on the right side of an account. d) A credit always decreases an account balance.

b) A credit is on the right side of an account.

The process of recording transaction in a journal is called: a) Posting b) Journalizing c) Recording d) Transactioning

b) Journalizing

Correctly identify steps 3 and 4 of the accounting process: a) Step 3: post entries into the ledger; Step 4: identify transactions and source documents. b) Step 3: record transactios into the journal; Step 4: post entries into the ledger. c) Step 3: analyze transactions using the accounting equation; Step 4: post entries into the ledger. d) Step 3: record transactions into the journal; Step 4: analyze transactions using the accounting equation.

b) Step 3: record transactios into the journal; Step 4: post entries into the ledger.

Alex invested $30,000 in cash in his business. How will this entry be posted in the ledger accounts? a) The $30,000 will be posted to the credit side of the Cash account. b) The $30,000 will be posted to the debit side of the Cash account. c) The $30,000 will be posted to the debit side of the Common Stock account. d) The $30,000 will be posted to the credit side of the Common Stock account.

b) The $30,000 will be posted to the debit side of the Cash account. d) The $30,000 will be posted to the credit side of the Common Stock account.

Which of the following statemetns are true about the chart of accounts? a) Different companies use different charts of accounts based on individual company need. b) The chart of accounts contains the balance of all the accounts in a ledger. c) The chart of accounts should be ordered in a logical sequence based on type of account. d) The chart of accounts can be ordered in any sequence because they are not formal financial systems.

b) The chart of accounts contains the balance of all the accounts in a ledger. c) The chart of accounts should be ordered in a logical sequence based on type of account.

A record of increases and decreases in a specific account is a(n): a) ledger b) account c) general ledger d) financial statement

b) account

Which of the following accounts is an asset? a) dividends b) prepaid advertising c) supplies expense d) accounts payable

b) prepaid advertising

Why are posting references entered in the journal when entries are posted to the ledger acccounts? a) Posting references are not completed when entries are posted to the ledger accounts. b) To ensure the journal entries balance. c) So we will know that the entry has been posted. d) So we will know that the postings need to be approved.

c) So we will know that the entry has been posted.

Which of the following statemetns are true about the general ledger? a) All companies will use the same general ledger accounts. b) The ledger contains the balance of all the accounts in a chart of accounts. c) The general ledger contains all the accounts that a company uses, along with detail of the balances in those accounts. d) The general ledger can be ordered in any sequence because they are not formal financial systems.

c) The general ledger contains all the accounts that a company uses, along with detail of the balances in those accounts.

Which of the following is a true statement concerning account titles: a) There is a wide range of account titles among different types of companies. b) All companies use exactly the same account titles. c) There is a small range in account titles regardless of type of company. d) All companies use different account titles.

c) There is a small range in account titles regardless of type of company.

Which of the following accounts is an equity? a) company truck b) prepaid advertising c) common stock d) accounts payable

c) common stock

With double-entry accounting, each transaction requires: a) that at least three accounts are affected. b) that the total debits equal the total debits. c) that at least two accounts are affected. d) that the total debits will equal the total credits.

c) that at least two accounts are affected. d) that the total debits will equal the total credits.

Which of the following accounts is a liability? a) company truck b) prepaid advertising c) common stock d) accounts payable

d) accounts payable