Chapter 2: Learn Smart

Brown Company purchased $900 of supplies on credit. Illustrate how to record the transaction by completing the following sentence. Accounts payable would be __________ (debited/credited) on the __________ (left/right) side of the T-account, and Supplies would be __________ (debited/credited) on the __________ (left/right) side of the T-account.

Accounts payable would be _credited_ (debited/credited) on the _right_ (left/right) side of the T-account, and Supplies would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account.

Accounts receivable are __________ (increased/decreased) by credit sales and are __________ (increased/decreased) by customer payments.

Accounts receivable are _increased_ (increased/decreased) by credit sales and are _decreased_ (increased/decreased) by customer payments.

Major Programming receives $5,000 cash in advance of providing programming services to a customer. Describe how to record the transaction by completing the following sentence. Cash would be _________ (debited/credited) on the _________ (left/right) side of the T-account, and Unearned Programming Revenue would be __________ (debited/credited) on the __________ (left/right) side of the T-account.

Cash would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account, and Unearned Programming Revenue would be _credited_ (debited/credited) on the _right_ (left/right) side of the T-account.

Brown Company paid $40 in cash dividends. Show how to record a transaction by completing the following sentence. Dividends would be __________ (debited/credited) on the ___________ (left/right) side of the T-account, and Cash would be __________ (debited/credited) on the __________ (left/right) side of the T-account.

Dividends would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account, and Cash would be _credited_ (debited/credited) on the _right_ (left/right) side of the T-account.

Revenues cause equity to __________ (decrease/increase) and they are increased on the __________ (left/right) side of the T-account.

Revenues cause equity to _increase_ (decrease/increase) and they are increased on the _right_ (left/right) side of the T-account.

Brown Company provided services to a customer and immediately collected $1,900 cash. Show how to record the transaction by completing the following sentence. Service Revenue would be __________ (debited/credited) on the __________ (left/right) side of the T-Account, and cash would be _________ (debited/credited) on the ___________ (left/right) side of the T-account.

Service Revenue would be _credited__ (debited/credited) on the _right_ (left/right) side of the T-Account, and cash would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account.

Since expenses are the costs of doing business and cause equity to __________ (increase/decrease), expenses are increased on the __________ (right/left) side of their T-account.

Since expenses are the costs of doing business and cause equity to _decrease_ (increase/decrease), expenses are increased on the _left_ (right/left) side of their T-account.

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transition in the T-Accounts by completing the following sentence. The Cash account would be __________ (debited/credited) on the __________ (left/right) side of the T-account and the Common stock account would be __________ (debited/credited) on the __________ (left/right) side of the T-account.

The Cash account would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account and the Common stock account would be _credited_ (debited/credited) on the _right__ (left/right) side of the T-account.

The Dividends account is used to record __________ (investments/dividends/expenses/revenues) by the owner and has a ___________ (positive/negative) impact on equity.

The Dividends account is used to record _dividends_ (investments/dividends/expenses/revenues) by the owner and has a _negative_ (positive/negative) impact on equity.

The T-account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a (debit/credit) __________ balance of $_________.

The T-account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a (debit/credit) _debit_ balance of $_270_.

Brown Company paid its employee his weekly wages of $400. Show how to record the transaction by completing the following sentence. The Wages expense account would be ___________ (debited/credited) on the ___________ (left/right) side of the T-account, and the Cash account would be __________ (debited/credited) on the __________ (left/right) side of the T-account.

The Wages expense account would be _debited_ (debited/credited) on the _left_ (left/right) side of the T-account, and the Cash account would be _credited_ (debited/credited) on the _right_ (left/right) side of the T-account.

To enter transactions on the right side of a T-account means you will _________ (debit/credit) the account and it will cause a(n) _________ (decrease/increase) in a liability account.

To enter transactions on the right side of a T-account means you will _credit_ (debit/credit) the account and it will cause a(n) _increase_ (decrease/increase) in a liability account.

Which of the following statements is (are) correct regarding a journal? a) A journal is used to record business transactions. b) In a journal, both the debit and credit side of the transaction can be seen. c) Entering transactions into a journal is called posting. d) A journal reports the balance of all the accounts in a business. e) Transactions are generally entered in chronological order.

a) A journal is used to record business transactions. b) In a journal, both the debit and credit side of the transaction can be seen. e) Transactions are generally entered in chronological order.

Given the descriptions below, which is (are) true regarding notes receivable? a) Another name for a note receivable is a promissory note. b) Notes receivable is classified as a liability. c) It is the promise of another entity to pay a specific sum of money on a specified future date. d) Notes receivable is classified as an asset.

a) Another name for a note receivable is a promissory note. c) It is the promise of another entity to pay a specific sum of money on a specified future date. d) Notes receivable is classified as an asset.

Match the items on the left with their definition on the right. Items a) Assets b) Equity c) Revenues d) Liabilities Definition a) Things of value owned by the business. b) The obligations owned by the business to creditors. c) The residual interest in the assets of a business after deducting the business's debts. d) The dollars earned because of services performed or products sold.

a) Assets - a) Things of value owned by the business. b) Equity - c) The residual interest in the assets of a business after deducting the business's debts. c) Revenues - d) The dollars earned because of services performed or products sold. d) Liabilities - b) The obligations owned by the business to creditors

Which of the following accounts impact equity? a) Common Stock b) Liabilities c) Assets d) Revenue e) Expenses f) Dividends

a) Common Stock d) Revenue e) Expenses f) Dividends

Which of the following is required information when entering a transaction into a journal? a) Credited accounts b) Initials of person entering the transaction. c) Explanation of transaction d) Date of the transaction e) Debited accounts.

a) Credited accounts c) Explanation of transaction d) Date of the transaction e) Debited accounts.

Match the item on the left with the definition on the right. Item a) Creditors b) Liabilities c) Assets d) Expenses Definition a) The costs of doing business. b) Individuals or organizations that have rights to receive payments from a business. c) Claims against the assets of a business. d) Things of value owned by a business.

a) Creditors - b) Individuals or organizations that have rights to receive payments from a business. b) Liabilities - c) Claims against the assets of a business. c) Assets - d) Things of value owned by a business. d) Expenses - a) The costs of doing business

You are entering a transaction in the journal. Place the following steps in the order that they would be entered in the journal. a) Enter date of transaction in date column _____ b) Enter name of account(s) debited and their amount(s). _____ c) Enter explanation _____ d) Enter name of account(s) credited and their amount(s). _____

a) Enter date of transaction in date column _1_ b) Enter name of account(s) debited and their amount(s). _2_ c) Enter explanation _4_ d) Enter name of account(s) credited and their amount(s). _3_

Which of the following statements is (are) correct regarding the posting process? a) Entries must be posted to the ledger before financial statements are prepared. b) Posting is only required at the end of the year. c) Entries are posted as soon as possible. d) The posting process creates a link between the ledger and the journal. e) The posting process does not required detailed explanations in the ledger. f) The journal page is entered in the posting reference column of the journal.

a) Entries must be posted to the ledger before financial statements are prepared. c) Entries are posted as soon as possible. d) The posting process creates a link between the ledger and the journal. e) The posting process does not required detailed

Illustrate how financial statements are linked by placing them in the correct order of preparation. a) Income Statement b) Statement of retained earnings. c) Balance sheet.

a) Income Statement b) Statement of retained earnings. c) Balance sheet.

Match the definition on the left with the term/item on the right. Definition a) It is a collection of all accounts with their activity and balances that exist in a business. b) It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred. c) It is a list of each account and its balance at any given time and is used to verify that debit = credits. d) It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account. Term/Item a) A chart of accounts. b) a trial balance c) A journal d) A general ledger.

a) It is a collection of all accounts with their activity and balances that exist in a business. - d) A general ledger. b) It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred. - c) A journal c) It is a list of each account and its balance at any given time and is used to verify that debit = credits. - b) a trial balance d) It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account. - a) A chart of accounts.

Recall the required information in a financial statement heading. Rearrange the following line items as they would appear in a heading. a) Name of Business b) Period of time the financial statement covers. c) Name of the financial statement.

a) Name of Business c) Name of the financial statement. b) Period of time the financial statement covers.

Which of the following would be included on an income statement? a) Net income b) Total equity c) Total assets d) Total revenues e) Total expenses f) Total liabilities

a) Net income d) Total revenues e) Total expenses

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business. a) Revenues increase, so total equity is increased. b) Revenues would be decreased, so equity is increased. c) Revenues would be decreased, so equity would be decreased. d) Liabilities are decreased, so total equity is increased.

a) Revenues increase, so total equity is increased.

Which of the following statements are accurate regarding supplies? a) Unused supplies are treated as assets. b) Unused supplies are treated as expenses. c) When supplies are purchased, they are added to the Supplies account. d) Supplies are assets until they are used. e) Unused supplies can be recorded as Store Supplies, Office Supplies, or Supplies. f) Supplies is considered a liability account.

a) Unused supplies are treated as assets. c) When supplies are purchased, they are added to the Supplies account. d) Supplies are assets until they are used. e) Unused supplies can be recorded as Store Supplies, Office Supplies, or Supplies. f) Supplies is considered a liability account.

Which of the following statements is correct in regards to debiting and crediting an account? a) Credit means to decrease an account if the account is on the right side of the accounting equation. b) A debit or a credit can increase an account, depending on what kind of account it is. c) Debit means to increase an account. d) Credit means to increase an account.

b) A debit or a credit can increase an account, depending on what kind of account it is.

Which of the following statements is the best definition of an asset? a) Assets are the distribution to the owners of a company. b) Assets are resources owned or controlled by a company and that have expected future benefits. c) Assets are claims against the company. d) Assets represent the owner's claims against a company.

b) Assets are resources owned or controlled by a company and that have expected future benefits.

Paul's Programming Services paid $100 dividends. Show how to record this transaction by selecting the correct answer below. a) Credit Cash; debit Common stock. b) Debit Dividends; credit Cash. c) Debit Cash; credit Dividends expense. d) Credit Cash; debit Retained earnings.

b) Debit Dividends; credit Cash.

The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business? a) Expenses would be decreased, so equity would be decreased. b) Expenses would be increased, so equity is decreased. c) Expenses would be decreased, so equity is increased. d) There is no affect on total equity.

b) Expenses would be increased, so equity is decreased.

Which of the following statements is (are) correct regarding the sides of a T-account? a) The left side is called the credit side. b) Liability accounts will be increased on the right side c) Asset accounts will be increased on the right side. d) The right side is called the credit side. e) Asset accounts will be increased on the left side. f) The left side is called the debit side. g) Liability accounts will be increased on the left side.

b) Liability accounts will be increased on the right side d) The right side is called the credit side. e) Asset accounts will be increased on the left side. f) The left side is called the debit side.

Which of the following is correct regarding posing a transaction? a) Posting takes place once during an accounting period. b) Posting means to transfer journal information to a ledger. c) Posting means to enter transactions into a journal.

b) Posting means to transfer journal information to a ledger.

Which of the following statements is (are) correct regarding the effect of debiting or crediting accounts? a) To increase a revenue account, you would debit it. b) To decrease an asset, you would credit it. c) To reduce Accounts payable, you would debit it. d) To increase an expense account, you would debit it. e) To reduce Cash, you would credit it. f) To increase the Dividends account, you would debit it. g) To increase the Common Stock account you would debit it.

b) To decrease an asset, you would credit it. c) To reduce Accounts payable, you would debit it. d) To increase an expense account, you would debit it. e) To reduce Cash, you would credit it. f) To increase the Dividends account, you would debit it.

Choose the account(s) below, that would have a normal credit balance. a) dividends b) common stock c) expenses d) revenues e) unearned revenues f) accounts payable

b) common stock d) revenues e) unearned revenues f) accounts payable

Which of the following statements explains what a trial balance is? a) A trial balance proves that debit balances equal debit balances within the general ledger. b) A trial balance confirms that no mistakes were made in recording transactions. c) A trial balance confirms that the sum of debit account balances equals the sum of credit account balances. d) A trial balance is prepared before posting of any journal entries.

c) A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

When the stockholders receive a dividend, how would this affect the equity of a business? a) Assets are decreased and liabilities are decreased. b) Equity is increased and assets are increased. c) Assets are decreased and equity is decreased. d) Assets are increased and equity is decreased.

c) Assets are decreased and equity is decreased.

Which of the following accounts has a normal credit balance? a) Accounts receivable b) Prepaid Insurance c) Common stock d) Unearned consulting revenue e) Supplies f) Accounts payable

c) Common stock d) Unearned consulting revenue f) Accounts payable

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order. a) Verify that total debit balances equal total credit balances. b) Compute the total of debit balances and the total of credit balances. c) List each account title and its amount from the general ledger.

c) List each account title and its amount from the general ledger. b) Compute the total of debit balances and the total of credit balances. a) Verify that total debit balances equal total credit balances.

Select the statement below that best defines prepaid accounts. a) Prepaid accounts are expenses and are increased with a credit. b) Prepaid accounts reflect a company's cash balance and include currency, coins, and money orders. c) Prepaid accounts are assets that represent prepayments of future expenses. d) Prepaid accounts are liabilities that are due within a specified time period.

c) Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following accounts are examples of expenses? a) Dividends b) Accounts Payable c) Rent Expense d) Supplies Expense

c) Rent Expense d) Supplies Expense

Which of the following would be included on a statement of retained earnings? a) Total assets b) Total liabilities c) Retained earnings at the end of the period. d) Total revenues e) Net Income (loss) f) Retained earnings at the beginning of period. g) Dividends

c) Retained earnings at the end of period. e) Net Income (loss) f) Retained earnings at the beginning of period. g) Dividends

The balance sheet reports: a) how cash was received and spent during a period b) how equity changed over a period of time. c) assets, liabilities, and the ending retained earnings balance. d) the revenues less the expenses incurred by a business

c) assets, liabilities, and the ending retained earnings balance.

Which of the following statements is the correct definition of a liability? a) A liability is a claim against a customer who is delinquent in paying their bill. b) A liability is recorded when money is earned by the business. c) A liability is a thing of value owned by a business. d) A liability is a claim by a creditor against the assets of a business.

d) A liability is a claim by a creditor against the assets of a business.

Identify which of the following lists include only examples of assets. a) Equipment, dividends, land b) Cash, accounts payable, supplies c) Unearned revenue, accounts payable cash d) Building, Cash, accounts receivable.

d) Building, Cash, accounts receivable.

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash. a) Checks, money orders, supplies b) Coins, accounts receivables, checks c) Checks, coins, accounts payable d) Coins, checks, money orders

d) Coins, checks, money orders