Chapter 2 SmartBook

What effect does revenue have on retained earnings?

increases

rory purchases supplies for cash. which of the following occurs

total assets remain the same

When services are provided on account, what is the effect on stockholders' equity?

increase

Net income ______ retained earnings.

increases

Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:

issued shares to stockholders

list of all accounts and their balances at a particular date showing that debits equal credits is referred to as

trial balance

the accounting equation is

Assets = Liabilities + Owner's Equity

Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?

Cash increases Notes payable increases

What are the effects of providing services on account to customers?

Increase assets Increase retained earnings

Accounts receivable are

assets

jeremy issues 5,000 shares of common stock for $10 per share. which of the following accounts are affected

common stock cash

An account should have an account title, account number, a place for the date of the transaction, and two columns for

debits and credits.

Dividends paid to stockholders will cause retained earnings to

decrease

What is the effect of dividends on retained earnings?

decrease

Stockholders' equity is increased by revenues because revenues increase

net income

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

an external transaction is a transaction the firm conducts with a separate economic entity

true

the accounting equation must always remain in balance

true

The two roles of financial accounting are to:

- communicate information to external parties for decision making purposes - measure business activities of the company

deferred revenue

Cash received from customers for services to be performed in the future

Which of the following are stockholder equity accounts?

Common stock Retained earnings

London Corp. issues 1,000 shares of stock for $20 per share. What are the effects of this transaction?

Common stock is increased. Cash is increased.

Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following?

Credit cash Debit equipment

Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction?

Debit cash; credit common stock.

Fuller Company provides services to customers for $25,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

Torrence purchases supplies for cash. Which of the following is used to record this transaction?

Debit supplies; credit cash.

The first step for analyzing the effect of transactions is:

Determine one account in the accounting equation that will increase or decrease

On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction?

February 15 February 27

LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?

Increase assets and increase retained earnings

computerized system

Journal entries are instantly posted to the general ledger

manual system

Journal entries are posted periodically to the general ledger

revenue

Services performed for customers for cash or on account

When should revenue be recorded?

When the services are performed

Indicate which situations would require Zenda Company to record revenue in the current period

Zenda performs services for cash. Zenda performs services on account.

if a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

a liability is decreased another asset is increased

When cash is received in advance for services to be performed at a later date, an asset is increased and

a liability is increased.

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

the account deferred revenue is used to record

an obligation to perform services in the future.

Slim purchases equipment with cash. The accounts affected are

cash and equipment.

the last step for analyzing the effect of transactions is

confirm that assets are equal to liabilities plus stockholders' equity

Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?

debit cash credit revenue????

Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:

debit to cash credit to notes payable

Sinclair purchased equipment for $100,000 cash. Recording this transaction would include a

debit to equipment $100,000.

Yeung Corp. purchases supplies on account. Recording this transaction will include a

debit to supplies.

What is the effect of expenses on retained earnings

decrease

What is the effect of expenses on retained earnings?

decrease

expenses will cause retained earnings to

decrease

When a company receives cash in advance from customers for services to be performed in the future, the transaction affects the ______ account.

deferred revenue

Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are

equipment and notes payable

Which type of account is increased with a debit?

expense

Credits increase revenues, whereas debits increase

expenses and dividends

The types of accounts which affect retained earnings are

expenses. dividends. revenues.

a _____________ transaction involves an exchange between the company and a separate economic entity

external

A balance sheet is a list of all accounts and their balances showing that debits equals credits.

false

A transaction is initially recorded in the journal, and then subsequently posted to the general

ledger

Which of the following includes the list of transactions affecting each individual account and the account's balance?

ledger

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

may 15

Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company

paid rent in advance.

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as

posting

Pilot Company pays for two years of rent in advance. Recording this transaction would include a debit to

prepaid rent

Rent paid in advance and classified as an asset is referred to as

prepaid rent

the purpose of a journal is to

record a chronological listing of every transaction for a company.

An increase in revenues increases net income, which results in an increase to:

retained earnings

consistent with the __________ recognition principle, companies record revenue at the time goods are provided to customers

revenue

An simplified version that is used informally for analysis instead of drawing a formal general ledger account is referred to as a:

t-account

Accounts receivable are assets which represent

Amounts owed by customers

In a double-entry accounting system, the _________ represents the left side of the account.

Debit

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 note payable

Shannon Corporation issues common stock for $25,000. Recording this transaction will include a

credit to common stock.

Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include a

credit to revenues.

A ledger provides a chronological record of all transactions affecting the firm.

false

the two functions of financial accounting are to measure business activities and prepare tax returns

false

Which of the following contains a list of transactions affecting each account and the account's balance?

general ledger

Revenues cause retained earnings to

increase

DiAngelo Company's journal shows a debit to cash and a credit to service revenue. This journal entry indicates that DiAngelo:

performed a service for a customer for cash

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.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

cray purchases equipment for cash. total assets will

remain the same

Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.

true

Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation?

Increase assets Increase retained earnings

Marcy receives $10,000 cash in advance from customers for services to be performed in the following year. This transaction would cause

assets to increase and liabilities to increase.

Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?

borrowing cash and signing a promissory note

Roslin Corp. provides services to customers on account for $5,000. Recording this transaction will include a

credit to revenues. debit to accounts receivable.

The type of information included in an account includes

the account title. columns for debits and credits.