Chapter 2 Smartbook

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called _____ events.

Internal

A transaction that involves an exchange of assets, liabilities, and/or stockholders' equity between the company and someone else is called an ____ exchange

external

True or false: when a company issues common stock, it gives cash to its owners in exchange for stock

false

The duality of effects refers to the fact that each transaction

has at least two effects on the basic accounting equation

A debit to cash and a credit to common stock is recorded when a company

incorporates and its owners contributes cash

Company X receives $10,000 from issuing common stock to its owners. The effect on the accounting equation is a(n) _____.

increase in assets and an increase in stockholders' equity

Identify which of the following is true about credits and debits

liabilities are on the right side of the accounting equation and have a normal credit balance, credits increase liabilities, assets are on the right side of the equation and have a normal debit balance, credits increase stockholder's equity

A classified balance sheet

shows subtotals for current assets and current liabilities

When a business issues common stock, what does it give to its owners?

stock certificates

What does a business typically receive when it issues stock to owners?

cash

All accounting systems

combine beginning balances with the activity during the accounting cycle to yield the ending balances for each account record and summarize financial effects of transactions follow the accounting cycle

Which of the following has normal credit balances?

common stock, notes payable, and accounts payable

A company paid 500 cash for a new printer. The entry to record this transaction would include a ____ to cash

credit

The beginning balance in Acme's cash account was 100,000. During the month, Acme issued 25000 of common stock for cash. The balance in Acme's cash account is now a:

debit of 125,000

Which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100?

An asset increases by 100 and a stockholders' equity account decreases by 100

Z Best, Inc. issued $1,000,000 of common stock for cash. By accident, Z Best recorded the transaction by increasing cash and decreasing stockholders' equity. As a result of this entry, ______.

the accounting equation is out of balance, common stock is understated, and stockholder's equity is understated

Business activities that affect the basic accounting equation and are recorded in the accounting system are called...

transactions