Chapter 2 Smartbook Questions

Which of the following statements is accurate regarding the Building account?

A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

Which of the following statements explains what a trial balance is?

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

Which of the following statements is accurate regarding Accounts payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

equity

The residual interest in the assets of a business after deducting the business's debts

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

a journal

the correct definition of an "account" includes which of the following

a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

notes receivable are considered an

asset

identity which of the following lists only examples of assets

cash, accounts receivable, building

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

false

true or false assets are claims (by creditors) against the company

false

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) in total liabilities or (equity/assets).

increase equity

creditors

individuals or organizations that have rights to receive payments from a business

Transferring entries from the journal to the ledger is called (posting/preparing/journalizing)

posting

which of the followings statements is correct about prepaid accounts

prepaid accounts are also called prepaid expenses and are considered assets

assets

resources owned or controlled by business

revenues

sales of products and services to customers

expenses

the cost of doing business

which of the following describes a general ledger

the general ledger is a record containing all accounts used by a company

liabilities

the obligations owed by the business to creditors

assets

things of value owned by a business

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.

-A company that finances their assets by borrowing will need to make enough money to pay off the debt. -A company's required debt payments may be greater than its ability to generate money to make those payments. -If a company has a lot of debt, they may not be able to afford to take on new debt.

In defining a reporting period, which of the following statements is (are) correct?

-A one-year reporting period is known as the fiscal year. -A reporting period is determined by the business. -A reporting period can be one month, one quarter or one year.

Which of the following statements is (are) accurate regarding equipment purchased within a business?

-Equipment is an asset. -Equipment cost is initially recorded as an asset and the cost is allocated over time to expense. -Equipment is reported on the left side of the accounting equation. -Equipment purchases are reported on the balance sheet.

Which of the following statements is (are) correct regarding the Notes payable account?

-Notes payable is a liability account. -Notes payable is reported on the balance sheet. -Notes payable is a formal promise to pay a certain sum of money on a specified future date.

Which of the following financial statements report(s) the financial position of a business over a period of time?

-Statement of cash flows -Statement of retained earnings -Income statement

Which of the following statements is accurate about the Land account?

-The Land account is an asset. -The Land account is used to record the costs of land purchased by the business. -The Land account is increased on the left side of its T-account.

There are several types of accounts that impact equity. Which of the accounts below cause equity to increase?

Common Stock and Revenues

The Building account is a ------------ account and is reported on the ------- side of the accounting equation.

asset left

Equipment is a -------------- account. It is reported on the ------------ side of the accounting equation and is ------------ when equipment is purchased.

asset left increased

Supplies are -------------- until they are used. When they are used up, their costs are reported as -----------------

assets expenses

When financial statements are prepared, unexpired prepaid accounts are recorded as ----------- and the expired portion of the prepaid account is reported as a----------

assets expenses

Identify which of the following formulas correctly defines how to calculate the debt ratio.

total liabilities /total assets

cash can take many forms. from the lists of items below, choose the one which includes only items that would be defined as cash

coins, checks, money orders

Which of the following statements is (are) correct regarding a T-account?

-A T-account will show the debit and credit effects of transactions. -A T-account may be used as a tool to visualize the effects of a transaction. -A T-account represents a ledger account.

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time

-The initial payment will be recorded as an increase to a Prepaid Insurance account. -As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. -Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset.

Choose the account(s) below, that would have a normal credit balance.

-common stock -revenues -Accounts Payable -Unearned Revenues

The general ledger can be used to determine which of the following

-increases and decrease in all accounts in a business -common and unique accounts used by a business -which accounts are being used by a company and their balances at any given time

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

Which of the following statements is the correct definition of equity?

Equity is the owner's claim on a company's assets.

a general ledger

It is a collection of all accounts with their activity and balances that exist in a business.

a chart of accounts

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Which of the following statements is (are) correct regarding the definition of a liability?

-A liability is a claim by creditors against the assets of a business. -A liability can be settled by transferring assets or providing products or services to others. -A liability is a debt owed by the business.

Which of the following accounts impact equity?

-Expenses -Revenue -Common Stock -Dividends

Which of the following statements correctly explains how to prepare a trial balance?

-List each account title and its amount from the ledger. -Verify that the total debit balances equals the total credit balances. -If an account has a zero balance, it may be omitted entirely. -Compute the total of debit balances and the total of credit balances.

given the descriptions below, which are true regarding notes recievables

-notes receivable is classifies as an asset -another name for a note receivable is a promissory note -promise of another entity to pay a specific sum of money on a specified future date

which of the following statements are accurate regarding supplies

-supplies are assets until they are used -unused supplies are treated as assets -unused supplies can be recorded as store supplies. office supplies -when supplies are purchased, they are added to the supplies account

Which of the following are accurate statements regarding how to report or treat prepaid accounts?

-the expired portion of prepaid accounts is reported on the income statement as an expense -Over time, the expired portion of prepaid accounts is transferred from the asset account and reported as an expense -The unexpired portion of prepaid accounts are treated as assets.

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1. list each account title and its amount from the general ledger 2. compute the total of debit balances and the total credit balances 3. verify that total debit balances equal total credit balances

which of the following would be considered a source document in an accounting system

checks, payroll records, purchase order, sales receipt

liabilites

claims against the assets of a business

It is a list of each account and its balance at any given time and is used to verify that debits = credits

a trial balance

Which of the following statements is the best definition of an asset?

assets are resources owned or controlled by a company and that have expected future benefits

which of the following would be considered an asset

building, accounts receivable, cash, supplies,

Accounts payable refer to obligations owed (by/to) the business and are classified as a(n) (asset/liability/expense) account.

by liability

Which set of accounts below would have a normal debit balance?

cash dividends expenses

which of the following items would be considered "cash: and reflected in a company's cash account

checks, coins, money orders

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction 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.

debited left credited right

which of the following is the correct definition of a liability

is a claim by a creditor against the assets of a business

The Notes payable account is a(n) (asset/liability/expense) account and is increased on the (left/right) side of the T-account.

liability right

A trial balance is a(n) (list/balance/chart) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum ------- of account balances.

list credit

select the statement below that best defines prepaid accounts

prepaid accounts are assets that represent prepayments of future expenses