SB Chapter 4

Which of the following are acceptable/correct expressions of the balance sheet equation?

1.) Assets = Liabilities + Stockholders' equity 2.) Assets = Liabilities + Paid-in capital + Retained earnings 3.) Assets - Liabilities = Stockholders' equity 4.) Assets = Liabilities + Paid-in capital + Retained earnings (beginning of period) + Revenues (during the period) - Expenses (during the period)

Liability accounts:

1.) Liability accounts: 2.) increase with credit entries 3.) normally have a credit balance

Which of the following accounts would be closed during the year-end closing process?

1.) Rent Expense 2.) Service Revenue 3.) Cost of Goods Sold 4.) Gain on Sale of Land

Which of the following accounts would be closed during the year-end closing process?

1.) Sales 2.) Loss on Sale of Buildings 3.) Dividends 4.) Wages Expense 5.) Rent Expense

Transactions:

1.) are summarized in accounts, and accounts are further summarized in financial statements 2.) can be seen as the bricks that build financial statements

Transactions:

1.) are the starting point in the accounting process that ends with the preparation of financial statements 2.) are economic interchanges between entities

Under accrual accounting, year-end adjustments are made: (Select all that apply).

1.) because revenue receipts may occur before or after the event that causes revenue recognition. 2.) to ensure that expenses are recognized in the year in which they are incurred.

Stockholders' equity accounts:

1.) increase with credit entries 2.) decrease with debit entries 3.) normally have a credit balance

Under accrual accounting, year-end adjustments are made: (Select all that apply).

1.) to ensure that revenues are recognized in the year in which they are earned. 2.) because the cash disbursement for expenses may occur before or after the event that causes expense recognition.

After transactions have been recorded in a journal, they are posted to a ___________.

ledger

When using the horizontal model, the arrow from net income to stockholders' equity indicates that:

net income affects retained earnings, which is a component of stockholders' equity.

Net income from the income statement is added to the beginning balance of:

retained earnings in the statement of changes in retained earnings.

Accounts are summarized in financial _______, whereas ________ are summarized in accounts.

statements / transactions

If debits equal credits, then:

the company's balance sheet equation will be in balance.

Which of the following groups of accounts would be closed in the year-end closing process?

Insurance Expense, Service Revenue, Loss on Sale of Equipment, and Sales

Which of the following groups of accounts would all be closed in the year-end closing process?

Interest Income, Cost of Goods Sold, Dividends, and Gain on Sale of Land

In the closing process, all income statement accounts (revenues, expenses, gains, and losses) and dividends are closed. What is the name of the account in which all the aforementioned accounts are closed into?

Retained Earnings

Assets = Liabilities +

Stockholders' equity

True or false: The key to using the horizontal model is to keep the balance sheet in balance.

True

Normal account balances

are on the debit side for assets and on the credit side for liability and stockholders' equity accounts.

If debits equal credits, then:

assets will equal the sum of liabilities and stockholders' equity.

Assets = Liabilities + Paid-in capital + Retained earnings _________ + __________ - _________

beginning / Revenues / Expenses

In bookkeeping and accounting, ________ means left and _______ means right.

debit / credit

In bookkeeping and accounting, _________ means ________ and credit means right.

debit / left

Although revenues and expenses are reported on the income statement, they also:

impact stockholders' equity on the balance sheet.

When using the horizontal model for a transaction that affects both the balance sheet and the income statement, the balance sheet will balance when the:

income statement effect on stockholders' equity is considered.

Transactions are:

initially recorded in a journal and then posted to a ledger.

Transactions are initially recorded in a ________

journal