Accounting Chapter 2-3

Which of the following are external transactions?

Purchasing inventory from suppliers Paying salaries to employees Borrowing money from the bank

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

account, general ledger

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

account; general ledger

The two components of stockholders' equity are

common stock and retained earnings

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 notes payable

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

debit equipment, debit cash

Accounts on the left side of the accounting equation (assets) are increased with a(n) to the account, whereas accounts on the right side of the accounting equation are increased with a(n)

debit, credit

What is the effect of dividends on retained earnings?

decrease

What is the effect of expenses on retained earnings?

decrease

Which type of account is increased with a debit?

expense

Credits increase revenues, whereas debits increase

expenses and dividends

Identify the three components of retained earnings.

expenses, revenues, dividends

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

false

Which of the following represents a common advantage of a computerized accounting system?

journal entries are instantly posted to the ledger

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

ledger

The process of transferring information from the journal to the ledger is referred to as

posting

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.

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

Which of the following is an external transaction

purchasing supplies from a vendor

Which type of account is increased with a credit?

revenue

Consistent with the recognition principle, companies record revenue at the time goods are provided to customers.

revenues

The types of accounts which affect retained earnings are

revenues, expenses, and dividends

The types of accounts which affect retained earnings are

revenues, expenses, dividends

Revenues cause retained earnings to

increase

A chronological record of all economic events affecting a firm are recorded in a(n)

journal

The type of information included in an account includes

the account title, columns for debits and credits

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

trial balance