Accounting - Financial Accounting: Information for Decisions - Wild 9e Chapter 2. Financial Statements and the Accounting System

Select the statements that are true regarding debiting and crediting. (Check all that apply.) -Crediting an account that exists on the right side of the accounting equation will reduce it -For an account where a debit is an increase, the credit is a decrease. -A credit will always decrease an asset account. -A debit or a credit can increase or decrease an account, depending on the account. -A debit can increase an expense account.

-For an account where a debit is an increase, the credit is a decrease. -A credit will always decrease an asset account. -A debit or a credit can increase or decrease an account, depending on the account. -A debit can increase an expense account.

Which of the following statements is (are) correct regarding the sides of a T-account? (Check all that apply.)

- The left side is called the debit side. -Asset accounts will be increased on the left side. - The right side is called the credit side. - Liability accounts will be increased on the right side.

On Mar 3, Lyons Company received $100 cash in advance of providing catering services to a customer. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry

-Cash would be debited and listed first -Unearned Revenue would be credited and listed second

Which of the following statements is (are) correct? -Crediting means to enter transations on the left side of a T-account -Crediting the Common Stock account means to increase it -Crediting a liability account will increase it. -Crediting means to enter transations on the right side of a T-account

-Crediting the Common Stock account means to increase it -Crediting a liability account will increase it. -Crediting means to enter transations on the right side of a T-account

Which of the following statements is (are) correct regarding a journal? (Check all that apply.)

-In a journal, both the debit and credit side of the transaction can be seen. -Transactions are generally entered in chronological order. -A journal is used to record business transactions.

Which of the following would be included on an income statement -Net income -Total liabilities -Total expenses -Total equity -Total assets -Total revenues

-Net income -Total expenses -Total revenues

You are entering a transation in the journal. Place the following steps in the order that they would be entered in the journal

1. Enter date of transaction in date column 2. Enter name of accounts debited and their amount 3. Enter name of accounts credited and their amounts 4. Enter explanation

Illustrate how the financial statements are linked by placing them in the correct order of preparation

1. Income statement 2. Statement of owner's equity/ retained earnings 3. Balance sheet

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order - Compute the total of debit balances and the total of credit balances - Verify that total debit balances equal total credit balances - Locate and resolve errors - List each account title and its amount from the general ledger

1. List each account title and its amount from the general ledger 2. Compute the total of debit balances and the total of credit balances 3. Verify that total debit balances equal total credit balances 4. Locate and resolve errors

Which of the following accounts would be considered an asset?

accounts receivable, building, cash, supplies

A journal

an accounting record in which transactions are initially recorded in chronological order

Notes receivable is considered a(n) (asset/liability)

asset

Equipment is a(n) ______________ (asset/liability/expense) account. It is reported on the ________________ (left/right) side of the accounting equation and is ________________ (increased/decreased) 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

The T-account for Accounts payable had 4 transactions entered into it. It was increased by $300 and by $100 and decreased by $50 and by $150, respectively. Its balance at the end of the period would be a (debit/credit)_____balance of $______

credit, 200

To enter transactions on the right side of a T-account means you will (debit/credit) the account and will cause a(n) (decrease/increase) in a liability account

credit, increase

Holt Computer Services received $200 from a customer that it had billed earlier in the month. Illustrate how to record the transaction to the T-accounts by completing the following sentences. Accounts receivable would be ________(debited/credited) on the _____________(left/right) side of the T-account, and Cash would be ___________(debited/credited) on the __________(left/right) side of the T-account.

credited; right; debited; left

Pintel Company paid $2000 cash for a 12 month insurance policy. Describe how to record the transaction to the T-accounts by completing the following sentence:Cash would be ________ on the _______ side of the T-account, and Prepaid Insurance would be ______ on the _______ side of the T-account.

credited; right; debited; left

On Jan. 2, Taylor company performed $800 worth of services for a client. The Client paid $100 immediately, but promised to pay the balance next month. The journal entry to record this transaction would include a __________ to the Cash account; a __________to the Accounts receivable account and a ____________ to the Service revenue account.

debit, debit, credit

Major Programming receives $5,000 cash in advance of providing programming services to a customer. Describe how to record the transaction to the T-accounts by completing the following sentence. ash would be _____________ (debited/credited) on the ______________ (left/right) side of the T-account, and Unearned Programming Revenue would be ______________ (debited/credited) on the ______________ (left/right) side of the T-account.

debited ,left, credited, right

Which of the ofllowing is required information when entering a transaction into a journal

debited accounts date of the transaction credited accounts explanation of transaction

Brown Company paid its employee his weekly wages of $400. Show how to record the transaction to the T-accounts by completing the following sentence. The Wages expense account would be______________ (debited/credited) on the______________ (left/right) side of the T-account, and the Cash account would be ______________ (debited/credited) on the ______________ (left/right) side of the T-account.

debited, left, credited, right

Butter Company purchased $300 of supplies for cash. Illustrate how to record the transaction into T-accounts by completing the following sentence. The Supplies account would be _____________ (debited/credited) on the __________ (left/right) side of the T-account and the Cash account would be ______________ (debited/credited) on the ________ (left/right) side of the T-account.

debited, left, credited, right

Holt Computer Services purchased $2,000 of new equipment and paid immediately. Illustrate how to record the transaction into T-accounts of Holt Services by completing the following sentence. The Equipment account would be __________ (debited/credited) on the ______________ (left/right) side of the T-account and the Cash account would be ____________ (debited/credited) on the ________________ (left/right) side of the T-account.

debited; left; credited; right

Lyons started a business and invested $4000. Illustrate how to record the transaction in the T-accounts by completing the following sentence.The Cash account would be ______ on the _______ side of the T-account and the Common stock account would be ______ on the _______ side of the T-account

debited; left; credited; right

An account is a record of increases and ___________ in a specific asset, liability, equity, revenue or expense item.

decreases

The dividends account is used to record (investments/ dividends/expenses/ revenues) by the owner and has a (positive/impact) on equity

dividends, negative

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

increase, assets

The rules of double-entry accounting say that for each transaction at least _____ accounts are involved, with at least one debit and one _________

two, credit

Choose the account(s) below, that would have a normal credit balance. expenses unearned revenues revenues accounts payable common stock dividends

unearned revenues revenues accounts payable common stock

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.

What is the formula depicting the expanded accounting equation?

Assets = Liabilities + Common stock - Dividends + Revenues - Expenses

The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business?

Assets would be decreased and total equity would decrease as well.

Which of the following accounts has a normal debit balance? Supplies Unearned revenue Cash Accounts payable Buildings Accounts receivable

Cash Accounts receivable Supplies Buildings

Which of the following statements is(are) correct regarding the effect of debiting or crediting accounts?

To reduce Cash, you would credit it To increase the Withdrawals account, you would debit it To reduce Accounts payable, you would debit it To increase an expense account, you would debit it To decrease an asset, you would credit it To increase dividends account, you would debit it

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account.

The business earns $2800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased

Which of the following accounts are examples of expenses? (Check all that apply.)

Supplies expenseRent expense

Expenses

The costs of doing business

On Jan. 2, Callie Taylor invests $40,000 into the business in exchange for common stock. She journalized the transaction as follows but something is wrong with the journal entry. Use your knowledge of what a correct journal entry should look like to identify everything that is wrong. Select all answers which apply.

The dollar amount is wrong in the Credit column Common Stock should be listed below Cash The Cash account should be listed first The Common Stock account should be indented as it is credited

Which of the following statements is (are) correct regarding the posting process?

The posting process does not require detailed explanations in the ledger Entries must be posted to the ledger before financial statements are prepared Entries are posted as soon as possible The posting process creates a link between the ledger and the journal

Assets

Things of value owned by a business

Transferring entries from the journal to the ledger is called

posting

Recall the required information in a financial statement heading. Rearrange the following line items as they would appear in a heading. Name of the financial statement Period of time the financial statement covers Name of the business

1. Name of the business 2. Name of the financial statement 3. Period of time the financial statement covers

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

Liabilities

Claims against the assets of a business

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 accounts impact equity

Common Stock, Revenue, Expenses, Dividends

Paul's Programming Services paid $100 in cash dividends. Show how to record this transaction by selecting the correct answer below.

Debit Dividends; credit Cash

Which of the following would be included on a statement of retained earnings?

Dividends Retained earnings at end of period Retained earnings at beginning of period Net income (loss)

Smith Company purchased $8,000 of supplies on credit. Show how to record this transaction to the T-accounts by selecting the correct answer below.v

Enter $8,000 on left side of the Supplies account; enter $8,000 on the right side of the Accounts payable account.

Creditors

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

From the lists of accounts below, which one contains only revenue accounts

Interest revenue, Professional fees earned, Sales

A General Ledger

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

A trial balance

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

The balance sheet reports:

assets, liabilities and the ending capital balance

Which of the following statements is (are) correct regarding a T- account? A T-account will show the debit or credit side of each transaction A T-account reflects whether a transaction was posted correctly A T-account represents a ledger account A T-account may be used as a tool to visualize the effects of transaction

A T-account will show the debit or credit side of each transaction A T-account represents a ledger account A T-account may be used as a tool to visualize the effects of transaction

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

A T-account will show the debit or credit side of each transaction A T-account represents a ledger account A T-account may be used as a tool to visualize the effects of transaction

A chart of accounts

A list of ledger accounts and their numbers arranged in ledger order.

Which of the following statements are true about accounts receivables? Accounts receivable reflects the amount still owed by customers. Accounts receivable increased when credit sales are made. Accounts receivable is a liability Accounts receivable are increased when payments are received from credit customers

Accounts receivable reflects the amount still owed by customers. Accounts receivable increased when credit sales are made.

Best definition of an asset?

Assets are resources owned or controlled by a company and that have a expectrd future benefits

Stan Programming Services provided 8,000 of services and received payment immediately. Show how to record this transaction by selecting the correct answer below.

Enter $8000 on the left side of Cash; enter $8000 on the right side of Service revenue

A business pays $500 for rent. How would this payment affect the equity of a business?

Expenses are increased, so equity is decreased.

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

Expenses; Dividends; Cash

Gunner Company made a $50 payment on account for a previous equipment purchase. Show how this transaction should be entered into T-accounts of Gunner Company, by selecting the correct answer below.

Place $50 on left side of the Accounts payable account; place $50 on the right side of the Cash account.

Select the statement below that best defines prepaid accounts

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following best and fully describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Which of the following statements is correct? To debit an account means to enter transations on the right side of a T account To debit an account means to enter transactions in a book of original entry in chronological order To debit an account means to enter transactions on the left side of a T-account A debit will increase a liability account

To debit an account means to enter transactions on the left side of a T-account