ACCT Ch. 2

correct order of financial statements

1. income statement 2. statement of retained earnings 3. balance sheet 4. statement of cash flows

Which of the following items would be considered "cash" and reflected in a company's cash account? a) money orders b) coin c) checks d) prepaid insurance e) notes receivable

a, b, c (money orders, coin, checks)

Recall that the BALANCE SHEET reports the equality of the accounting equation and would include which of the following amounts? a) total assets b) total liabilities c) retained earnings balance at end of period d) net income (loss) e) total revenues f) retained earnings balance at the beginning of the period g) total expenses h) dividends

a, b, c (total assets, total liabilities, retained earnings balance at END of period)

Which of the following would be included on an INCOME STATEMENT? a) total revenues b) total expenses c) net income d) total assets e) total liabilities f) total equity

a, b, c (total revenues, total expenses, and net income are included on an INCOME STATEMENT.)

Prepaid accounts are ______ that represent prepayments of future expenses.

assets

Supplies are ______ until they are used.

assets

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

assets

When stockholders receive a dividend, how would this affect the equity of a business?

assets are decreased and equity is decreased

A DEBIT is used to record an increase in all of the following except: a) prepaid insurance b) accounts payable c) supplies d) cash e) dividends

b (accounts payable)

From the list of accounts below, which contains only revenue accounts? a) sales, rent revenue, accounts receivable b) interest revenue, professional fees earned, sales c) accounts receivable, service revenue, commissions earned

b (interest revenue, professional fees earned, and sales)

Entries must be posted to the ledger ______ financial statements are prepared.

before

Order of Required Information in a Financial Statement Heading: 1. Name of ______ 2. Name of ______ 3. Period of time the financial statement covers

business, financial statement

A company's list of accounts and the identification numbers assigned to each account is called a...

chart of accounts

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

chart of accounts

To decrease an asset, you would _____ it.

credit

To increase the common stock account, you would ______ it.

credit

To reduce cash, you would ______ it.

credit

The T-accounts for accounts payable had 4 transactions entered into it. It was increased by $300 and by $100 and decreased by $50 and by $150. Its balance at the end of the period would be a... ______ balance of $____

credit, 200

an individual or organization that has a right to receive payments from a business

creditor

Steps of Entering a Transaction in a JOURNAL in Order: 1. Enter ______. 2. Enter name of account(s) ______ and their amount(s). 3. Enter name of account(s) ______ and their amount(s). 4. Enter ______.

date debited credited explanation

4 requirements when entering a transaction into a JOURNAL

date, debited accounts, credited accounts, explanation

To ______ an account means to enter transactions on the LEFT side of a T-ACCOUNT.

debit

To increase an expense account, you would ______ it.

debit

To increase the dividends account, you would _____ it.

debit

To reduce accounts payable, you would ______ it.

debit

A CREDIT will always ______ an asset account.

decrease

Dividends cause equity to ______.

decrease

Expenses cause equity to ______.

decrease

A CREDIT entry _______ asset and expense accounts and _______ liability, common stock, and revenue accounts.

decreases; increases (A CREDIT entry decreases asset and expense accounts and increases liability, common stock, and revenue accounts.)

do journal entries?

do journal entries?

an accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits

double-entry accounting system

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

equity

the costs of doing business

expenses

Order of Preparing a TRIAL BALANCE: 1. List each account title and its amount from the ______. 2. Compute the total of debit balances and the total of credit balances. 3. Verify that total debit balances equal total credit balances.

general ledger

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

general ledger

a record containing all accounts used by a company

general ledger

A DEBIT will ______ an expense account.

increase

Common stock and revenues cause equity to ______ and are increased on the right side of the T-account.

increase

Common stock causes equity to ______.

increase

Revenues cause equity to ______.

increase

Posting is transferring entries from the ______ to the LEDGER.

journal

a book of original entry that includes a CHRONOLOGICAL record of all transactions that have occurred within a business during a PERIOD of time

journal

A T-account represents a ______ account.

ledger

Posting is transferring entries from the JOURNAL to the ______.

ledger

The record of all accounts and their balances used by a business is called a...

ledger (or general ledger)

The posting process creates a link between the ______ and the ______.

ledger and journal

A DEBIT is the ____ hand side of a T-account.

left

Expenses and dividends cause equity to decrease and are increased on the ______ side of the T-account.

left

Expenses cause equity to decrease and are increased on the ______ side of the T-account.

left

Unearned revenues are generally _____ created when a customer pays in advance for products or services before the revenue is earned.

liabilities

_____ can be settled by transferring assets or providing products or services to others.

liabilities

claims by creditors against the assets of a business

liabilities

debts owed by the business

liabilities

the obligations owed by the business to creditors

liabilities

Are dollar signs required in a JOURNAL?

no

Transferring entries from the JOURNAL to the LEDGER is called...

posting

______ accounts are assets that represent prepayments of future expenses

prepaid

the dollars earned because of services performed or products sold

revenues

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

right

reports how equity changed over a PERIOD of time

statement of retained earnings

a list 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 credit account balances

trial balance

True or False? A T-account may be used as a tool to visualize the effects of a transaction.

true

True or False? A T-account will show the debit and credit effects of transactions.

true

True or False? Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed.

true

True or False? Equipment is an asset account. It is reported on the left side of the accounting equation and is increased when equipment is purchased.

true

True or False? Equipment is an asset.

true

True or False? Equipment is reported on the left side of the accounting equation.

true

True or False? Equipment purchases are reported on the BALANCE SHEET.

true

True or False? Regarding the posting process, entries are posted as soon as possible.

true

True or False? Supplies are assets until they are used. When they are used up, their costs are reported as expenses.

true

True or False? The posting process does not require detailed explanations in the ledger.

true

True or False? Unused supplies are treated as assets.

true

True or False? Unused supplies can be recorded as Store Supplies, Office Supplies, or Supplies.

true

True or False? When supplies are purchased, they are added to the Supplies account.

true