ch 4 smartbook

A = L + Paid in Capital + Retained Earnings

Beginning (retained earnings) + Revenue (during the period) - Expenses (during the period)

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

impact stockholders' equity on the balance sheet.

If debits equal credits, then:

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

transactions ________.

- are the starting point in the accounting process that ends with the preparation of financial statements - are economic interchanges between entities - provide the raw data that ends up being analyzed in financial statements - are summarized in accounts, and accounts are further summarized in financial statements

Which of these statements accurately describe a chart of accounts?

It serves as an index to a company's ledger. It is usually sequenced with assets listed first, followed by liabilities, stockholders' equity, revenues, and expenses.

When a bank (debits/credits) your account for the interest earned during the month, what it is really communicating is that it is (increasing/decreasing) the (asset/liability) recorded in its accounting records to represent your account from its perspective.

credits increasing liability

Merchants who send you a notice that they have "charged" your account are really communicating that they have ______ your account in their accounting records to ______ your account balance, which is shown as a(n) ______ from their perspective, since you owe them money.

debited increase asset

Merchants who send you a notice that they have "charged" your account are really communicating that they have:

debited your account to increase your account balance, which is shown as an asset (accounts receivable) in their accounting records.

Transactions are:

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

A chart of accounts serves as an index to a company's

ledger

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

ledger

In bookkeeping and accounting, debit means _____ , and credit means _____.

left right

The report format of the balance sheet ______.

presents assets above liabilities and stockholders' equity items

The account format of the balance sheet:

presents assets on the left and liabilities and stockholders' equity items on the right.

In a balance sheet, net income from the income statement is added to the beginning balance of ______.

retained earnings in the statement of changes in retained earnings