Chap 2 BUSA 7

Accounts receivable are_______by credit sales and are_______by customer payments.

1. increased 2. decreased

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt. (Check all that apply.)

A company's required debt payments may be greater than its ability to generate money to make those payments. If a company has a lot of debt, they may not be able to afford to take on new debt. A company that finances their assets by borrowing will need to make enough money to pay off the debt.

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.

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

A liability is a claim by creditors against the assets of a business. A liability can be settled by transferring assets or providing products or services to others. A liability is a debt owed by the business.

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

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 (are) true about accounts receivables? (Check all that apply.)

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

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.)

Another name for a note receivable is a promissory note. Notes receivable is classified as an asset. It is the promise of another entity to pay a specific sum of money on a specified future date.

liability.

Assets are claims against the company.

Which of the following statements is the best definition of an asset?

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

The Dividends account is used to record___________by the owner and has a_______impact on equity.

Blank 1: dividends Blank 2: negative

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

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

Which of the following statements about the Dividends account is (are) correct? (Check all that apply.)

Dividends are increased on the left side of the T-account. Dividends is used to record distributions of assets to the owners of a business. Dividends decrease equity.

Which of the following statements about the Dividends account is (are) correct? (Check all that apply.)

Dividends is used to record distributions of assets to the owners of a business. Dividends decrease equity. Dividends are increased on the left side of the T-account.

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.)

Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. Equipment is reported on the left side of the accounting equation. Equipment is an asset. Equipment purchases are reported on the balance sheet.

True or false: Assets are claims (by creditors) against the company.

False

Which of the following items would be considered "cash" and reflected in a company's Cash account? (Check all that apply.)

Money orders, checks and coins.

This is an asset, but not cash:

Prepaid Insurance Notes Receivable

Which of the following statements is correct about prepaid accounts

Prepaid accounts are also called prepaid expenses and are considered assets.

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

Prepaid accounts are assets and are increased with a debit.

True

Which of the following statements are accurate regarding supplies? (Check all that apply.)

When supplies are purchased, they are added to the Supplies account. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. Unused supplies are treated as assets. Supplies are assets until they are used.

Assets

are resources owned or controlled by the business.

Notes receivable is considered a(n)________

asset

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

decreases