Chapter 2

1. use a source doc to identify accounts affected 2. analyze the impact of the transaction on the accounting equation 3. assess whether the transaction results in a debit or credit to account balance 4. record transaction to a journal 5. post the transaction to the general ledger

The steps of measuring transactions are

Accounting

The term __________ cycle refers to the full set of procedures utilized to measure and communicate business transactions to external decision makers.

1. communicate information to external parties for decision making purposes. 2. measure business activities of the company.

The two roles of financial accounting are to

assets in the balance sheet

accounts receivable are

the amounts owed by customers

accounts receivable are assets which represent

account

A separate ____________ is maintained for each financial position element

external

A(n) _____________________ transaction involves an exchange between the company between the company and a separate economic entity.

determine the accounts to debit and credit

After the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to. .

internal transaction

An event that affects the financial position of a company but does not include an exchange with a separate economic entity is a(n)

borrowing cash and signing a promissory note

Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. What could have caused increase?

equipment and notes payable

Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are

accounts

Elements of the accounting equation are represented by ________, which are contained in the general ledger.

a liability is decreased another asset is increased

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

Account

a company records the effects of transactions for a particular item in a(n)

cash increases notes payable increases

Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?

cash and equipment

Slim purchases equipment with cash. The accounts affected are

confirm that assets are equal to liabilities plus equity

The last step for analyzing the effect of transactions is

internal or external transactions

Transactions are classified as

True

True or False: the accounting equation must always remain in balance

1. using supplies purchased and paid for last month 2. earning revenues after cash is received in advance from customers.

What are internal transactions?

revenues, expenses, and dividends

What are the three components of retained earnings?

Purchasing supplies from a vendor

What is an external transaction

account

a separate _____________ is used to post transactions and provides a summary of the effects of all transactions for a particular item

list of all account names and numbers used by a company

a chart of accounts is a

rent paid in advance

repaid rent is

Dividend

the distribution of net income to stockholders of a company is called

Common Stock and retained earnings

the two components of stockholders' equity are

Accounts Receivable

when a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?