Chapter 2: The Accounting Cycle During the Period
It is possible to generate _______ but not _______
Revenue: Income
Which of the following normally has a credit balance
Service revenue
the first step for analyzing the effect of transactions in the correct order?
1. determine one account in the accounting equation that will increase or decrease
the second step for analyzing the effect of transactions in the correct order?
2. determine a second account in the accounting equation that will increase or decrease
Claire purchases equipment for $10,000 by paying $3,000 in cash and borrowing $7,000 from the bank. The number of accounts affected by this transaction is?
3 accounts are affected: equipment, notes payable, and cash.
If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?
A liability is decreased Another asset is increased
A trial balance can best be explained as a list of:
All accounts and their balances at a particular date.
Accounts receivable are assets which represent?
Amounts owed by customers
Providing services to customers for cash would be recorded with a
Credit to service revenue
Providing services to customers on account for $100 is recorded as
Debit accounts receivable 100; credit service revenue $100
Purchasing office supplies on account for $100 is recorded as
Debit supplies $100; credit accounts payable $100
A credit to cash will
Decrease assets
After ____ ____ is earned it is moved over to retained earnings
Deferred revenue
_____ decrease retained earnings
Expenses
Which of the following represents a common advantage of a computerized accounting system?
Journal entries are instantly posted to the ledger
Purchasing land with cash would have what effect on the accounting equation?
No effect
Which of the following transactions decreases stockholders equity
Pay salaries for the current period
Which of the following transactions cause an increase in stockholders equity
Provide services to customers on account
Which of the following transactions increases total assets
Provide services to customers on account
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account; general ledger
A debit is used to decrease which of the following accounts
accounts payable
examples of short term liabilities
accounts payable
examples of assets
accounts receivable, cash, supplies
Smith Company's journal shows a debit to cash and a credit to notes payable, both for $15,000. This indicates that Smith Company:
borrowed $15,000 cash and signed a note
deferred revenue
collected the money, but have not done the service
The type of information included in an account includes?
columns for debits/credits; the account title
Tabor Company issues $20,000 of common stock to investors. Recording this transaction will include a credit to
common stock
The two components of stockholders' equity are
common stock and retained earnings
Which of the following are stockholder equity accounts?
common stock and retained earnings
the third step for analyzing the effect of transactions in the correct order?
confirm that assets are equal to liabilities plus stockholders' equity
Shannon Corporation issues common stock for $25,000. Recording this transaction will include a
credit to common stock
the balance of a liability account increases with a ____ and decreases with a ______?
credit;debit
Geo Corporation issues stock to investors for $100,000. Recording this transaction will include which of the following?
debit cash;credit common stock
Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?
debit cash;credit notes payable
Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:?
debit to cash; credit to notes payable
a ______to expense is essentially a ____ to retained earnings decreasing the account
debit; debit
the balance of an asset increases with a _____ and decreases with a ______?
debit;credit
the balance of an expense account increases with a _______ and decreases with a ________
debit;credit
Because expenses reduce retained earnings, a ______ to expense is essentially a(n) ______ to retained earnings.
debit;debit
The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the left side of this equation are increased with?
debits
A t-account has space at the top for the account title and two sides for recording ______ and ______ to the account.
debits;credits
liabilities
decrease debits & increase credits
revenues
decrease debits & increase credits
stockholders' equity
decrease debits & increase credits
Expenses ______ retained earnings; therefore, to increase any expense, one would ______ the expense account.
decrease; debit
_____ decrease retained earnings
dividends
The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with debits (represented by the DEA in the acronym) are
dividends,expenses and assets
Which type of account is increased with a debit?
expense
Which of the following contains a list of transactions affecting each account and the account's balance?
general ledger
revenues cause retained earnings to?
increase
assets
increase debits & decrease credits
dividends
increase debits & decrease credits
expenses
increase debits & decrease credits
Revenues ______ retained earnings; therefore, to increase any revenue, one would ______ the revenue account.
increase; credit
Analyze the following journal entry. What is the transaction that required this entry? debit cash 25,000-----> credit common stock 25,000 ;
issue stock to investors
Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:
issued shares to stockholders
accounts payable
known as purchasing on account
The term debit means to place the entry on the ____ hand side of the account, and the term credit means to place the entry on the ______ hand side of the account.
left;right
The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with credits (represented by the LOR in the acronym) are?
liabilities, owners' equity and revenues
examples of liabilities
notes payable, long term
the purpose of a general ledger is to?
provide in a single location the list of transactions affecting each account and the account's balance
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer
general ledger
provides in a single collection each account with its individual transactions and resulting account balance
Which of the following is an external transaction?
purchasing supplies from a vendor
What are the three components of retained earnings?
revenues, expenses, and dividends
if total assets decrease then ___________ will _____________
stockholders' equity; decrease
An account that is used informally for analysis instead of drawing a formal general ledger account is referred to as a?
t account
A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n)
trial balance
True or false: The accounting equation must always remain in balance.
true
examples of long term assets
vehicles, buildings, equipment
______ increase retained earnings
Revenues
trial balance
all accounts and their balances at a particular date showing total debits equal total credits - also assist in preparing entries for internal transactions
sales revenue
already provided services, performed obligations
the balance of a revenue accounts increases with a ______ and decreases with a _____
credit;debit
the balance of stockholders' equity account increases with a ______ and decreases with a _____?
credit;debit
The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the right side of this equation are increased with
credits
An account should have an account title, account number, a place for the date of the transaction, and two columns for________?
debits and credits
Credits increase revenues, whereas debits increase
expenses and dividends.
True or false: A ledger provides a chronological record of all transactions affecting the firm.
false
Net income ______ retained earnings.
increases
posting
is process of transferring the debit and credit info from the journal to individual ledgers accounts
a transaction is initially recorded in the general _______ and then subsequently posted to the general ________
journal;ledger
Which of the following includes the list of transactions affecting each individual account and the account's balance?
ledger
Analyze the following journal entry. What is the transaction that required this journal entry? debit equipment 24,000---->credit cash 24,000;
purchase equipment for cash
The purpose of a journal is to?
record a chronological listing of every transaction for a company