Chp 2 Accounting

The best interpretation of the word "credit" is the a. offset side of an account. b. increase side of an account. c. right side of an account.

c. right side of an account.

The income statement is an example of a source document. True/False

F

The revenue accounts are the first accounts listed in the general ledger. T/F

F

Assets Accounts = _________ + ___________

liability accounts + equity accounts

The trial balance of Clooney Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Owner's Capital $42,000; Owner's Drawings $15,000; Equipment $61,000. In preparing a trial balance, the total in the debit column is: $131,000. $216,000. $91,000. $116,000.

$131,000.

Debits: (a)increase both assets and liabilities. (b)decrease both assets and liabilities. (c)increase assets and decrease liabilities. (d)decrease assets and increase liabilities

(c)increase assets and decrease liabilities.

Credit: a)increase both assets and liabilities. (b)decrease both assets and liabilities. (c)increase assets and decrease liabilities. (d)decrease assets and increase liabilities

(d)decrease assets and increase liabilities

What goes on the left side of a T account?

Debit

Which of the following statements about a journal is false? It is not a book of original entry. It provides a chronological record of transactions. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. It discloses in one place the complete effect of a transaction.

It is not a book of original entry.

What does the following describe (a) discloses in one place the complete effects of a transaction, (b) provides a chronological record of transactions, and (c) prevents or locates errors because the debit and credit amounts for each entry can be easily compared.

Journal

What is debited and credited? Purchase of Office Equipment for Cash- On Account

Office Equipment/Asset (Debit) goes up, cash goes down (Credit)- Asset (Debit) increases, Liability (Credit) increases

Which of the following is not part of the recording process? Analyzing transactions. Preparing a trial balance. Entering transactions in a journal. Posting transactions.

Preparing a trial balance.

A T account is similar to a general ledger. T/F

T

Do you enter the date in the ledger? T/F

T

If the trial balance does not balance, the error(s) must be found and corrected. T/F

T

The purchase of supplies on account should result in: a debit to Supplies Expense and a credit to Cash. a debit to Supplies Expense and a credit to Accounts Payable. a debit to Supplies and a credit to Accounts Payable.

a debit to Supplies and a credit to Accounts Payable.

The purchase of supplies on account should result in what?

a debit to supplies and a credit to accounts receivable

What is the journal entry that should be made for this transaction? The company paid $3,100 cash for an insurance policy covering the next 24 months. a) Debit Prepaid Insurance $3,100; Credit Cash $3,100 b) Debit Cash $3,100; Credit Insurance Expense $3,100 c) Debit Insurance Expense $3,100; Credit Prepaid Insurance $3,100 d) Debit Cash $3,100; Credit Prepaid Insurance $3,100

a) Debit Prepaid Insurance $3,100; Credit Cash $3,100

What is the normal balance for an account? a)The side the account increases on b)The side the account decreases on c)None of these

a) The side the account increases on

Which of the following accounts is increased with a debit? a. Dividends b. Service Revenue c. Interest Payable

a. Dividends

A debit is NOT the normal balance for which account listed below? a. Revenue b. Cash c. Accounts Receivable d. Dividends

a. Revenue

Powers Corporation received a cash advance of $500 from a customer. As a result of this event, a. assets increased by $500 (Debited). b. equity increased by $500 (Credited). c. liabilities decreased by $500 (Debited)

a. assets increased by $500 (Debited).

The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger.

a.in at least two different accounts

A chronological record of financial transactions expressed as debits and credits to accounts is provided by the a.journal. b.balance sheet. c.ledger. d.trial balance.

a.journal.

All of the following are examples of source documents except a.the balance sheet. b.sales tickets. c.check stubs. d.purchase invoices.

a.the balance sheet.

An _______ is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. The _____ is a record containing all accounts used by the company.

account general ledger

List 4 liability accounts

accounts payable accrued liabilities notes payable unearned revenue

List 8 asset accounts

accounts receivable buildings cash equipment land note receivable prepaid accounts supplies

the first step in the recording process is to

analyze each transaction for its effect on the accounts

The basic steps in the recording process are(a) ____ each transaction and event from source documents,(b) enter the transaction information in a _____, and(c) transfer the information to the appropriate accounts in the ____.

analyze, journal, ledger

What is the journal entry that should be made for this transaction? The company completed services for a client and immediately received $6,000 cash. a) Debit Services Revenue $6,000; Credit Accounts Receivable $6,000 b) Debit Cash $6,000; Credit Services Revenue $6,000

b) Debit Cash $6,000; Credit Services Revenue $6,000

What type of account is Accounts Payable and which side does it increase on? a) Equity; Credit b) Liability; Credit c) Liability; Debit

b) Liability; Credit

Which of these shows the correct order of financial accounting activities? a) None of these b) Make journal entries, Post to the ledger, Prepare Trial Balance c) Post to the ledger, Prepare Trial Balance, Make Journal Entries

b) Make journal entries, Post to the ledger, Prepare Trial Balance

A journal is the first formal accounting record for a transaction, and as such it is referred to as a. a common journal. b. a book of original entry. c. a general ledger.

b.a book of original entry.

Is the trial balance one of the financial statements that gets published to people outside of the business? a) All of these b) None of these c) No d) Sometimes e) Yes

c) No

What is the balance for Accounts Receivable? Debit Credit 8,600 3,600 4,360 a.$0 b. $5000 c. $9,360 d. $4,360

c. $9,360

An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done. b. Debit a stockholders' equity account for $500. c. Debit another asset account for $500.

c. Debit another asset account for $500.

Which of the following steps in the accounting process is done after analyzing business transactions? a. Preparing the financial statements b. Preparing a trial balance c. Entering transactions in a journal

c. Entering transactions in a journal

Which accounts normally have credit balances? a. Revenues, liabilities, and dividends b. Revenues, liabilities, and assets c. Revenues, liabilities, and retained earnings

c. Revenues, liabilities, and retained earnings

On July 7, 20XX, Shireman Enterprises received cash $1,400 for services rendered. The entry to record this transaction will include a. a debit to Service Revenue of $1,400. b. a credit to Accounts Receivable of $1,400. c. a debit to Cash of $1,400

c. a debit to Cash of $1,400

An account consists of a. a title, a debit balance, and a credit balance. b. a title, a left side, and a debit balance. c. a title, a debit side, and a credit side. d. a title, a right side, and a debit balance

c. a title, a debit side, and a credit side.

On November 24th, the following transaction took place: Davis Company purchased $1,200 of supplies on account. The journal entry to record this entry would be a.A debit to accounts payable for $1,200 and a credit to supplies for $1,200 b.Adebit to supplies for $1,200 and a credit to cash for $1,200. c.A debit to supplies for $1,200 and a credit to accounts payable for $1,200.

c.A debit to supplies for $1,200 and a credit to accounts payable for $1,200.

For EVERY transaction, the accountant enters the a.month and day. b.year, month, and day. c.day.

c.day.

A ledger: a.contains only asset and liability accounts. b.should show accounts in alphabetical order. c.is a collection of the entire group of accounts maintained by a company. d.is a book of original entry.

c.is a collection of the entire group of accounts maintained by a company.

A day-by-day listing of the transactions of a business is called aa.ledger. b.chart of accounts. c.journal.

c.journal.

List 5 equity accounts

common stock dividends expenses retained earnings revenue

What goes on the right side of a T account?

credit

What is the journal entry for the following transaction? The company collected $3,000 cash for services billed on June 4. d) Debit Cash $3,000; Credit Accounts Receivable $3,000 e) Debit Cash $3,000; Credit Services Revenue $3,000

d) Debit Cash $3,000; Credit Accounts Receivable $3,000

What is the journal entry that the company should make for the following transaction? The owner, invested $8,000 cash and $34,400 of photography equipment in the company in exchange for common stock. a) Debit Cash $8,000; Debit Photography Equipment $34,400; Credit Revenue $42,400 b) Debit Common Stock $42,400; Credit Cash $8,000; Credit Photography Equipment $34,400 c) Debit Photography Equipment $34,400; Credit Cash $34,400 d) Debit Cash $8,000; Debit Photography Equipment $34,400; Credit Common Stock $42,400

d) Debit Cash $8,000; Debit Photography Equipment $34,400; Credit Common Stock $42,400

Which accounts normally have debit balances? a. Assets, expenses, and revenues b. Assets, expense, and retained earnings c. Assets, liabilities, and dividends d. Assets, expenses, and dividends

d. Assets, expenses, and dividends

A debit to an asset account indicates a(n) a. error. b. credit was made to a liability account. c. decrease in the asset. d. increase in the asset.

d. increase in the asset.

15. The primary purpose of the trial balance is to a. disclose the complete effect of a transaction in one place. b. make sure a journal entry is not posted twice. c. transfer journal entries to the ledger accounts. d. prove the equality of the debit and credit amounts after posting.

d. prove the equality of the debit and credit amounts after posting.

A proper journal entry should include a. a brief description. b.the date of the transaction. c.the title of each account debited and credited, as well as the amounts. d.All of these choices are correct.

d.All of these choices are correct.

Jill Bailey started a tax preparation business by investing $7,000 in cash and $3,000 in equipment. The journal entry to record this transaction is b.Assets 10,000 Liabilities 10,000 c.Cash and Equipment 10,000 J. Bailey, Capital 10,000 d.Cash 7,000 Equipment 3,000 J. Bailey, Capital 10,000

d.Cash 7,000Equipment 3,000J. Bailey, Capital 10,000

Because the first formal accounting record of a transaction is made in a journal from source document information, a journal is commonly referred to as a(n) a.account. b.ledger. c.cross-reference. d.book of original entry.

d.book of original entry.

The transaction to record payment for delivery equipment that was purchased on account in the previous month would include b.debiting Delivery Equipment and crediting Cash. c.debiting Cash and crediting Accounts Payable. d.debiting Accounts Payable and crediting Cash.

d.debiting Accounts Payable and crediting Cash.

Describes the relationship between the amounts of the company's liabilities and assets

debt ratio

This transaction occurs between the organization and an outside party.

external transactions

What is a ledger?

is a collection of all accounts for an information system. A company's size and diversity of operations affect the number of accounts needed

A revenue account: is increased by debits. is decreased by credits. has a normal balance of a debit. is increased by credits.

is increased by credits.

After transaction information has been recorded in the journal, it is transferred to the

ledger

What are internal transactions

occur within the organization

What is a T-account?

represents a ledger account and is a tool used to understand the effects of one or more transactions

What is debt ratio

total liabilities/total assets Helps to assess the risk that a company will fail to pay its debts

lists all account balances in the general ledger. If the books are in balance, the total debits will equal the total credits.

trial balance