SB2 Connect Intro Financial Accounting

The ______ principle is used to measure the amount assets are to be recorded at when exchanged.

cost

Liabilities represent the ____ claims to a business's assets.

creditors

A company received $5,000 cash when it issued stock certificates to shareholders. The increase in cash would be recorded with a ______ to the Cash account.

debit

The accounting system captures the receiving and the giving of something of value and is often referred to as a " _____ -entry" system.

double

The line item, Land, on the balance sheet results from a(n) ______.

investing activity

Transactions are first entered in the ______.

journal

On May 1, Lord of the Fries, Inc. hires an employee to begin work next month. On May 1, Lord of the Fries will ______.

not record anything

Businesses typically buy goods or services from others ______.

on account

Journals are used to ______.

record transactions chronologically

Which of the following are considered business documents?

stock certificates invoices

If a company records $1,000 of debits, it must have recorded:

$1,000 of credits

A company's beginning Equipment account is $100,000. It purchased $10,000 of new equipment and sold $4,000 of its equipment during the period. The company's ending Equipment balance equals a _____ balance.

$106,000 debit

Which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100?

An asset increases by $100 A stockholders' equity account decreases by $100

The accounting cycle consists of 3 steps, place the following steps in their correct order with the first step listed first.

Analyze the transaction Record the transaction Summarize the transaction

Show the effect of recording the borrowing of $10,000 from a bank on the accounting equation. _____ by $10,000.

Assets increase Liabilities increase

Which of the following are true about Notes Payable and Accounts Payable?

Both Notes Payable and Accounts Payable are liabilities. Notes Payable are interest-bearing, Accounts Payable are not.

What does a business typically receive when it issues stock to owners?

Cash

In May, Pasta Disasta, Inc. paid its suppliers $500 that it owed for the pizza pans purchased and received in April. Which accounts are affected?

Cash is decreased. Accounts Payable is decreased.

The issuance of common stock is recorded with a debit to ______ and a credit to ______.

Cash; Common Stock

Which of the following accounting cycle steps describes the summarizing in ledger accounts?

Dollars amounts from journal entries are copied (posted) to the appropriate accounts in the ledger, so that account balances can be totaled.

True or false: A printing press has been ordered but not yet received. The business has promised to pay but has not received an invoice yet. This should be recorded as an accounting transaction.

False

True or false: If one asset increased, it must be the case that either liabilities or stockholders' equity increased by the same amount.

False

_____ activities are the first step in starting a business and involves obtaining contributions from owners and borrowing.

Financing

Identify what a company gives and receives when it invests in equipment by paying cash and signing a two-year note.

It gives a promissory note. It gives cash. It receives equipment.

Which of the following are assets?

Land Cash Equipment

Which account is debited when a logo is purchased for cash?

Logo and Trademarks

A company orders $100,000 of software on May 3. The software was delivered on July 3 and paid for on July 31. What is recorded on May 3?

No entry is recorded

Which of the following are possible effects on the accounting equation when recording a transaction that affects two accounts?

One asset account increases and one stockholders' equity account increases One asset account increases and one asset account decreases

Which of the following are characteristics of Notes Payable and not Accounts Payable?

Only notes Payable have interest charges. Notes Payable are documented with formal documents called notes. Notes Payable are amounts borrowed from a lender; Accounts Payable are not.

Identify the key activities necessary to start a business

Purchase assets Obtain financing

Which of the following transactions increase total assets and liabilities by $4,000.

Purchasing $5,000 of equipment by paying $1,000 cash and promising to pay the remaining $4,000 next month Purchasing $4,000 of equipment on account

Select the investing activities from the list below.

Purchasing a company logo Purchasing land Purchasing equipment

Company X issued $10,000 of common stock to its owners for cash. It recorded the transaction by increasing assets and increasing liabilities. Which of the following statements are correct?

Stockholders' equity will be too low. Liabilities will be too high.

Increases and decreases in individual accounts, as well as an ending balance, are shown in a(n) ______.

T-account ledger

Which of the following do not affect the accounting equation?

The signing of a contract for future services The hiring of an employee to start work at the beginning of the next month Obtaining a bid for future services

What is the effect on total assets when a company buys a building in exchange for a 20-year note payable?

Total assets will increase.

Which of the following accounting cycle steps describes the process of recording journal entries?

Transactions are recorded chronologically showing the accounts debited along with the corresponding accounts credited.

Able Company purchased $25,000 worth of equipment in exchange for a promise to pay at the end of the month. The journal entry to record this transaction would include ______ of $25,000.

a debit to Equipment a credit to Accounts Payable

The journal entry to record the payment of $30,000 cash for the creation of the company's logo includes ______.

a debit to Logo/Trademarks and a credit to Cash

Financial information needed to manage a company is provided by a(n) ______ system.

accounting

All transactions ______.

affect assets, liabilities, and/or stockholders' equity have at least two effects on the accounting equation

A transaction may be recorded with an increase in an asset and a decrease in a(n) ______.

another asset

Which of the following are similarities between Notes Payable and Accounts Payable? They both ______.

are amounts owed to creditors are liabilities

When a company buys an asset on account:

assets increase. liabilities increase.

A company typically receives ____ an asset, when it issues stock to its owners.

cash

Every company establishes a _____ of accounts which is a list that designates a name and reference number that the company will use when recording transactions.

chart

The ____ principle requires that assets be recorded at the amount exchanged for them at the time of purchase.

cost

A company paid $2,000 cash to an employee for this month's salary. The entry to record this transaction would include a ______ to Cash.

credit

A company paid $500 cash for a new printer. The entry to record this transaction would include a ______ to Cash.

credit

Liabilities have a normal ___ balance

credit

The beginning balance in Lucre's Notes Payable account was $50,000. During the month, Lucre borrowed $60,000 cash from Last National Bank and then paid First National Bank the $40,000 it had borrowed 5 months prior. The balance in Lucre's Notes Payable account is now a ______.

credit of $70,000

MMM Pizza purchased a $25,000 pizza delivery truck in exchange for a 4-year promissory note. The journal entry to record this transaction would include a ______ of $25,000.

credit to Notes Payable debit to Equipment

Two sources of financing for a new business are ______.

creditors stockholders

When recording a transaction, the debits must always equal the ____.

credits

A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a ______ to Notes Payable.

debit

Assets have a normal ___ balance

debit

When a company pays for amounts purchased on account, the entry includes ______.

debit Accounts Payable credit Cash

The beginning balance in Lucre's Cash account was $1,200. During the month, Lucre borrowed $5,000 cash from Last National Bank and paid a supplier $500. The balance in Lucre's Cash account is now a:

debit of $5,700.

Acme Enterprises issued $20,000 of stock in exchange for cash. The journal entry to record this transaction will include a Blank______ of $20,000

debit to Cash credit to Common Stock

The double-entry system requires ______.

debits to equal credits total assets to equal total liabilities plus stockholders' equity

Business ____ are used by businesses to indicate the nature of the underlying business activity and include promissory notes, electronic stock certificates, checks, invoices, etc.

documents

Which type of activities are not captured by the accounting system because they are not considered transactions?

exchanges of promises

A transaction that involves an exchange of assets, liabilities and/or stockholders' equity between the company and someone else is called a(n) ____ exchange

external

All accounting systems ______.

follow the accounting cycle combine beginning balances with the activity during the accounting cycle to yield the ending balances for each account. record and summarize financial effects of transactions

Sofa So Good, Inc. signs a contract with a programmer for the development of software that will be developed, delivered and paid for in the next year. The signing of the contract ______.

has no effect on the accounting equation

Assets are required to be initially recorded at the ______.

historical cash-equivalent cost

Assets are required to be initially recorded at the ______.

historical cash-equivalent cost amount paid or payable on the date of the transaction

A consulting firm signs a contract with a new employee. The employee is expected to begin work in one month from the signing of the contract. This event ______.

is an exchange of promises and thus is not a transaction

Noodlecake signs a contract with an independent developer for program code for a game app which will not be received until two months from the signing of the contract. This event ______.

is an exchange of promises and thus is not a transaction

Entries are first recorded in the ____ and then summarized in the ledger.

journal

Lox, Stock and Bagel, Inc., issued $100,000 of common stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry,:

the accounting equation will be out of balance.

Account titles are ______.

the names given to the items exchanged in transactions based on a company's chart of accounts

Who has first claim to a business's assets should the company go out of business?

Creditors

Complete the accounting equation: Assets = ____ + Stockholders' equity.

Liabilities

A company purchased a new cash register in exchange for a cash payment of $1,200. As a result of recording the purchase, ______.

total assets remain the same one asset is exchanged for another

Morris Lest, Inc. purchased machinery for $10,000 cash. The effect of this transaction is to cause ______.

total assets to remain the same

Business activities that affect the basic accounting equation and are recorded in the accounting system are called ____.

transactions

True or false: Chart of accounts are tailored to each company's business.

true

Which of the following statements is TRUE?

Accounts Payable is a liability.

A company's beginning Accounts Payable is $1,000. It had a $10,000 of purchases on account and paid $7,000 of the amounts owed. The Accounts Payable ending balance equals a ______ balance.

$4,000 credit

On December 31, 2017, Accounts Payable had a balance of $10,000. During the period 2018, there were $500,000 purchases on account and $490,000 payments of accounts payable. The December 31, 2018 balance must equal $

20,000

On December 31, 2020, Cash had a balance of $100,000. During 2021, there were $1,100,000 debits and $950,000 credits posted to Cash. The December 31, 2021 balance must equal $

250,000

Shoe Fly, Inc. purchased software. It paid $100 and promised to pay the remainder next month. What did Shoe Fly receive and give in this transaction?

A promise to pay is given Cash is given Software is received

Which account is affected by recording the buying of goods on credit?

Accounts Payable

The effect of journal entries on each account is summarized in the ______.

ledger

Transactions are first recorded in the journal and then are summarized in the ____

ledger

The Land account is increased with an entry on the ____ side of the Land T-account.

left

Which of these line items appear on a balance sheet?

liabilities stockholders' equity assests

When a company borrows from a bank by signing a formal agreement, an asset titled Cash is increased and a _____ titled ____ ____ is increased.

liability notes payable

A chart of accounts is a ______.

list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named

In April, Pizza Aroma hired a new employee at a rate of $1,000 per month to start work at the beginning of May. In April, Pizza Aroma should record ______.

nothing, because an exchange of promises is not a transaction

Accounts ____ is a liability account and represents amounts owed to suppliers.

payable

Every transaction involves a(n) ______.

receiving and giving something of value

Accounts Payable is increased with an entry on the ____ side of the T-account.

right

The Common Stock account is increased with an entry on the ____ side of the T-account.

right

The Mortgage Payable account is increased with an entry on the ____ side of the T-account.

right

The Retained Earnings account is increased with an entry on the ____ side of the account

right

Equity financing is financing obtained from ______.

stockholders

Chart of accounts are ______.

tailored to each company's business

A company purchased $2,200 of equipment in exchange for a cash payment of $1,200 and a $1,000 promise to pay. The company recorded a $1,200 increase in the Equipment and a $1,200 decrease in the Cash account. No entry was made to the Accounts Payable account. As a result, ______.

the accounting equation is in balance total assets are too low