A304 SB Ch. 2
A company received $2,000 of equipment and promised to pay for it next month. The increase in equipment would be recorded with a Blank______ to the Equipment account.
debit
A company received $5,000 cash when it issued stock certificates to shareholders. The increase in cash would be recorded with a Blank______ to the Cash account.
debit
If a company has issued 10,000 shares of common stock and its Common Stock account has a balance of $100,000, then par value must equal
$10
List the steps in the accounting cycle in chronological order. - Adjust revenues and expenses in the journal and post the ledger - Prepare financial statements - Close revenues, expenses, gains, and losses to Retained Earnings - Analyze transactions - Record journal entries in the general journal - Post amounts to the general ledger
1. Analyze transactions 2. Record journal entries in the general journal 3. Post amounts to the general ledger 4. Adjust revenues and expenses in the journal and post the ledger 5. Prepare financial statements 6. Close revenues, expenses, gains, and losses to Retained Earnings
List these liability accounts in the same order in which they would appear on a company's balance sheet from top to bottom. Mortgage payable (due in 25 years) Note payable (due in 5 years) Note payable (due in 5 months)
1. Note payable (due in 5 months) 2. Note payable (due in 5 years) 3. Mortgage payable (due in 25 years)
Every transaction has at least Blank______ effect(s) on the basic accounting equation.
2
On July 19, WX Company ordered $100 of supplies, promising to pay for them in August. The supplies were delivered and invoiced to WX on July 21 and WX paid $100 for them on August 10. The journal entry that WX made on August 10 would include a debit to
Accounts Payable
Which account is affected by recording the buying of goods on credit?
Accounts payable
Which of the following is used to record the summary of effects on one particular item?
An account
The payment of cash owed to suppliers for purchases recorded earlier includes a decrease to
Cash Accounts Payable
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? (Check all that apply.)
Cash is decreased. Accounts Payable is decreased.
An amount posted on the right side of a T-account causes which accounts to increase?
Common Stock Liabilities Notes Payable
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.
Which of the following are internal events?
Earning revenues after cash is received in advance from customers Using supplies purchased and paid for last month
Transaction analysis is based on which two principles?
Every transaction affects at least two accounts The accounting equation remains in balance with each transaction
True or false: In accounting, credit entries are always good.
False Reason: Credit entries are simply right-sided entries and are neither good nor bad. They could represent decreases in assets or increases in liabilities or stockholders' equity.
What is the the effect on the accounting equation when the company declares a dividend to be paid later? (Check all that apply.)
Liabilities increase Retained earnings decrease
On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?
May 15 Reason: Ace received something of value (equipment) and gave a promise to pay for it later.
Which of the following is an external transaction?
Purchasing supplies from a vendor
Select the statements below that are correct in regards to entering transactions in a journal.
Total dollar amount of debits must equal the total dollar amount of credits. Credited accounts should be indented.
What is the effect on total liabilities when a company buys a building in exchange for a 20-year note payable?
Total liabilities will increase.
On December 15, Pasta Disasta's board of directors declares a $1,000 cash dividend to shareholders to paid next month. Show the effect of this event on Pasta Disasta's accounting equation on December 15.
Total stockholders' equity will decrease.
True or false: Debit means left side of an account.
True
A company typically receives ___________ , an asset, when it issues stock to its owners.
cash
A company paid $5,000 cash to purchase equipment. The company recorded a debit to Equipment of $5,000 and a credit to Cash of only $500. This company's accounting records are
incorrect because debits do not equal credits
When a company gives common stock to an investor, the effect is to
increase stockholders' equity
What are current assets?
Assets that will be used up or converted to cash within 12 months.
Which accounting assumption states that financial statement elements should be measured in terms of the US dollar for business in the United States?
Monetary unit
Able Company purchased $25,000 worth of equipment for $5,000 cash and a $20,000, 5-year note payable. Which accounts would be credited in the journal entry to record this transaction?
Note Payable Cash
Which of these liability accounts would appear first on a company's balance sheet?
Note Payable (due in 5 months)
What does the company give when it borrows from a bank?
Notes Payable
Which of the following is an external transaction?
Sale of merchandise to customers
Which of the following events are transactions that should be entered in the accounting system? (Check all that apply.)
Paying $48 for 4 cases of copy paper that were delivered last month Paying the office secretary's monthly salary of $2,000 Receiving 3 cases of copy paper that cost $12 per case
The entry to record the issuance of $1 par value common stock to investors for $10 per share in cash results in an increase in
Stockholders' Equity Additional Paid-in Capital Common Stock Assets Cash
A Blank______ to a stockholders' equity account causes total stockholders' equity to decrease.
debit
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.
True or false: The accounting equation is Assets = Liabilities + Stockholders' Equity.
True
True or false: An external event is a transaction the firm conducts with a separate economic entity.
True Reason: An external event occurs with a separate economic entity.
True or false: The accounting equation remains in balance for every accounting transaction because of the dual effects concept whereby something of equal value is received and given in exchange.
True Reason: The dual effects concept refers to both receiving and giving something of equal value in transactions.
Which is an internal transaction?
Using up insurance paid in advance
A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a Blank______ to Notes Payable.
debit
A separate ___________ is maintained in order to accumulate the dollar effect of transactions on each financial statement item.
account
Financial information needed to manage a company is provided by a(n) Blank______ system.
accounting
Retained earnings is increased with
an excess of revenues over expenses credits
A common characteristic of ______________ (assets/liabilities) is their ability to provide benefits to the company.
assets
___________ are economic resources owned by the company
assets
Lox, Stock and Bagel, Inc., issued $100,000 of 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
Identify what a company gives and receives when it invests in equipment by paying cash and signing a 2-year note. (Check all that apply) a. It receives cash b. it gives equipment c. it gives a promissory note d. it receives equipment e. it receives a promissory note f. it receives stockg. it gives stock h. it gives cash
c. it gives a promissory note d. it receives equipment h. it gives cash
What does a business typically receive when it issues stock to owners?
cash
A list of all account names used to record transactions of a company is referred to as the
chart of accounts
A journal entry that involves debiting and crediting more than two accounts is called a ___________ journal entry.
compound
Under the going concern or ___________ assumption, a business normally is assumed to exist long enough to meet its contractual obligations and plans.
continuity
Financing provided by owners is referred to as
contributed capital
A company purchased supplies and promised to pay $200 for them next month. The increase in Accounts Payable would be recorded with a
credit
A company sold 1,000 shares of stock for $100,000. The increase in the Common Stock account would be recorded with a Blank______. Multiple choice question.
credit
Assets that will be used up or converted to cash within 12 months are ____________ assets.
current
The account(s) that is/are Blank______ is/are always listed first in a journal entry.
debited
The effect of the paying back of amounts borrowed previously include all of the following a
decrease in assets decrease in liabilities
The payment of amounts previously borrowed (ignoring interest) causes a(n)
decrease in assets and liabilities
The entry to record the purchase of equipment with cash
decreases the asset cash increases the asset equipment
A number on the left side of a T-account means the account balance
either increased or decreased depending on the account
A(n) ________ event involves an exchange between the company and a separate economic entity.
external
An accounting system provides
financial information needed to manage a company financial information needed to report results to outsiders
Transactions are recorded chronologically in the
general journal
Posting a transaction refers to the transferring of dollar amounts to each account affected by the transaction in the
general ledger
Most balance sheet elements are recorded at their
historical cost
A company paid $200 cash for supplies that were purchased last month. However, the company recorded a debit to Accounts Payable of $200 and a credit to Cash of $20. This company's accounting records are
incorrect, because debits do not equal credits
After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) _________ in total liabilities and/or (equity/assets) _________.
increase equity
The entry to record the borrowing of cash from a bank by signing a note
increases assets increases liabilities
An event that affects the financial position of a company but does not include an exchange with a separate economic entity is a(n) Blank______ event.
internal
Transactions are classified as Blank______ events.
internal and external
During the accounting period, transactions are analyzed and recorded in the general Blank______ first.
journal
The document that shows the effects of transactions chronologically, but does not provide account balances, is the general
journal
During the accounting period, transactions are analyzed and recorded in the general Blank______ first and then are posted to the accounts in the general Blank______.
journal; ledger
Increases and decreases in individual accounts, as well as an ending balance, are shown in a(n)
ledger T-account
Assets appear on the ________ side of the accounting equation and are increased by amounts that appear on the ________ side of asset T-accounts.
left left
Par value of common stock is the
legal amount per share amount established by the board of directors
If a company is not expected to continue in business, its assets should be valued and reported at their Blank______ values.
liquidation
A chart of accounts is a
list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named
A chart of accounts is a
list of all account names and numbers used by a company
Transactions are ______. (Select all that apply.)
measurable internal events such as the use of assets in operations exchanges between a business and one or more external parties to a business
The ___________ unit assumption states that financial statement elements should be measured in terms of the United States dollar, without any adjustment for changes in purchasing power (e.g., inflation).
monetary
Intangibles such as trademarks and patents are
noncurrent assets
The purchase of equipment for cash impacts the accounting equation by
not changing total assets.
Mauricio, the owner of Pizza Aroma, spent $2,500 of his own money to take his family to Disney World. Because of the separate-entity assumption, Pizza Aroma's financial statements will report
nothing about this trip
The separate entity assumption assumes the balance sheet of a corporation reports
only the results of the business's activities
Which action is done to update account balances?
posting entries
external events
purchasing supplies from a vender
Journals are used to
record transactions chronologically
Accounts Payable is increased with an entry on the __________ side of the T-account.
right
Credit means
right
The Retained Earnings account is increased with an entry on the _________ side of the account.
right
Stockholders' equity appears on the __________ side of the accounting equation and are increased by amounts that appear on the __________ side of stockholder equity T-accounts.
right right
The Common Stock account is increased with an entry on the ________ side of the T-account
right, credit
On the balance sheet, contributed capital appears under
stockholders' equity
An asset is initially recorded at
the total cost incurred to acquire it
A company purchased a $100,000 building in exchange for a 20-year note payable. The company recorded a $100,000 increase in the Building account and a $100,000 decrease in Cash. As a result of this error, Blank______.(Check all that apply.)
total assets are too low total liabilities are too low
Which of these are long-term intangible assets?
trademarks patents
External ________ are exchanges between a business and one or more external parties to a business.
transactions
internal events
using supplies on hand
