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?