Chapter 2 Smartbook

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business. A liability is a debt owed by the business. A liability can be settled by transferring assets or providing products or services to others.

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

In defining a reporting period, which of the following statements is (are) correct?

A reporting period can be one month, one quarter or one year. A one-year reporting period is known as the fiscal year. A reporting period is determined by the business.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances. Compute the total of debit balances and the total of credit balances. List each account title and its amount from the ledger. Verify that the total debit balances equals the total credit balances.

Choose the accounts below, that would have a normal credit balance.

Accounts Payable Revenues Common Stock Unearned Revenues

Which of the following statements is (are) accurate regarding equipment purchased within a business?

Equipment is reported on the left side of the accounting equation. Equipment purchases are reported on the balance sheet. Equipment cost is initially recorded as an asset and the cost is allocated over time to expense. Equipment is an asset.

Which set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

Which of the following financial statements report(s) the financial position of a business over a period of time? (Check all that apply.)

Income statement Statement of retained earnings Statement of cash flows

Which of the following statements are accurate regarding supplies?

unused supplies are treated as assets unused supplies can be recorded as store supplies, office supplies, or supplies supplies are assets until they are used when supplies are purchased, they are added to the supplies account

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

Match the definition on the left with the term/item on the right. 1 a general ledger 2 journal 3 trial balance 4 chart of accounts

1 It is a collection of all accounts with their activity and balances that exist in a business .2 It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred 3 It is a list of each account and its balance at any given time and is used to verify that debits = credits 4 It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1. list each amount title and its amount from the general ledger 2. compute the total of debit balances and the total of credit balances 3. verify that the total debit balances equal total credit balances

Which of the following statements is accurate regarding the Building account?

A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of transactions.

Which of the following statements is (are) correct regarding a T-account?

A T-account will show the debit and credit effects of transactions. A T-account may be used as a tool to visualize the effects of a transaction. A T-account represents a ledger account.

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.

A company's required debt payments may be greater than its ability to generate money to make those payments. If a company has a lot of debt, they may not be able to afford to take on new debt. A company that finances their assets by borrowing will need to make enough money to pay off the debt.

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

Identify which of the following lists include only examples of assets.

Building, Cash, Accounts receivable

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts in a business and includes an identification number assigned to each account.

Which of the following are accurate statements regarding how to report or treat prepaid accounts?

Over time, the expired portion of prepaid accounts is transferred from the asset account and reported as an expense. The unexpired portion of prepaid accounts are treated as assets. The expired portion of prepaid accounts is reported on the income statement as an expense.

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

Which of the following statements is correct about prepaid accounts

Prepaid accounts are also called prepaid expenses and are considered assets.

Which of the following statements is accurate about the Land account?

The Land account is an asset. The Land account is increased on the left side of its T-account. The Land account is used to record the costs of land purchased by the business.

Which of the following describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Given the descriptions below, which are true regarding notes receivable? (Check all that apply.)

another name for a note receivable is a promissory note It is the promise of another entity to pay a specific sum of money on a specified future date Notes receivable is classified as an asset.

Notes receivable are a(n) (asset/liability).

asset

The Building account is a(n) (asset/liability/expense) account and is reported on the (left/right) side of the accounting equation.

asset; left

Equipment is a(n) (asset/liability/expense) account. It is reported on the (left/right) side of the accounting equation and is

asset; left; increased

Prepaid accounts are (assets/liabilities) that represent prepayments of future expenses and are increased with a (debit/credit).

assets; debit

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities).

assets; expenses

Which of the following accounts is an asset? (Check all that apply.)

building, accounts receivable, supplies, cash

Which of the following items would be considered "cash" and reflected in a company's Cash account? (Check all that apply.) Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

checks, money orders, coins

The general ledger can be used to determine which of the following (select all answers which apply):

common and unique accounts used by a business. which accounts are being used by a company and their balances at any given time. increases and decreases in all accounts in a business.

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be (debited/credited) on the (left/right) side of the T-account and the Common stock account would be (debited/credited) on the (left/right) side of the T-account.

debited; left credited; right

An account is a record of increases and _____ in a specific asset, liability, equity, revenue or expense.

decreases

Assets are claims (by creditors) against the company.

false

The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

false

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

false

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) in total liabilities or equity.

increase

A trial balance is a(n) (list/balance/chart) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of account balances. Use one word for each blank.

list, credit

Transferring entries from the general journal to the general ledger is called (posting/preparing/journalizing)

posting

Which of the following would be considered a source document in an accounting system? (Check all that apply.)

purchase order, checks, sales receipt, payroll records