Principles of Financial Accounting Chapter 2

The accounting equation is:

Assets = Liabilities + stockholders' equity

An _____________ is a maintained for each statemen item, whereas an ___________ contains all of the accounts of the company

account and general ledger

Which of the following are external transactions?

borrowing money from the bank, purchasing inventory from suppliers, paying salaries to employees.

The two roles of financial accounting are to:

communicate information to external parties for decision-making purposes

Accounts on the left side of the accounting equation (assets) are increased with a(n)______________ to the account, whereas accounts on the right side of the accounting equation increased with a(n) ______________

credit debit

Shannon corp issues common stock for $25,000. Recoding this transaction will include a

credit to common stock

Geo corp. issues stock to investors for $100,000. Recording this transaction will include which of the following?

debit to cash and credit to common stock

Identify the three components of retained earnings.

evenues, Dividends, Expenses

Which type of account is increased with a debit?

expense

Credits increase revenues, whereas debits increase

expenses and dividends

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

false

Which of the following includes the list of transactions affecting each individual account and the account's balance?

general Ledger

Klick's journal shows and debit to chats and a credit to common stock. This journal entry indicates that klick:

issues shares to stockholders

A chronological record of all economic events affecting a firm are recorded in a(n)

journal

Computerized system

journal entries are instantly posted to the

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as

posting

The purpose of a general ledger is to

provide in a single location the list of transactions affecting each account and the account's balance.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer

Which of the following are stockholder equity accounts?

retained Earnings and common stock.

Consistent with the ______________recognition principle, companies record revenue at the time goods are provided to customers.

revenue

Which type of account is increased with a credit?

revenue

A list of all accounts and their balances at a particular date showing that debits equal credits are referred to as a

trial balance

The term debit means to place the entry on the _______ and side of the account, and the term credit means to place the entry on the __________ hand side of the account.

Left side and right side

True or false: The term debit means increase, and the term credit means decrease.

false

A transaction is initially recorded in the journal, and then subsequently posted to the general

ledger

True or false: A ledger provides a chronological record of all transactions affecting the firm

false

An account should have an account title, account number, a place for the date of the transaction, and two columns for

debits and credits

True or false: A balance sheet is a list of all accounts and their balances showing that debits equal credits.

false

Manual system

journal entries are posted periodically to the general ledger

Which of the following is an external transaction?

purchasing supplies from a vendor